Customer Value

It is no longer enough to satisfy customers. You must delight them.

Kotler on Marketing

The 4 Ps The 4 Ps

Marketing Mix

ProductProduct VarietyQualityDesignFeaturesBrand NamePackagingSizes ServicesWarrantiesReturns

PromotionSales PromotionAdvertisingSales ForcePublic RelationsDirect Marketing

PlaceChannelsCoverageAssortmentsLocationsInventoryTransportation

PriceList PriceDiscountsAllowancesPayment PeriodCredit Terms

Old Economy vs. New Economy

Old Economy New Economy

Organize by product units

Focus on profitable transactions

Look primarily at financial scorecard

Focus on shareholders

Marketing does the marketing

Build brands through advertising

Focus on customer acquisition

No customer satisfaction measurement

Overpromise, underdeliver

Organize by customer segments

Focus on customer lifetime value

Look also at marketing scorecard

Focus on stakeholders

Everyone does the marketing

Build brands through behavior

Focus on customer retention and growth

Measure customer satisfaction and retention rate

Underpromise, overdeliver

Product

Price

Place

Promotion

Consumer

Cost

Convenience

Communication

OLD NEW

Value and Satisfaction

Expectation

Performance810

If performance is lower than expectations, satisfaction is low.

If performance is higher than expectations, satisfaction is high.

Expectation

Performance

108

Why is Customer Satisfaction Receiving So Much Attention?

The SQIP Diamond

VALUEVALUE

ServiceService

PricePriceImage

QualityQuality

Understand Satisfaction Drivers

Customer Customer SatisfactionSatisfaction

Access to Access to products & products &

ServicesServices

Emotional Emotional FactorFactor

Service Service QualityQuality

PricePrice

Product Product QualityQuality

Consumers definition of Value

Low price Whatever I want in a product or

service The Quality I get for the price I pay What I get for what I give

Customer Value

Is the customer’s perceptions of what they want to happen (i.e. the

consequences) in a specific use situation with the help of a product or service offering in order to accomplish

a desired purpose/goal

Five approaches to Customer Value

The total value of their relationship with your company

The potential value of their relationship The profitability of their relationship The insights they can provide your

company The influence they can yield over other

customers

Types of customer value

Product value Services value Personnel value Image value

Form Utility: Raw Material (converted ) Finished Goods Place Utility: Channel of distribution (Physical

Distribution) Customer Time Utility: Warehousing (Availability) Customers Ownership: Seller (Transfer goods to) Customers

Customer Perceived Value

Customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers.

Wal-MartCustomer Value: Best

Price

Determinants of Customer

Delivered Value

Annual Customer

Satisfaction Surveys

Focus Groups (Fomal/

informal)

Online Questionnaires

Phone or Fax Surveys

Feedback Forms

Online Polls

Customer Service

FeedbackCRM

Software

Different forms of satisfaction measurement

The Generic Value Chain

The Customer Development

Process

Customer Lifetime Value

Is defined as the net present value of the profits stream from a customer relationship

It measures how much business the customer is expected to do with your company during the lifetime of their relationship.

CLTV calculations(Simple)

CLV= Average transaction value * Frequency of purchase * customer life expectancy

e.g. One loyal pizza customer buying on average one pizza per week over a 10 year period would be

=Rs. 70 * 52 *10

=Rs.36400 to the company

Link b/w the CRR and the ACL

Average customer lifetime(years)

= 1/ 1-retention rate

e.g. If the customer retention rate is 90 percent per annum(meaning that we lose 10 percent of our existing customer base each year), then the average customer lifetime will be ten years

Linking profitability and loyalty

High profitability and Short term customers(Butterflies)

Low Profitability and Short term customers(Strangers)

Long term customers and Low profitability(Barnacles)

High profitability and Long term customers

(True friends)

Butterflies

-good fit between customer’s offerings and customer’s needs

-high profit potential

True friends

-good fit between customer’s offerings and customer’s needs

-highest profit potential

Strangers

-little fit between company ‘s offerings and customer’s needs

-lowest profit potential

Barnacles

-limited fit between company’s offerings and customer’s needs

-low profit potential

Allocating marketing investment according to customer value

Why would you feel more brand loyalty Why would you feel more brand loyalty for a company that tried to immediately for a company that tried to immediately resolve a complaint via E-mail, or a resolve a complaint via E-mail, or a company that had a customer service company that had a customer service representative call within two business representative call within two business days to resolve the problem over days to resolve the problem over the phone?the phone?

HOME TASK

Find a company that has Find a company that has gained a significant customer gained a significant customer loyalty rate by fundamentally loyalty rate by fundamentally

changing the buyer-seller changing the buyer-seller relationship? relationship?

HOME TASK

HOME TASK GUIDELINES

Not to be copied directly from any source (i.e. Book, Magazine, Internet and even from your friend/mate)

Handwritten Ruled sheets to be used (one sided) Details on top of the page:

Home Task Date Name Roll no. Regd. no. Class & Section Topic / Question

Examples / References are Mandatory Prepare a Marketing File and document every home task activity in it. You are required to bring your Marketing File in every lecture.