Part 3 : Connecting with Part 3 : Connecting with CustomersCustomers

Chapter 5 - Creating Customer Value, Chapter 5 - Creating Customer Value, Satisfaction and LoyaltySatisfaction and Loyalty

Maximizing Customer Lifetime ValueMaximizing Customer Lifetime Value

• Ultimately, marketing is the art of attracting and keeping profitable customer.

• Losing profitable customers can dramatically affect a firm’s profits. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy

• Implication is that a company could improve its profits by “firing” its worst customers

• The key to retaining customers is relationship marketing

Cultivating mCustomer RelationshipsCultivating mCustomer Relationships

• Maximizing customer value means cultivating long term customer relationships. Companies are now moving away from mass marketing to mass customization to build strong customer relationships

• As companies have grown proficient at gathering information about individual customers and business partners, they have increased their ability to individualize market offerings, messages, and media

• Mass customization is the ability of a company to meet each customer’s requirements – to prepare on a mass basis individually designed products, services, programs & communications

• These steps can be done because of business information technology

Customer Relationship Management (CRM)Customer Relationship Management (CRM)• Thus, the process of managing detailed information about

individual customers and carefully managing all customer “touch points” to maximize customer loyalty is Customer Relationship Management (CRM).

• A customer touch point is any occasion on which a customer encounters the brand and product

• Example: For a hotel, the touch points include reservation, check in & out, room service, exercise facilities, restaurant & bar

• A four step framework for one to one marketing that can be adapted to CRM marketing:

a. Identify your prospects and customers. b. Differentiate customers in terms of their needs and their

value to your companyc. Interact with individual customers to improve your

knowledge about their individual needs and to build stronger relationships

d. Customize products, services, and messages to each customer

Customer Databases and Database Customer Databases and Database MarketingMarketing

• Marketers must know their customers. And in order to know the customer, the company must collect information and store it in a database and do database marketing

• Customer database is an organized collection of comprehensive information about individual customer or prospect that is accessible for marketing purposes

• Database marketing is the process of building, maintaining, and using customer databases for the purpose of contacting, transacting, and building customer relationship

• In general, companies can use their database in five ways:1. To identify prospects2. To decide which customers should receive a particular offer3. To deepen customer loyalty4. To reactivate customer purchases5. To avoid serious customer mistakes