Creating Customer Value,
5Creating Customer Value,
Satisfaction, and Loyalty
Mr. Ajit Arya
Faculty-Marketing
Department of Business Studies
C. U. Shah College of Engg. & Tech.
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 cultivate strong customer
relationships?relationships?
• How can companies both attract and retain
customers?
• What is database marketing?
“The only value your company will ever create is
the value that comes from customers – the ones
you have now and the ones you will have in the
future. Businesses succeed by getting, keeping,
and growing customers. Customers are the onlyand growing customers. Customers are the only
reason you build factories, hire employees,
schedule meeting, etc. Without customers, you
don’t have a business.”
HDFC Offers an Assortment of
Services to Satisfy its Customers
Organizational Charts
What is Customer Perceived Value?
Customer perceived value is the difference between the prospective
customer’s evaluation of all the benefits and all the costs of an offering and the and all the costs of an offering and the
perceived alternatives.
Determinants of Customer Perceived Value
Product benefit Monetary cost
Total customer benefit Total customer cost
Image benefit Psychological cost
Personal benefit Energy cost
Services benefit Time cost
Product benefit Monetary cost
Steps in a Customer Value Analysis
• Identify major attributes and benefits thatcustomers value
• Assess the qualitative importance of differentattributes and benefits
• Assess the company’s and competitor’s• Assess the company’s and competitor’sperformances on the different customer valuesagainst rated importance
• Examine ratings of specific segments
• Monitor customer values over time
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 situational influences and marketing efforts having the potential to cause
switching behavior.
Top Brands in Customer Loyalty
1. Avis
2. Google
3. L.L. Bean
4. Samsung
7. Land’s End
8. Coors
9. Hyatt
10.Marriott4. Samsung
5. Yahoo!
6. Canon (office
copiers)
10.Marriott
11.Verizon
12.KeySpan Energy
13.Miller Genuine Draft
14.Amazon
The Value Proposition
The whole cluster of
benefits the
company promises company promises
to deliver
What is Satisfaction?
Satisfaction is a person’s feelings of pleasure or disappointment that result from comparing a product’s perceived
performance or outcome to their performance or outcome to their expectations.
Measuring Satisfaction
Periodic Surveys
Customer Loss Rate
Mystery Shoppers
Monitor Competitive
Performance
What is Quality?
Quality is the totality of features and
characteristics of a product or
service that bear on its
ability to satisfyability to satisfy
stated or implied needs.
Impact of Quality
• Product and service quality customer satisfaction company profitability
• Quality is the key to value creation and • Quality is the key to value creation and customer satisfaction.
Maximizing Customer Lifetime Value
Customer
ProfitabilityProfitability
Customer
Equity
Lifetime
Value
Estimating Lifetime Value
• Annual customer revenue: Rs.500
• Average number of loyal years: 20
• Company profit margin: 10%• Company profit margin: 10%
• Customer lifetime value: Rs.1000
Customer-Product Profitability Analysis
What is Customer Relationship
Management?
CRM is the process of carefully managing detailed information about individual customers and all customer
touchpoints to maximize touchpoints to maximize customer loyalty.
Framework for CRM
Identify prospects and customers
Differentiate customers by needs
and value to companyand value to company
Interact to improve knowledge
Customize for each customer
CRM Strategies
Reduce the rate of defection
Increase longevity
Enhance “share of wallet”
Terminate low-profit
customers
Focus more effort on
high-profit customers
Focus Focus on
CRM
Customer Retention
• Acquisition of customers can cost five times
more than retaining current customers.
• The average customer loses 10% of its
customers each year.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.
The Customer Development Process
Prospects
Suspects
Disqualified
First-time
customersRepeat
customers Clients Members
PartnersEx-customers
Building Loyalty
• Interacting with customers
• Developing loyalty programs (FPs, Club
member)
• Personalizing marketing• Personalizing marketing
• Creating institutional ties
• Win - Backs
Database Key Concepts
• Customer database
• Database
• Business database
• Data warehouse• Database marketing
• Mailing list
• Data warehouse
• Data mining
Customer Database
Customer database is an organized
collection of comprehensive information
about individual customers or prospects
that is current, accessible, and that is current, accessible, and
actionable for such marketing purposes
as lead generation, sale of a product or
service, or maintenance of customer
relationships.
Using the Database
To identify prospects
To target offers
To deepen loyalty
To reactivate customers
To avoid mistakes
Don’t Build a Database When
• The product is a once-in-a-lifetime purchase
• Customers do not show loyalty
• The unit sale is very small• The unit sale is very small
• The cost of gathering information is too high
Thank You!!!Thank You!!!