5

Creating Long-term Loyalty

Relationships

Marketing Management
Canadian Fourteenth Edition
Copyright  2013 Pearson Canada Inc. 5 -1
 Chapter Questions
• What are customer value, satisfaction, and
loyalty, and how can companies deliver them?
• What is the lifetime value of customers and how
can marketers maximize it?
• How can companies attract and retain customers
and cultivate strong customer relationships?
• What are the pros and cons of database
marketing?

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 Figure 5.1 Customer-
Orientations

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 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.

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 Figure 5.2 Determinants of
Customer Perceived Value
Total customer benefit Total customer cost

Product value Monetary cost

Services value Time cost

Personnel value Energy cost

Image value Psychological cost

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 Caterpillar Maximizes
Customer Value

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 Steps in a
Customer Value Analysis
1. Identify major attributes and benefits that
customers value
2. Assess the qualitative importance of different
attributes and benefits
3. Assess the company’s and competitor’s
performances on the different customer values
against rated importance
4. Examine ratings of specific segments
5. Monitor customer values over time

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 What is Loyalty?
• Loyalty is a deeply held commitment to re-
buy or repatronize a preferred product or
service in the future despite situational
influences and marketing efforts having the
potential to cause switching behavior.

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 Top Brands in Customer
Loyalty
 Apple iPhone  Google
 Clairol  Amazon
 Samsung  Bing
 Mary Kay  J.Crew
 Grey Goose  AT&T Wireless
 Clinique  Discover Card
 Avis  Verizon Wireless
 Walmart  Intercontinental
Hotels
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 Establishing Value

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 Measuring Satisfaction
• Periodic surveys
• Customer loss rate
• Mystery shoppers
• Monitor competitive performance

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 Influence of Customer
Satisfaction
• Companies need to be especially concerned
with their customer satisfaction level today
because the Internet provides a tool for
consumers to quickly spread both good and
bad word of mouth to the rest of the world.

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 Managing Customers
1. Set up a 7-day, 24-hour toll-free hotline (by phone,
fax, or e-mail) to receive and act on customer
complaints.
2. Contact the complaining customer as quickly as
possible.
3. Accept responsibility for the customer’s
disappointment; don’t blame the customer.
4. Use customer service people who are empathic.
5. Resolve the complaint swiftly and to the customer’s
satisfaction.

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 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.

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 Maximizing Customer Lifetime
Value
• Customer Profitability
– A profitable customer is 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.

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 Figure 5.3 Customer-Product
Profitability Analysis

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 Customer Lifetime Value (CLV)
• Customer Lifetime Value (CLV) describes
the net present value of the stream of future
profits expected over the customer’s lifetime
purchases.

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 Table 5.3 Illustrating CLV
Calculations

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 What is Customer Relationship
Management (CRM)?
• CRM is the process of carefully managing
detailed information about individual
customers and all customer touch points to
maximize customer loyalty.

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 Personalizing Marketing
• Personalizing marketing is about making
sure the brand and its marketing are as
relevant as possible to as many customers
as possible—a challenge, given that no two
customers are identical.

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 Permission Marketing
• Permission marketing, the practice of
marketing to consumers only after gaining
their expressed permission, is based on the
premise that marketers can no longer use
“interruption marketing” via mass media
campaigns.

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 Four-Step Framework for CRM
1. Identify prospects and customers
2. Differentiate customers by needs and value
to company
3. Interact to improve knowledge
4. Customize for each customer

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 Customer Empowerment
• The newly empowered consumer—in
charge, setting the direction of the brand,
and playing a much bigger role in how it is
marketed—it’s still true that only some
consumers want to get involved with some of
the brands they use and, even then, only
some of the time.

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 Customer Reviews and
Recommendations
• Although the strongest influence on consumer
choice remains “recommended by relative/friend,”
an increasingly important decision factor is
“recommendations from consumers.”
• With increasing mistrust of some companies and
their advertising, online customer ratings and
reviews are playing an important role for Internet
retailers such as Amazon.com and Shop.com.

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 Attracting and
Retaining Customers
• Reduce the rate of defection
• Increase longevity
• Enhance share of wallet
• Terminate low-profit customers
• Focus more effort on high-profit customers

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 Figure 5.4 The Marketing
Funnel

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 Building Loyalty
• Interacting with Customers
• Developing Loyalty Programs
• Creating Institutional Ties

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 Database Key Concepts
 Customer database  Business database
 Database marketing  Data warehouse
 Mailing list  Data mining

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

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 Don’t Build a Database When
1. The product is a once-in-a-lifetime purchase (a
grand piano)
2. Customers show little loyalty to a brand (there is
lots of customer churn)
3. The unit sale is very small (a candy bar) so CLV is
low
4. The cost of gathering information is too high
5. There is no direct contact between the seller and
ultimate buyer.

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 Downside of Database
Marketing and CRM
1. Some situations are just not conducive to database
management.
2. Building and maintaining a customer database requires a
large, well-placed investment in computer hardware,
database software, analytical programs, communication
links, and skilled staff.
3. It may be difficult to get everyone in the company to be
customer oriented and use the available information.
4. Not all customers want a relationship with the company.
5. The assumptions behind CRM may not always hold true.

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