Marketing Planning and Applications

Week 05

Creating Customer Value, Satisfaction and Loyalty

Identifying Market Segments and Targets

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?
4.What is database marketing?
What is Customer Perceived Value?

Customer perceived value is the difference between the prospective

customer’s evaluation of all the benefits and all the costs of an offering
and the perceived alternatives.
 . 2
e 5 Customer-
ur
i g perceived value
F
Total customer Total customer
benefit cost

Determinants Product Monetary

of Customer benefit cost

Services Time
Perceived Value benefit cost

Personal Energy
benefit cost

Image Psychological
benefit cost
 ed
fin
De Customer Loyalty
“A deeply held commitment to re-buy a preferred
product or service in the future despite situational
influences and marketing efforts having the potential
to cause switching behavior.”
-- Oliver
Value Proposition
Volvo
Core positioning:
• Safety

Other benefits:
• Good performance
• Design
• Environmentally friendly
 ed
fin
De Customer Satisfaction
A person’s feelings of pleasure or
disappointment that result from
comparing a product’s perceived
performance to (or outcome) to
expectations.
Measuring Satisfaction
Periodic
Periodic Surveys
Surveys

Customer
Customer Loss
Loss Rate
Rate

Mystery
Mystery Shoppers
Shoppers

Monitor
Monitor competitive
competitive
performance
performance
Monitoring Satisfaction
Influence of
Customer Satisfaction

Measurement
Techniques

Customer
Complaints
Measurement Techniques
Customer Loss Rate

Surveys

Mystery Shopper
Influence of Customer Satisfaction

Customer satisfaction

Speed of communication
Product and Service Quality
Performance Conformance

Quality

Satisfaction Profitability
Maximizing Customer Lifetime Value

Customer
Profitability

Customer Lifetime
Equity Value
 ed
fin
De Maximizing Customer Lifetime
Profitable Customer A person, household, or company that over time yields a revenue
stream exceeding by an acceptable amount the company’s cost stream for attracting,
selling, and serving that customer.

Customer equity is the total combined customer lifetime values of all of the company’s
customers

Customer lifetime value is the value of the entire stream of purchases that the customer
would make over a lifetime of support.
What is Customer Relationship Management?

The overall process of building and maintaining profitable customer

relationships by delivering superior customer value and satisfaction
 One-to-One Marketing
Differentiate
customers

Identify prospects and customers

Interact with each customer Customize

CRM Strategies
• Reduce the rate of defection
• Increase longevity
• Enhance share of wallet
• Eliminate low-profit customers
• Focus more effort on high-profit customers
Customer Retention
• Acquisition of customers can cost 5 times more than retaining current
customers.
• The average company loses 10% of its customers each year.
• A 5% reduction to the customer defection rate can increase profits by
25% to 85%.
• The customer profit rate increases over the life of a retained customer.
Database Key Concepts

• Customer database • Business database

• Database marketing • Data warehouse
• Mailing list • Data mining
Using the Database
• To identify prospects
• To target offers
• To deepen loyalty
• To reactivate customers
• To avoid mistakes
Don’t Build a Database When
• The product is a once-in-a-lifetime purchase
• Customers do not show loyalty
• The unit sale is very small
• The cost of gathering information is too high
Perils of CRM
• Implementing CRM before creating a customer strategy
• Rolling out CRM before changing the organizational culture to match
• Assuming more CRM technology is better
• Stalking, not wooing, customers