3 Creating Long-Term Relationship Loyalty2

1
Learning Objectives
1. What are customer value, satisfaction, and

loyalty, and how can companies deliver them?
2. What is the lifetime value of customers, and
how can marketers maximize it?
3. How can companies attract and retain the right
customers and cultivate strong customer
relationships and communities?
4. How do customers’ new capabilities affect the
way companies conduct their marketing?
Building Customer Value,
Satisfaction, and Loyalty
 Figure 5.1
 Customer-perceived value (CPV)
 The difference between the prospective

customer’s evaluation of all the benefits
and costs of an offering and the perceived
alternatives
 Total customer benefit vs. total customer

cost
Customer-perceived value (CPV)
 is the difference between the

 prospective customer’s evaluation of all the
benefits
 and all the costs of an offering and the
perceived alternatives.
Total customer benefit is the perceived monetary
value of the bundle of economic, functional, and
psychological benefits customers expect from a
given market offering because of the product,
service, people, and image.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1-5
Figure 5.2
Determinants
of Customer-
perceived value
(CPV)
‫محددات القيمة المتوقعة‬
customer value analysis
1. Identify the major attributes and benefits that
customers value
2. Assess the quantitative importance of the different
attributes and benefits
3. Assess the company’s and competitors’
performances on the different customer values
against their rated importance
4. Examine how customers in a specific segment rate
the company’s performance against a specific major
competitor on an individual attribute or benefit basis
5. Monitor customer values over time
 Customer-perceived
value (CPV)
 Choice processes
 Delivering high
customer value
 Loyalty
 Total customer satisfaction
 A person’s feelings of pleasure or
disappointment that result from comparing a

product or service’s perceived performance
(or outcome) to expectations
 Monitoring satisfaction: many companies are
systematically measuring how well they treat
customers, identifying the factors shaping
satisfaction, and changing operations and
marketing as a result
 Periodic surveys, customer loss rate, mystery
shoppers, J. D. Power’s satisfaction ratings

 Product and service quality
 Quality is the totality of features and
characteristics of a product or service that

bear on its ability to satisfy stated or implied
needs
 Conformance quality vs. performance quality
 Impact of quality
Maximizing Customer Lifetime
Value
 Customer lifetime value (CLV)
 The net present value of the stream of
future profits expected over the customer’s

lifetime purchases
Attracting and Retaining
Customers
 Reducing defection/customer churn
 Define and measure retention rate

 Distinguish/identify customer attrition causes
 Compare lost CLV to reducing defection rate
Customers
 Retention dynamics/marketing funnel
Figure 5.4 shows the main steps in attracting
and retaining customers in terms of a funnel.
The marketing funnel identifies the percentage
of the potential target market at each stage in
the decision process, from merely aware to
highly loyal. Consumers must move through
each stage before becoming loyal customers.
Some marketers extend the funnel to include
loyal customers who are brand advocates or
even partners with the firm.

Customers
 Managing the customer base
Reduce
customer
defection
Focus on Increase
high-profit customer
customers longevity
Terminate Share of wallet

low-profit &
customers cross/upselling
Building loyalty
Interact closely with customers
Develop loyalty programs
Create institutional relations

Brand communities
 A specialized community of consumers and

employees whose identification and activities
focus around the brand
Cultivating Customer
Relationships
 Customer relationship management (CRM)
 The process of carefully managing detailed
information about individual customers and

all customer “touch points” to maximize
loyalty
 Customer value management (CVM)
CRM
 Personalizing/permissi
on marketing
 Customer
empowerment
 Customer reviews/
recommendations
 Customer complaints
 Today, companies face a very high competition ever.
Moving from a product-and-sales philosophy to a
holistic marketing philosophy, however, gives them
a better chance of outperforming the competition.
 The cornerstone of a well holistic marketing orientation

is strong customer relationships. Marketers must
connect with customers—informing, engaging, and
maybe even energizing them in the process. Customer
centered companies are adept at building customer
relationships, not just products; they are skilled in
market engineering, not just product engineering.

What is
Customer Perceived Value?
 Customer perceived value is the
difference between
the expected all the costs of

customer’s an offering and
evaluation of all the perceived
the benefits alternatives

Top Brands in Customer Loyalty
 Apple iPhone  Google

 Samsung  Amazon
 Clinique  AT&T Wireless
 Avis  Discover Card
 Wal-Mart  Verizon Wireless

Chapter
21
Managing Digital
Communications:
Online, Social
Media, and Mobile
Copyright © 2016 Pearson Education Ltd. 5-24

Learning Objectives
1. What are the pros and cons of online

marketing?
2. How can companies carry out effective
social media campaigns?
3. What are some tips for enjoying positive
word of mouth?
4. What are important guidelines for mobile
marketing?
Steps in Developing Effective
Marketing Communication
 Identify the target audience
 Determine the communication objectives
 Design the message
 Choose the media to send the message
 Select message source and collect feedback
Marketing Communication (2 of 10)
Identifying the Target Audience
 What will be said
 How it will be said
 When it will be said
 Where it will be said
 Who will say it
Designing a Message
AIDA Model
 Get Attention
 Hold Interest
 Arouse Desire
 Obtain Action
Message Content – “What to Say”
Rational appeal relates to the audience’s self-interest.
Emotional appeal is an attempt to stir up positive or
negative emotions to motivate a purchase.
Moral appeal is directed to an audience’s sense of what is
right and proper.
‫النداء العقالنى‬
‫النداء العاطفى‬
‫النداء االخالقى‬
Designing a Message
Message content is “what to say.”
Message structure and format is “how to say it.”
Message format: To attract attention, advertisers can use novelty and
contrast, eye-catching images and headlines, and distinctive formats,
as shown in this Reese’s ad.
Choosing Communication Channels and Media
Personal communication involves two or more people
communicating directly with each other.
 Face-to-face
 Phone
 Mail or email
 Texting or internet chat
Opinion leaders are people whose opinions are sought by
others.
Buzz marketing involves cultivating opinion leaders and
getting them to spread information about a product or
service to others in their communities.
Nonpersonal communication channels are media that
carry messages without personal contact or feedback,
including major media, atmospheres, and events.
Selecting the Message Source
The message’s impact depends on how the target
audience views the communicator.
 Celebrities
 Athletes
 Entertainers
 Professionals
 Health-care providers
Collecting Feedback
Collecting feedback involves the communicator
understanding the effect on the target audience by
measuring behavior resulting from the content.
Shaping the Overall Promotional Mix
(4 of 5)
Figure 14.3 Push versus Pull Promotion Strategy
Online Marketing
 Categories of online marketing

communications
 Web sites
 Search ads
 Display ads
 e-mail
Online Marketing
Advantages Disadvantages
• Can offer or send tailored • Consumers can screen out
information/messages most messages
• Can trace effects by UVs • Ads can be less effective than
clicks on a page/ad they appear (bogus clicks)
• Contextual placement • Lost control over online
• Can place advertising messages via
based on search engine hacking/vandalism
keywords
Figure 21.1
Major Media Time Spent Per Day
Online Marketing
 Communication Options
Web sites
Search ads
Display ads
E-Mail
Online Marketing
 Web sites
 Ease of use
 Physical attractiveness
 Microsites
 Search ads
 Paid search or pay-
per-click ads
 Search engine
optimization (SEO)
Seven Key Design Elements of a
Web site
Commerce Content
Connection Community
Communication Customization
Maximize the Marketing Value of
e-mails
 Give the customer a reason to respond

 Personalize the content of your e-mails
 Offer something instead of direct mail
 Make it easy to opt and unsubscribe
 Combine e-mail and social media
Social Media
 Means for consumers to share text, images,
audio, and video information with each other
and with companies, and vice versa
Online
communities/forums
Blogs
Social networks
Social Media
 Social media are rarely
the sole source of
marketing
communications for a
brand
 Only some
consumers want to
engage with some
brands, and, even
then, only some of
the time
Word of Mouth
 Face-to-face and phone

 Online
 Viral marketing (“word of mouse”)
Mobile Marketing
Is uniquely tied to one user
Is virtually always “on”
Allows for immediate consumption
Is highly interactive
Mobile Marketing
 Mobile apps
 Bite-sized software programs that can be
downloaded to smart phones

Mobile Marketing
 Being concise is critical
 Copy should be only 50% of screen

 Brands should limit ads to phrase pair
 Put brand logo in corner of ad frame
 Use only one or two bright colors
 Calls to action should be in a bright color
Measuring Satisfaction
Periodic Surveys
Customer Loss Rate
Mystery Shoppers
Monitor Competitive
Performance

Measuring Satisfaction
Many companies are systematically

measuring how well they treat
customers, identifying the factors
shaping satisfaction, and changing
operations and marketing as a result.
Wise firms measure customer
satisfaction regularly, because it is one
key to customer retention.

A highly satisfied customer generally
 stays loyal longer,

 buys more as the company introduces new and
upgraded products,
 talks favorably to others about the company and its
products,
 pays less attention to competing brands and is less
sensitive to price
 offers product or service ideas to the company, and
costs less to serve than new customers

What is Quality?
Quality is the totality of features and

characteristics of a product or
service that bear on its
ability to satisfy
stated or implied needs.

What is
Customer Relationship Management?
CRM is the process of carefully managing

detailed information about individual
customers and all customer touch points to
maximize customer loyalty.
A customer touch point is any occasion on
which a customer encounters the brand
and product— from actual experience to
personal or mass communications to
casual observation.

Framework for CRM
Identify prospects and customers
Differentiate customers by needs

and value to company
Interact to improve knowledge
Customize for each customer

The IDIC Model
Identify Differentiate Interact Customize
…customers as …by value, …more cost - …some aspect of

unique addressable behavior and efficiently and the company’s
individuals needs effectively behavior, offerings,
or communications
Analysis Action
COPYRIGHT © 2009. ALL RIGHTS PROTECTED AND RESERVED. 56

Framework for CRM
 Don Peppers and Martha Rogers outline a four-step framework

for one-to-one marketing that can be adapted to CRM marketing
as follows:
 Identify prospects and customers
1 Don’t go after everyone. Build, maintain, and mine a rich customer
database with information from all the channels and customer touch
points.
 Differentiate customers by needs and value to company
2 Differentiate customers in terms of (1) their needs and (2) their value to
your company. Spend proportionately more effort on the most valuable
customers (MVCs). Apply activity-based costing and calculate customer
lifetime value. Estimate net present value of all future profits from
purchases, margin levels, and referrals, less customer-specific servicing
costs.

3 Interact to improve knowledge
Interact with individual customers to improve your
knowledge about their individual needs and to build
stronger relationships. Formulate customized
offerings you can communicate in a personalized
way.
4 Customize for each customer
Customize products, services, and messages to each
customer. Facilitate customer interaction through the
company contact center and Web site.

5
9
Relationship Development:
IDIC and Trust
Identify
Developing trust
Analysis
Differentiate
Feedback
Loop
Interact
Action
Customize
Customer information is an economic asset, and trust is the currency of all

commerce.
Managing Customer Relationships: A Strategic Framework,Third Edition, Don Peppers and Martha Rogers
6
0
The Role of a Trusted Agent

 Always prioritizes customer’s interest – even if
it means referring a competitor’s product –
because such a transaction builds trust
 Improves the customer’s ability to make
choices that best manage his life or business
 Is confident that knowledge of customer’s
needs and preferences will be monetized at a
higher value and with greater dependability
long term than a product-based model
6
1
Customer Information Comes Only
with Trust
 Only with trust will customers share information the
enterprise needs to serve them better
 If a mistake is made in handling customer information,
a prompt apology most effectively can restore trust
 Elements of effective apology:
 Must be sincere, forthrightly acknowledge the
wrongdoing, and reiterate importance of trust

 Must accept responsibility for the mistake
 Must articulate what it has learned and how it is
improving its procedures to ensure it will not

happen again
Attracting and
Retaining Customers
 Reduce the rate of defection
 Increase longevity
 Terminate low-profit customers
 Focus more effort on high-profit customers

Database Key Concepts
 Customer database  Business database

 Database marketing  Data warehouse
 Mailing list  Data mining

Customer database
 Marketers must know their customers. And in

order to know the customer, the company must
collect information and store it in a database from
which to conduct database marketing.
 A customer database is an organized collection of

comprehensive information about individual
customers or prospects that is current, accessible,
and actionable for lead generation, lead
qualification, sale of a product or service, or
maintenance of customer relationships.

Database marketing
 Database marketing is the process of building,

maintaining, and using customer databases and
other databases (products, suppliers, resellers) to
contact, transact, and build customer relationships.
 Customer mailing list
 A customer mailing list is simply a set of names,

addresses, and telephone numbers.

Business database marketing
 A business database contains business customers’

past purchases; past volumes, prices, and profits;
buyer team member names (and ages, birthdays,
hobbies, and favorite foods); status of current
contracts; an estimate of the supplier’s share of the
customer’s business; competitive suppliers;
assessment of competitive strengths and weaknesses
in selling and servicing the account; and relevant
customer buying practices, patterns, and policies.

Data warehouse
 The business data are collected by the

company’s contact center and organized into a
data warehouse where marketers can capture,
query, and analyze them to draw inferences
about an individual customer’s needs and
responses. Through data mining, marketing
statisticians can extract from the mass of data
useful information about individuals, trends,
and segments.

Using the Database
 To identify prospects
 To target offers
 To deepen loyalty
 To reactivate customers
 To avoid mistakes

The Future of Marketing
 The coming years will see:
 The demise of the marketing department and the rise
of holistic marketing
 The demise of free-spending marketing and the rise
of ROI marketing
 The demise of marketing intuition and the rise of
marketing science
 The demise of manual marketing and the rise of both
automated and creative marketing
 The demise of mass marketing and the rise of
precision marketing
Holistic Marketing
• CRM • PR marketing
• PRM • Brand-building &
• Database marketing & brand-asset
data mining management
• Contact center • Experiential marketing
management & • Integrated marketing
telemarketing communications
• Digital marketing & • Profitability analysis
social media

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1

1. What are customer value, satisfaction, and

 The difference between the prospective

 Total customer benefit vs. total customer

 is the difference between the

disappointment that result from comparing a

shoppers, J. D. Power’s satisfaction ratings

characteristics of a product or service that

future profits expected over the customer’s

 Reducing defection/customer churn

 Define and measure retention rate

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1-15

Terminate Share of wallet

Interact closely with customers

Develop loyalty programs

Create institutional relations

 A specialized community of consumers and

information about individual customers and

 The cornerstone of a well holistic marketing orientation

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1-21

the expected all the costs of

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-22

 Apple iPhone  Google

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-23

Copyright © 2016 Pearson Education Ltd. 5-24

1. What are the pros and cons of online

 Categories of online marketing

 Give the customer a reason to respond

 Face-to-face and phone

Is uniquely tied to one user

Is virtually always “on”

Allows for immediate consumption

downloaded to smart phones

 Being concise is critical

 Copy should be only 50% of screen

Customer Loss Rate

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-50

Many companies are systematically

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-51

 stays loyal longer,

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1-52

Quality is the totality of features and

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-53

CRM is the process of carefully managing

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-54

Identify prospects and customers

Differentiate customers by needs

Interact to improve knowledge

Customize for each customer

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-55

Identify Differentiate Interact Customize

…customers as …by value, …more cost - …some aspect of

COPYRIGHT © 2009. ALL RIGHTS PROTECTED AND RESERVED. 56

 Don Peppers and Martha Rogers outline a four-step framework

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-57

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1-58

Customer information is an economic asset, and trust is the currency of all

The Role of a Trusted Agent

wrongdoing, and reiterate importance of trust

 Must articulate what it has learned and how it is

improving its procedures to ensure it will not

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-62

 Customer database  Business database

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-63