5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty
Dec 22, 2015
5-1
MARKETING MANAGEMENT
5 Creating
Customer Value, Satisfaction, and
Loyalty
5-2
Chapter Questions
• What are customer value, satisfaction, and
loyalty, and how can companies deliver
them?
• What is the lifetime value of customers?
• How can companies both attract and retain
customers?
5-3
A Customer-Oriented Model?
5-4
The Value Proposition
The cluster of benefits thecompany promises to deliver
5-5
Measuring Satisfaction
Periodic SurveysPeriodic Surveys
Customer Loss RateCustomer Loss Rate
Mystery ShoppersMystery Shoppers
Monitor competitive performance
Monitor competitive performance
5-6
Loyalty
A commitment to re-buy
or re-patronize a product
or service in the future.
5-7
Building Loyalty
Partnership
Proactive
Accountable
Reactive
Basic
5-8
Maximizing Customer Lifetime Value
Customer Profitability
Customer Equity
LifetimeValue
5-9
Customer-Product Profitability Analysis
5-10
Estimating Lifetime Value
• Annual customer revenue: $500
• Average number of loyal years: 20
• Company profit margin: 10
• Customer lifetime value: $1000
5-11
Framework for CRM
Identify prospects and customers
Differentiate customers by needs and value to company
Interact to improve knowledge
Customize for each customer
5-12
CRM Strategies
Reduce the rate of defectionReduce the rate of defection
Increase longevityIncrease longevity
Enhance “share of wallet”Enhance “share of wallet”
Terminate low-profit customers
Terminate low-profit customers
Focus more effort on high-profit customersFocus more effort on high-profit customers
5-13
Customer Retention
• Acquisition of customers can cost 5 times more than retaining current customers.
• The average customer 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.
5-14
Customer-Development Process
Prospects
Suspects
Disqualified
First-timecustomers
Repeatcustomers Clients Members
PartnersEx-customers
5-15
Reducing Customer Defection
• Define and measure retention rate.
• Distinguish causes of customer attrition.
• Estimate profit loss associated with loss
of customers.
• Assess cost to reduce defection rate.
• Gather customer feedback.
5-16
Forming Strong Customer Bonds
Add financialbenefits
Add socialbenefits
Add structuralties
5-17
Activity
Choose a business and show how
you would go about developing a
quantitative formulation that captures
the concept of customer lifetime value.