MKT: 601

Chapter 05: Creating Long-term Loyalty Relationships

Building Customer Value, Satisfaction, and Loyalty

Customer Perceived Value/ Benefit and cost

Applying Value concept

Steps for Customer value Analysis

1. Identify the major attributes and benefits customers’ value

2. Assess the quantitative importance of the different attributes and benefits.

3. Assess the company’s and competitors’ performances on the different customer values against their rated importance.

4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor on an individual attribute or benefit basis. If the company’s offer exceeds the competitor’s offer on all important attributes and benefits, the company can charge a higher price (thereby earning higher profits), or it can charge the same price and gain more market share.

5. Monitor customer values over time.

Delivering High Customer Value

  • Value proposition (all the benefits that company promised)
  • Value delivery system (experience of customers for obtaining the product)

Total Customer satisfaction

Monitoring satisfaction

Measurement techniques:

  • Periodic survey
  • Customer loss rate
  • Mystery shoppers

Influence of Customer Satisfaction

Customer complaints: Steps for recovering customer goodwill

  • Hotline number
  • Contact complaining customer ASAP
  • Accept responsibility for the customer’s disappointment: don’t blame
  • Use empathic people
  • Resolve the complaint swiftly

Product and Service quality

Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Impact of Quality

Total quality

Total quality is the key to value creation and customer satisfaction. Total quality is everyone's job, just as marketing is everyone's job.

Maximizing customer Lifetime value

Customer Profitability

Customer Profitability Analysis/Activity Based Costing

Platinum / Gold / Iron / Lead
Most profitable / Profitable / Low profitability but desirable for volume / Unprofitable and undesirable

Customer Portfolios

Customer-Product Profitability Analysis

C1 / C2 / C3
P1 / Highly profitable product
P2 / Profitable product
P3 / Unprofitable product
P4 / Highly unprofitable product
High profit / Mixed bag / Losing

Measuring Customer Lifetime Value

Cultivating Customer Relationships

Customer Relationship Management “touch points"

PERSONALIZING MARKETING

One to One Marketing

  • Identify your prospects and customers.
  • Differentiate customers in terms of (1) their needs and (2) their value to your company
  • Interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships.
  • Customize products, services, and messages to each customer.

CUSTOMER EMPOWERMENT

CUSTOMER REVIEWS AND RECOMMENDATIONS

Attracting and Retaining Customers

Reducing Defection

  • Define and measure its retention rate
  • Distinguishes the causes of customer attrition and identify those can be managed better
  • Compare the lost profit equal to the customer’s lifetime value from a lost customer to the cost to reduce the defection rate

Retention Dynamics

Potentials, Prospects, first time customers, repeat customers, members, advocates (talks others about the company), Partners

  • Acquiring new customers can cost five times more than satisfying and retaining current ones. Itrequires a great deal of effort to induce satisfied customers to switch from their current suppliers.
  • The average company loses 10 percent of its customers each year.
  • A 5 percent reduction in the customer defection rate can increase profits by 25 percent to85 percent, depending on the industry.
  • Profit rate tends to increase over the life of the retained customer due to increased purchases,referrals, price premiums, and reduced operating costs to service.

MANAGING THE CUSTOMER BASE

  • Reducing the rate of customer defection
  • Increasing the longevity of the customer relationship.
  • Enhancing the growth potential of each customer through “share of wallet,” cross-selling, and up-selling
  • Making low-profit customers more profitable or terminating them
  • Focusing disproportionate effort on high-profit customers

Building loyalty

INTERACTING WITH CUSTOMERS

Forming Strong Customer Bonds

  • Create superior products, services, and experiences for the target market.
  • Get cross-departmental participation in planning and managing the customer satisfaction and retention process.
  • Integrate the “Voice of the Customer” to capture their stated and unstated needs or requirements in all business decisions.
  • Organize and make accessible a database of information on individual customer needs, preferences,contacts, purchase frequency, and satisfaction.
  • Make it easy for customers to reach appropriate company staff and express their needs, perceptions, and complaints.
  • Assess the potential of frequency programs and club marketing programs.
  • Run award programs recognizing outstanding employees.

Developing loyalty programs

Frequency programs (FPs)

Club membership program

Creating Institutional Ties

Win Backs

Customer Databases and Database Marketing

Customer Databases

Data Warehouses and Data Mining(extracting useful information)

Uses of Database

  • To identify prospects
  • To decide which customers should receive a particular offer.
  • To deepen customer loyalty
  • To reactivate customer purchases.
  • To avoid serious customer mistakes

The downside of database Marketing and CRM

  • Some situations are just not conducive to database management
  • Building and maintaining a customer database requires a large, well-placed investment.
  • It may be difficult to get everyone in the company to be customer oriented and use the availableinformation.
  • Not all customers want a relationship with the company.
  • The assumptions behind CRM may not always hold true.

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MNH, MKT 601, CH05-14th