chapter three marketing mngmt

7/29/2019 CHAPTER THREE Marketing Mngmt

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Creating Customer, ValueSatisfaction and Loyalty

Ch # 3MARKETING MANAGEMENT


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Copyright 2009, Prentice-Hall, Inc. 4-2

Chapter Objectives

Able to understand how companies delivercustomer value, satisfaction, and loyalty

To Understand the important of lifetimevalue of a customer towards marketers

Understand How companies able tocultivate strong customer relationships?

To understand the important of databasemarketing in customer relationshipmanagement


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5-3

CUSTOMER VALUE

The level of priority the

customer gives to a product.


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5-4

CUSTOMER SATISFICATION

When the customer perceiveexpected value

from the product is called

customer satisfaction.


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Customer Value Analysis Steps

1. Identify the major attributes and benefits thatcustomers value

2. Assess the quantitative importance of the

different attributes and benefits3. Assess the companys and competitors

performances on the different customer valuesagainst their rated importance

4. Examine how customers in a specific segmentrate the companys performance against aspecific major competitor on an individualattribute or benefit basis

5. Monitor customer values over time


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3-6

Determinants of

Customer

Perceived Value

(CPV)


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5-7

The Value Proposition

The whole cluster

of benefits thecompany promises

to deliver


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5-8

The Value Proposition - Example


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Delivering High Customer Value

2. Value delivery system


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Total Customer Satisfaction:Customer satisfaction depends on the offers

performance that meets customer expectation.

1.IF the performance matches the expectations, the

customer is satisfied.

2. IF the performance exceeds the expectations , the

customer is highly satisfied or delighted.


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5-11

SATISFICATION

A persons feelings of pleasure

or disappointmentthat result from comparing

a products perceived

performance (or outcome)to expectations.


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How do Buyers form their

ExpectationsExpectations result from past buying experience;

friends and associates advice and marketers

and competitors information and promises.

1.If marketers raise expectations TOO HIGH, the

buyer is likely to be DISAPPOINTED.

2.If the company sets expectations TOO LOW, it

WONT ATTRACT enough buyers.


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5-13

Measuring Satisfaction

Periodic Surveys

Customer Loss Rate

Mystery Shoppers

Monitor competitive

performance


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Measurement Techniques

Periodic Surveys is way to measure the customersatisfaction.

Customer loss rate also tells about the customersatisfaction.

Questionnaire from customers who have stoppedbuying or who have switched to another supplierto find out Why?

Finally, companies can hire mystery shoppers to

pose as potential buyers and report on strong andweak points experienced in buying the companysand competitors products.


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Monitoring Satisfaction

Companies should measure systematically that how wellthey treat with the customers, identifying the factorsshaping satisfaction, and making changes in their operationsand marketing as a result.

Monitoring satisfaction is very important because one keyto Customer Retention is Customer Satisfaction.

A highly satisfied customer generally stays loyal longer, buysmore as the company introduces new products andupgrades existing products, talks favorably to others about

the company and its products, pay less attention tocompeting brands and is less sensitive to price, offersproducts or service ideas to the company, and costs less toserve than new customers.

High customer satisfaction has also been linked to higher

returns and lower risk in the stock market.


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Rated Customer Satisfaction on a Scale From

One To Five

1. At a level one, customers are likely toabandon the company and even bad-of-

mouth.

2. At level two to four, customers are fairlysatisfied but still find it easy to switch when a

better offer comes along.3. At level five, the customers is very likely to

repurchase and even spread good word ofmouth about the company


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5-17

Product and Service Quality

Quality is the totality of features and

characteristics of a product orservice that bear on its

ability to satisfy

stated or implied needs.


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Quality

CONFORMANCE QUALITY:

If the product is giving its

promise quality then it is called conformance quality.

PERFORMANCE QUALITY:

Quality that is based on the

product features is called performance quality.


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5-19

Total Quality Management

TQM is an organization-wide

approach to continuouslyimproving the quality of

all the organizations processes,

products, and services.


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Marketers Roles in Delivering

Quality Correctly identifying customers needs and requirements

Communicate customer expectations properly to product

designers

Be sure orders are filled correctly and on time Provide customers with proper instructions, training, and

technical assistance

Stay in touch with customers after the sale

Gather customer ideas for improvements and convey

them to the appropriate departments


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5-21

Drivers of Customer Equity

Value equity

Brand equity

Relationship equity


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Maximizing Customer Life Time Value

CLV is the net present value of the cash flowsattributed to the relationship with a customer.

The well known 20-80 rule says that the top 20 of

customers often generates 80% or more of thecompanys profit.

The least profitable 10% to 20% of customers , on

the other hand, can actually reduce profits between

50% and 200% per account, with the middle 60% to70% breaking even.
http://en.wikipedia.org/wiki/Net_present_valuehttp://en.wikipedia.org/wiki/Net_present_value


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Maximizing Customer Life-Time Value

Customer Profitability

A profitable customer is a

person, household, or company

that over time yields a revenue

stream that exceeds by an

acceptable amount thecompanys cost stream of

attracting, selling, and servicing

that customer.

Customer profitability can beassessed individually, by market

segment, or by channel.

Most companies fail to

measure individual customer

profitability.

Customer

Profitability

Customer

Equity

Lifetime

Value


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MAXIMIZING CUSTOMER LIFETIME VALUE

Customer Profitability Analysis

Customer 1 is very profitable.

Customer 2 is mixed profitability.

Customer 3 is a losing customer.

What can the company doabout customers 2 and 3?

It can raise the price of its

less profitable products or

eliminate them.

It can try to sell them its

profit-making products.

It can encourage

customer 3 to switch to

competitors.

Profitability Analysis


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MAXIMIZING CUSTOMER LIFETIME VALUE

Customer profitability analysis(CPA) is best conducted with the

tools of an accounting technique

called Activity-Based Costing

(ABC).

Platinum customers (most

profitable).

Gold customers

(profitable).

Iron customers (low

profitability but desirable).

Lead customers

(unprofitable and

undesirable).

Profitability Analysis


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Cultivating Customer Relationships

Customer relationship management (CRM) isthe process of carefully managing detailed information about

individual customers and all customer touch points to

maximize customer loyalty.

Customer relationship management enables companies

to provide excellent real-time customer service through

the effective use of individual account information.

Touch pointany occasion on which a customer

encounters the brand and product.


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Cultivating Customer RelationshipOne To One Marketing

One-to-one marketing is a customer relationshipmanagement (CRM) strategy emphasizingpersonalized interaction with customers.

Four Step framework for one to one marketing

Identify your prospects and customers

Differentiate customers in terms of their needs and their value toyour company

Interact with individual customers to improve your knowledgeabout their individual needs and to build stronger relationships

Customize products, service and messages to each customers.
http://searchcrm.techtarget.com/definition/CRMhttp://searchcrm.techtarget.com/definition/CRM


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5-28

Framework for CRM ( CRM Steps)

Identify prospects and customers

Differentiate customers by needsand value to company

Interact to improve knowledge

Customize for each customer


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Cultivating Customer Relationship /

CRM Strategies

1. Reducing the rate of customer defection

2. Increasing the longevity of the customer relationship

3. Enhancing the growth potential of each customer

through share-of- wallet, cross-selling and up-

selling

4. Making low profit customers more profitable orterminating them

5. Focusing disproportionate effort on high-value

customers


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5-30

CRM Strategies

Reduce the rate of defection

Increase longevity

Enhance share of wallet

Terminate low-profitcustomers

Focus more effort on

high-profit customers


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Attracting and Retaining Customers

Five levels of investment in customer relationship

building.

1. Basic Marketing2. Reactive Marketing

3. Accountable Marketing

4. Proactive Marketing5. Partnership Marketing


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5-32

Building Loyalty

Partnership

Proactive

Accountable

Reactive

Basic


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Forming Strong Customer Bonds

The basics

Cross departmental participation

Integrate the voice of the customer into allbusiness decisions

Create superior offering for the targetmarket

Organize and make a accessible a database of customer information


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5-34

Forming Strong Customer Bonds

Add financial

benefits

Add social

benefits

Add structural

ties

FrequencyPrograms(FPs))

Create long term contracts Charge lower price to high volume

customer Turn product into long term service


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Reduce Customer Defection

Define and measure retention rate Distinguish causes of customer attrition

Estimate profit loss associated with loss of

customer

Assess cost to reduce customer defection

Gather customer feedback

Cultivating Customer Relationship


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5-36

Customer-Development Process

Prospects

Suspects

Disqualified

First-time

customersRepeat

customersClients Members

PartnersEx-customers


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5-37

Loyalty

A commitment to re-buy

or re-patronize a product

or service in the future.


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Building Loyalty

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 onindividual customer needs, preferences, contacts, purchasefrequency and satisfaction.


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Make it easy for customers to reach appropriatecompany personnel and express their needs,perceptions, and complaints.

Assess the potential of frequency programs and clubmarketing programs.

Run award programs recognize outstandingemployees

Building Loyalty


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Customer Database:

A customer database is an organized

collection of comprehensive information about individual

customers or prospects that is current, accessible, and

actionable for such marketing purposes as lead generation,

lead qualification, sale of a product or service, or

maintenance of customer relationships.

Database Marketing:

Data base marketing is the process

of building, maintaining and using customer databases and

other data bases to contact, transact, and build customer

relationship.


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Data Warehouse:

Where marketers can capture,query, and analyze it to draw inferences aboutan individual customers needs and responses.

Data Mining:Through data mining marketing

statisticians can extract useful information

about individual trends, and segmentsfrom the mass of data.


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Use of Database

1. To identify prospects

2. To decide which customer should receive aparticular offer

3. To deepen customer loyalty

4. To reactive customer purchase5. To avoid serious customer mistakes


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Cases in which Customer Database

would not be Worthwhile

1. When the product is a once-in-a-lifetime purchase.

For example: A Grand Piano.

2. When customer show little loyalty to a brand.

3. When the units sale is very small.

For Example: A Candy Bar.

4. When the cost of gathering information is too high.


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Four problem that prevent a firm

effectively using CRM

Large Investment

Difficulty in getting every one customer

oriented Not all customers want an ongoing

relationship

Assumption behind CRM may not alwayshold true


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Acquiring the right

customer

Crafting the right

value proposition

Instituting the best

processes

Motivating

employees

Learning to retain

customer

CRM Imperative

You Get It When

Have identified most

valuable customers

Have calculated

share of their wallet for

goods/services

Have studied what

products/services

customers need today,

tomorrow

Have surveyed what

competitors offer

today, tomorrowHave spotted what

products/services we

should offer

Have researched the

best way to deliver

products/services to

customers

Including alliance

need to strike, tech

need to invest, andservices capabilities

that need to be

developed or acquired

Know what tools our

employees need to

use to foster customer

relationships

Have identified HR

systems needed to

boost employee loyalty

Have learned why

customers defect and

how to win them back

Have analyzed what

competitors do to win

your high value

customersSenior management

monitors customer

defection metrics

CRM Technology Can Help

Analyze customer

revenue & cost data toidentify current and

future high value

customers

Target direct-

marketing efforts

better

Capture relevant

product/servicebehavior data

Create new

distribution channels

Develop new pricing

models

Build communities

Process transaction

fasterProvide better info to

the front line

Manage logistic and

supply chain more

efficiently

Catalyze collaborative

commerce

Align incentives and

metricsDeploy knowledge

management systems

Track customer

defection and retentionlevels

Track customer

service satisfaction

levels

Source: Darrel K., Reichheld F., and Schefter P., Avoid the Four Perils of CRM Harvard Business Review (Feb, 2002) pg. 106


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It is no longer enough

to satisfy customers.

You must delight

them.

Kotler on

Marketing

chapter three marketing mngmt

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