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Sultan Ahmed 1
Topic 04
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You would be able to answer the followings after reading the chapter:
1. Definitions: perceived value, satisfaction, loyalty, value proposition, quality, TQM, customer retention.
2. What are the determinants of customer perceived value?
3. How do company measures customer satisfactions? Explain.
4. Explain the framework of CRM.5. Explain various strategies of CRM.6. What are the differences between one-to-one and
mass marketing?7. Draw the customer development process.8. Explain various ways of building customer loyalty.9. How do a firm strengthen customer bonding?
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Value and Satisfaction
•Perceived Value– The customer’s evaluation of the difference
between benefits and costs.– Customers often do not judge values and
costs accurately or objectively.
•Customer Satisfaction– Product’s perceived performance relative to
customer’s expectations.
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Determinants of Customer Perceived Value
Image benefit Psychological cost
Personal benefit Energy cost
Services benefit Time cost
Product benefit Monetary cost
Total customer benefit Total customer cost
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Determinants of Customer-Delivered Value
Customer-delivered
value
Total customer
value
Total customer
cost
Product value
Monetarycost
Personalvalue
Energycost
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Loyalty
A deeply held commitment to re-buyor re-patronize a preferred product
or service in the future despite situationalinfluences and marketing efforts having
the potential to cause switching behavior.
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The Value Proposition
The whole cluster of benefits thecompany promises to deliver
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Measuring Satisfaction
Periodic SurveysPeriodic Surveys
Customer Loss RateCustomer Loss Rate
Mystery ShoppersMystery Shoppers
Monitor competitive performance
Monitor competitive performance
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Product and Service Quality
Quality is the totality of features andcharacteristics of a product or
service that bear on its ability to satisfy
stated or implied needs.
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Total Quality Management
TQM is an organization-wide approach to continuously improving the quality of
all the organization’s processes, products, and services.
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Customer-Product Profitability Analysis
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Framework for CRM
Identify prospects and customers
Differentiate customers by needs and value to company
Interact to improve knowledge
Customize for each customer
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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
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Mass vs. One-to-One Marketing
Mass• Average customer• Customer anonymity• Standard product• Mass production• Mass distribution• Mass advertising• One-way message• Economies of scale
One-to-One• Individual customer• Customer profile• Customized market
offering• Customized
production• Economies of scope• Share of customer
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Customer Retention
• Acquisition of customers can cost 5 times more than retaining current customers.
• The average company 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.
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The Customer-Development Process
Prospects
Suspects
Disqualified
First-timecustomers
Repeatcustomers Clients Members
PartnersEx-customers
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Building Loyalty
Partnership
Proactive
Accountable
Reactive
Basic
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Forming Strong Customer Bonds
Add financialbenefits
Add socialbenefits
Add structuralties