Market-Based Management

Copyright Roger J. Best, 2012

Customer Focus, Customer Performance, and Profit Impact

Satisfied is not good enough. Completely satisfied—that’s a big deal. A completely satisfied customer is at least three times more likely to return than one who’s just satisfied. ―Andrew Taylor, CEO, Enterprise Rent-A-Car

Very Satisfied Customers Drive Profits

Chapter 1 Objectives

Building a customer focused organization

MBM6Chapter 1

Copyright Roger J. Best, 2012

Customer Focus, Customer Performance, and Profit Impact

Building a Customer-Focused Organization

MBM6Chapter 1

Copyright Roger J. Best, 2012

In this section we will look at how customer-focused organizations not only outperform their competition over the long term by consistently delivering higher levels of customer satisfaction, they also realize higher profits

over the short run.

Underwhelming Customers

Little or no customer focus translates into an unfocused competitive position and minimal customer satisfaction. The result is a vicious circle of poor performance.

Copyright Roger J. Best, 2012

MBM6Chapter 1

Top Performers Produce Higher Investor Returns

Apple, Southwest Airlines, and Clorox would be a part of the top performers in the graph above..

Copyright Roger J. Best, 2012

MBM6Chapter 1

How to build a customer focus organization?

Voice of the Customer

Customer Performance

Customer Focused Leadership

Benchmarking Customer Satisfaction

ACSI studies have shown that Customer Satisfaction is a leading indicator of company financial performance. The ACSI database reports all companies by industry.

American Customer Satisfaction Index - University of Michigan (www.theACSI.org)

Copyright Roger J. Best, 2012

MBM6Chapter 1

Profitability of Satisfied Customers

Copyright Roger J. Best, 2012

MBM6Chapter 1

When we chart customer profitability against customer satisfaction, we see that the “very satisfied” customers are the ones who

drive profitability.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-12

Measuring Satisfaction

Periodic SurveysPeriodic Surveys

Customer Loss RateCustomer Loss Rate

Mystery ShoppersMystery Shoppers

Monitor Competitive Performance

Monitor Competitive Performance

Complaint Behavior and Retention

Copyright Roger J. Best, 2012

Each year, the business above loses $22,400 customers who are dissatisfied, but do not complain.

Dissatisfied customers often do not complain, but they do walk and they do talk.

Marketing Performance

Tool 1.2

Customer Dissatisfaction and the Use of Social Media

Facebook as an Outlet for Customer Dissatisfaction

•An individual’s car was towed despite being legally parked with a valid parking sticker. The individual created a Facebook page to express his dissatisfaction with the towing company.

•More than 10,000 supporters, some using other social media, also expressed their dissatisfaction with the towing company.

•Many related their own bad experiences, and 20 formal complaints were filed over a 3-year period as a result .

Copyright Roger J. Best, 2012

MBM6Chapter 1

Strategies for Complaint HandlingStrategies for Complaint Handling

Estimating Customer Retention

Copyright Roger J. Best, 2012

MBM6Chapter 1

To estimate retention rates, businesses can use a customer survey as outlined above.

How likely are you to buy this product or brand again on your next purchase?

What is Loyalty?

Loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or

service in the future, despite situational influences and marketing efforts.

Managing Customer Loyalty

Manage Selection

CRM Loyalty Promotions

Critical Care

Strategies to manage each type of customersStrategies to manage each type of customers

Crown JewelsCrown Jewels

Rough Cut DiamondsRough Cut Diamonds

Unpolished Gems

Unpolished Gems Profit DrainProfit Drain

Customer Satisfaction

Customer Loyalty

Company’s Profit

What is Customer Relationship Management?

CRM is the process of carefully managing detailed information about individual

customers and all customer touch points to maximize customer loyalty.

Framework for CRM

Identify prospects and customersIdentify prospects and customers

Differentiate customers by needs and value to company

Differentiate customers by needs and value to company

Interact to improve knowledgeInteract to improve knowledge

Customize for each customerCustomize for each customer

CRM Strategies

Reduce the rate of defection

Enhance “share of wallet”

Terminate low-profit customers

Focus more effort on high-profit customers

Database Marketing

It is the process of building , maintaining, and using customer databases and other databases (products, suppliers, resellers) to contact, transact, and build

customer relationships.

Customer database VS Mailing list

A customer mailing list is simply a set of names, addresses, and telephone numbers

A customer database contains much more information, accumulated through customer transactions, registration information, telephone queries, cookies, and every customer contact

Many companies confuse a customer mailing list with a customer database.

Ideally, a customer database also contains the consumer’s past purchases, demographics(age, income, family members, birthdays), psychographics (activities, interests, and opinions),

Media graphics (preferred media), and other useful information. The catalog companyFingerhut possesses some 1,400 pieces of information about each of the 30 million households

in its massive customer database.

Data warehouse• Banks and credit card companies, telephone companies, catalog

marketers, and many other companies have a great deal of information about their customers, including not only addresses and phone numbers, but also transactions and enhanced data on age, family size, income, and other demographic information

• These data are collected by the company’s contact center and organized into a data warehouse where marketers can capture, query, and analyze them to draw inferences about an individual customer’s needs and responses.

• Telemarketers can respond to customer inquiries based on a complete picture of the customer relationship, and customized marketing activities can be directed to individual customers.

Data MiningThrough data mining, marketing statisticians can extract

from the mass of data useful information about individuals, trends, and segments. Data mining uses sophisticated

statistical and mathematical techniques such as cluster analysis, predictive modeling etc. Some observers believe a properly developed database can provide a company with a

significant competitive advantage.

Using the Database

To identify prospects

To target offers

To deepen loyalty

To reactivate customers