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Chapter 5:Creating Customer Value, Satisfaction
and Loyalty
Group 4Crisostomo, Kathleen LizetteJongco, KristofferPinon, Ralph RaymundSiton, Galicano
Selected Presentation
Visual Model: Creating Customer Value, Satisfaction and Loyalty
Raymund C. PiñonMarketing Management V57
April 27, 2010
Rationale
• The 3rd important task of Modern Marketing:
ObjectivesAt the end of the presentation, the participants should be able to understand
concepts related to the 3rd marketing task of CONNECTING WITH CUSTOMERS
1. Customer Value, Customer Satisfaction, Customer Loyalty and how do we deliver them?
2. What is the lifetime value of customers?3. How can companies cultivate strong customer
relationships?4. How can companies both attract and retain customers?5. What is database marketing?
To Win Customers and ….Beat Competition!!!
Traditional
Customer-centered
X
To Win Customers and ….Beat Competition!!!
Value
Satisfaction
Loyalty
Customers’ Perceived ValueCustomers are value maximizers
Total Costs
Money
Time
Effort
Psychological
Total Benefits
Product
Service
Personnel
Image
DeliveredValue
Steps in Customer Value Analysis
Identify features & benefits customers value Assess qualitative importance
of attributes & benefits
Assess company’s and competitors’ performance on different values against ratedperformance
Examine ratings of specific segments Monitor customer values over tme
Delivering High Customer Value
Value Proposition Value Delivery System
Total Customer Satisfaction
_ =
Perceived Performance
Buyer’sExpectation Satisfaction
Total Customer SatisfactionSatisfaction is Related to Loyalty
Total Customer SatisfactionInfluence of Customer Satisfaction
Total Customer SatisfactionMonitoring Customer Satisfaction
Periodic SurveysCustomer Loss Rate
Mystery ShopperCompetitors’ Performance
Total Customer SatisfactionSatisfaction Will Also Depend on Quality
• Totality of features and characteristics of products or services that satisfy stated or implied needs
What is Quality?
= or >
Product or ServiceMeets or exceeds
Expectations
Customer Lifetime ValueArt of attracting and keeping profitable customers
Maximizing Customer Lifetime Value
Customer Profitability
Customer Equity Lifetime Value
Maximizing Customer Lifetime ValueCustomer Profitability Analysis
C1 C2 C3
P1 + + +Highly profitable product
P2 + Profitable product
P3 - - Unprofitable product
P4 -Highly unprofitable product
High-profit customer
Mixed-bag customer
Losing customer
Maximizing Customer Lifetime ValueCustomer Profitability Analysis
Activity-Based Costing
Customer Portfolios• acquaintances• friends• partners
Maximizing Customer Lifetime ValueMeasuring Customer Lifetime Value
Year 0 Year 1 Year 2 Year 3 Year 4
Number of Customers
Revenue per Customer
Variable Cost per Customer
Margin per Customer
Acquisition Cost per Customer
Total Cost or Profit
Present Value
Maximizing Customer Lifetime ValueMeasuring Customer Lifetime Value
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Number of Customers
Revenue per Customer
Variable Cost per Customer
Margin per Customer
Acquisition Cost per Customer
Total Cost or Profit
Present Value
Cultivating Customer Relationships
Customer Relationship ManagementKey to retaining customers is relationship marketing
1. Identify prospects and customers
2. Differentiate customers in terms of: a. Their needs b. Their value to your company
3. Interact with individual customers to improve knowledge about needs and build stronger relationships
4. Customize products, services and messages to each customer
Customer Relationship ManagementIncreasing Value of Customer Base
1. Reduce customer defection
2. Increase longevity of relationship
3. Enhance growth potential of each customer
4. Make low-profit customers profitable or weed out
5. Focus on high-value customers
Customer Relationship Management Focuses on attracting and keeping right customers,
and satisfying their needs
Customer Relationship ManagementAttracting and Retaining Customers
Reducing Defections Retention Dynamics
Disqualified ProspectsPotentials
Prospects
1st-TimeCustomer
RepeatCustomer
Clients
Members
Advocates
Partners
Inactive or Ex-Customers
Customer Relationship ManagementBuilding Customer Loyalty
Interacting with Customers Creating Loyalty Programs
Personalizing Marketing Creating Institutional Ties
Customer Database and Database Management
Customer Database
Data Warehousing
Data Mining
Customer Database and Database Management
Identify prospectsChoose which customers receive a particular offer Deepen loyalty
Reactivate customer purchases Avoid mistakes
SummaryThe 3rd important marketing task of
CONNECTING WITH CUSTOMERS
1. Customer Value, Customer Satisfaction, Customer Loyalty and how do we deliver them
2. Lifetime value of customers3. How companies cultivate strong customer relationships4. How companies attract and retain customers5. Database marketing
Individual Reports
Crisostomo, Kathleen Lizette C.MARKMAChapter 5 - Creating Customer Value, Satisfaction, and Loyalty
The CUSTOMER is now a top priority in the modern organization chart
Customer Perceived Value (CPV) = Difference between all benefits and costs of an offering and the perceived alternatives
Loyalty = deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior
Quality = totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs
Marketing is the art of ATTRACTING and KEEPING profitable customers
Profitable Customer = revenue from person/household/company is greater than the company’s cost of attracting, selling and servicing
Satisfaction = Customer Lifetime Value
Customer Relationship Management = carefully managing detailed information about individual customers and all customer touch points to maximize customer loyalty
Framework for CRM:1. Identify prospects and customers
2. Differentiate customers by needs and value to company
3. Interact to improve knowledge
4. Customize for each customer
CRM Strategies (how winning companies improve their customer base):1. Reduce the rate of defection
2. Increase longevity
!
3. Enhance share of wallet
!
4. Terminate low-profit customers
!
5. Focus more effort on high-profit customers
Creating Customer Value, Satisfaction and Loyalty
KRISTOFFER Z. JONGCOAPRIL 27, 2012
Objective:How is this created?
• Through customer value• Steps in customer value analysis?• Through customer satisfaction• The CRM Framework?• Through customer loyalty• Customer retention: using database
Customer Value
• What customer gets from a product & what he has to give to attain it
Steps:Customer Value Analysis
• Know major attributes & benefits • Assess importance• Assess performances• Examine ratings
• Monitor customer values
Customer Satisfaction
Measured
by number of repeat and happy customers
CRM Framework
• Identify customers• Differentiate customers• Interact• Customize for each customer
Customer Loyalty
Measure of success of supplier in retaining
a long term relationship with customer
Customer Retention
• Use Database
-Identify/attract prospects-Target offers-Deepen loyalty-Reactivate customers-Avoid mistakes
CUSTOMERS
Customer Value
Customer SatisfactionCustomer Loyalty
Framework
5 Steps:
Retention
Summary
• What is customer value• 5 Steps in customer value analysis• Customer satisfaction and framework• What is customer loyalty• All about customer retention• Using Database
Creating Customer Value, Satisfaction and Loyalty
by Galicano Siton
Creating Customer Value, Satisfaction and Loyalty
Value
CustomersFrontline People
Middle Management
Top Management
Loyalty
Profit for the stakeholders
Customer Satisfaction
Quality Perceived by the Customer