Creating customer Value, Satisfaction and Loyalty

Chapter: 5

Customer Perceived Value

“ It 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 value is the perceived monetary value of the bundle of economic, functional and psychological benefits customer expect from a market offering ( product value+service value+personnel value+image value)

Total customer cost : Monetary cost+Time cost+Energy cost+Psychic cost

Total Customer Satisfaction

Satisfaction is a feeling of pleasure that results from comparing product’s perceived performance with one’s expectations

Actual < Expected = Dissatisfaction

Actual > Expected = Delight

Actual = Expected = Satisfaction

Maximising customer Value

• The 80 : 20 principle• The concept of profitable customer –

whose revenue stream exceeds cost of servicing him

• Customer profitability analysis : different tiers

• Customer life time value: net present value of stream of future profits expected over the customer’s lifetime purchases

Cultivating Customer Relationships

• Mass customisation – ability of firm to meet requirements of each and every customer

• CRM: process of managing detailed information about customers and managing “customer touch point” to ensure customer loyalty

Attracting, Retaining and Growing Customers

Suspects(Potentials) Prospects First time customers Repeat customers Clients Members Advocates Partners

At any point customers – from first timers to partners can become inactive or ex-customers

Building Loyalty

1. Basic marketing: Sales men simply sells product2. Reactive marketing: Sales men sells product and

encourages customer to call up in case of any queries3. Accountable marketing: Sales men rings up the

customer asking for problems, suggestions and improvements

4. Proactive marketing: Salesmen contacts customer from time to time with suggestions about improved product used or new products

5. Partnership marketing: Company works continuously with customers to help improve their performance

Forming strong customer bonds

1. Adding financial benefits – e.g. Frequent flier program

2. Adding social benefits – e.g. TTL’s customer loyalty program

3. Adding structural ties – e.g. Magazine’s subscription

Customer database and Database marketing

Customer database is an organised collection of comprehensive information about individual customer or prospects that is accessible and actionable for marketing purpose

Database marketing is the process of building, maintaining and using customer databases and other databases for the purpose of contracting, transacting and building customer relationships

Analysing Consumer Markets

Chapter: 6

Cultural factors

Consumer behavior is influenced by culture, subculture and social class

Culture is values, rituals, beliefs that are passed from generation to generation

Subculture is alternate culture that moves parallel to culture in the same or opposite direction

Social stratification : SEC in India – Socioeconomic classification – on the basis of education and occupation of the chief wage earner – A1, A2,B1,B2, C,D,E1,E2

In rural areas SEC is based on occupation of the chief wage earner and the type of house – R1 to R4

Social factors

Reference groups - groups with which person has direct or indirect contact which affects his behaviour

Memberships groups – groups having direct influencePrimary groups - continuous and informal interactionSecondary groups – Less continuous and formal interactionAspiration group – hope to joinDissociative groups – whose values person rejectsFamily : blood or legal linkageFamily of orientation : Parents and siblingsFamily of Procreation: One’s spouse and kids

Personal factors

• Age and stage in the life cycle

• Occupation and economic circumstance

• Personality and self concept

- personality is set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli

• Lifestyle and values

Key psychological processes

Motivation:

• Sigmund Freud’s theory :”Psychological forces shaping people’s behaviour are largely unconscious”

• Maslow’s theory: “Human needs are arranged in an hierarchy”

• Herzeberg’s theory: “Dissatisfiers and Satisfiers”

Perception

• Selective Attention

• Selective distortion

• Selective retention

• Subliminal perception

Learning

• Permanent change in individual’s behaviour that rises from experience

• It is an interplay of drives, stimuli, cues, responses and reinforcement

Memory

• Short term – temporary repository of information

• Long term memory – permanent repository of information

Associative network memory model

• Long term memory has a set of nodes an links

• Nodes are stored information connected by links that vary in strength

• Nodes becomes activated when external information is encoded or internal information is retrieved from long term memory

The buying decision process : Five stage model

1. Problems Recognition – triggered by internal or external stimuli

2. Information search – sources of information - personal,commercial,public,experimental

3. Evaluation of alternatives – purchase intention – affected by attitude of others and unanticipated situational factors

4. Purchase decisions5. Post purchase behaviour – post purchase

satisfaction and post purchase dissonance

Purchase decisions

Noncompensatory models of consumer choice – the negative aspects of a product are not off set by its positive aspects as in compensatory models

Types of choice heuristics:1. Conjunctive : consumer sets minimum acceptable

cutoff for each attribute and choose the first option that meets the minimum requirements

2. Lexicographic : consumer chooses the best brand on the basis of its perceived most important attribute

3. Elimination by aspect: consumer compares brands on attribute selected probabilistically – based on attribute's importance

Level of Consumer Involvement

1. Elaboration Likelihood model : Central route and peripheral route to persuasion

2. Variety seeking buying behaviour

Analysing Business Markets

Chapter : 7

Business market v/s Consumer market

• Few and larger buyers• Close supplier –customer relationships• Professional purchasing• Several buying influences• Multiple sale calls• Derived demand• Fluctuating demand• Geographically concentrated buyers• Direct purchasing

Buying situations

• Straight rebuy

• Modified rebuy

• New task

Participants in business buying process

• Initiators

• Users

• Influencers

• Deciders

• Approvers

• Buyers

• Gatekeepers

Stages of buying process

1. Problem recognition2. General need recognition and product

specification3. Supplier search4. E-procurement5. Proposal solicitation6. Supplier selection7. Order routine specification8. Performance review

Identifying Market Segments and Targets

Chapter 8

Levels of Market Segmentation

• Segment Marketing

• Niche Marketing

• Local Marketing

• Customerisation

Segmenting consumer markets

• Geographic Segmentation

• Demographic Segmentation

• Psychographic segmentation

• Behavioural segmentation : Occasions, Benefits, User status,Usage rate, Buyer readiness stage, Loyalty status, Attitude

Segmenting Business markets

• Demographic : Industry, company size, Location• Operating variables: Technology, User or

nonuser status, customer capabilities• Purchasing approaches: purchasing function,

power structure, nature of existing relationships, purchase polices, purchasing criteria

• Situational factors: urgency, specific application, size of order

• Personal characteristics: buyer seller similarity, attitudes towards risk, loyalty

Favorable market segments

• Measurable

• Substantial

• Accessible

• Differentiable

• Actionable

Evaluating and Selecting Market Segments

• Single segment concentration

• Selective specialisation

• Product Specialisation

• Market Specialisation

• Full Market coverage