Chapter 5

Creating customer value, satisfaction, and loyalty

Building customer value, satisfacation, and loyalty• Traditional vs Modern customer oriented organization chart

Creating customer value, satisfaction, and loyalty

Customer Perceived value (CPV)• The difference between the prospective customer's evalution of all the

benefits and all tthe cost of ann offering and the perceived alternatives.

• Total customer value is perceived monetary value of the bundle of economical, functional, and psychological benefits customers expect from a given market offering.

• Total customer cost is the bundle of costs customers expect to incur in evaluting, obtaining, usin, and disposing of the given market offering, including monetary, time, energy, and psychic costs.

Creating customer value, satisfaction, and loyalty

Choises and implications• The buyer might be under orders to buy at the lowest price

• The buyer will retire before the company realizes that the object is more expensive to operate. (Good in short run)

• The buyer enjoys a long-term friendship with some salesperson.

Delivering high customer value• Loyalty

• Value proposition (cluster of benefits)

• Value delivering system

Creating customer value, satisfaction, and loyalty

Total customer satisfaction• Satisfaction is a person's feelings of pleasure or disappointment

resulting from comparing a product's perceived performance (or outcome) in realtion to his or her expections.

• Danger of lower profits or lower satisfaction of other ”parterns”..

• Customer expections comes from past buying experience, friends' and associates' advice, and marketers' and competitors information and promises.

• Branded customer experience

Creating customer value, satisfaction, and loyalty

Measuring satisfaction• Periodic surveys

• Customer loss rate

• Mystery shoppers

• Internet

Creating customer value, satisfaction, and loyalty

Product and service quality• Satisfaction will also depend on product and service quality.• Quality in the totality of features and characteristics of a product

or service that bear on its ability to satisfy stated or implied needs.• Marketers have to think of themselves as customer satisfiers.• Marketing managers have two responsibilities in a quality-

centered company.

1. They must participate in formulating strategies and policies to help the company win through total quality exellence.

2. They must deliver marketing quality alongside production quality.

Creating customer value, satisfaction, and loyalty

Total Quality Management• TQM is an organization-wide approach to continuously improving the

quality of all the organization's processes, products and services.• John F. Welch Jr. : Quality is our best assurance of customer

allegiance, our strongest defense against foreing competition, and the only path to sustained growth and earnings.

• Problems: Some firms lost sight of the needs and wants of customers and WHY they were doing business. They became overly focused with processes and HOW they were doing business.

• Marketers play several roles in helping their companies define and deliver high-quality goods and services to target customers.

Creating customer value, satisfaction, and loyalty

• They bear the major responsibility for correctly identifying the customers' needs and requirements.

• They must communicate customer expectations properly to product designers.

• They must make sure that customers' orders are filled correctly and on time.

• They must check that customers have received proper instructions, training, and technical assistance in the use of the product.

• They must stay in touch with customers after the sale to ensure that they are satisfied and remain satisfied.

• They must gather customer ideas for product and service improvements and convey them to the appropriate departments.

Creating customer value, satisfaction, and loyalty

Maximising Customer Lifetime Value• Marketing is the art of attracting and keeping profitable customers.• Every company loses money on some of its customers.• 20-80-30 rule: the top 20 percent of the customers generate 80

procent of the company's profits, half of which are lost serving the bottom 30 percent of unprofitable customers.

• Company could improve its profits by "firing" its worst customers.• The midsize customers are often the most profitable because they

receive good service and pay nearly full price.

Creating customer value, satisfaction, and loyalty

Customer Profitability• A profitable customer is a person, household, or company that over

time yields a revenue stream that exceeds by an acceptable amount the company's cost stream of attracting, selling, and serving that customer.

Customer Profitability Analysis• KUVA s. 149• The company estimates all revenues coming from the customer,

less all costs.• Then, it's possible to classify customers into different profit tiers:• platinum customers (= most profitable), gold customers, iron

customers, lead customers (= unprofitable and undesirable)

Creating customer value, satisfaction, and loyalty

Competitive Advantage is a company's ability to perform in one or more ways that competitors cannot or will not match.

• Companies must also create high value relative to competitors at a sufficiently low cost.

• Companies must focus on building customer advantage.

Measuring Customer Lifetime Value• CVL calculations provide a formal quantitative framework for planning

customer investment and help marketers to adopt a long-term perspective.

Customer Equity• is the total of the discounted lifetime values of all of the firm's customers.

Three drivers of customer equity:• Value equity: The customer's objective assessment of the utility of an

offering based on perceptions of its benefits relative to its costs.• Brand equity: is the customer's subjective and intangible assessment of the

brand, above its objectively perceived value.• Relation equity: The tendency of the customer to stick with the brand even

when it is priced higher than an otherwise equal product.