6 copyright © 2012 pearson education, inc. publishing as prentice hall6-1 value for customers

6

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall 6-1

Value for Customers


CHAPTER OBJECTIVES

1. What is customer value? How do consumers use it to make decisions?

2. When are customers satisfied? What are the benefits of having satisfied customers?

3. How do companies establish, develop, and enhance mutually beneficial relationships with customers?

4. What activities establish, develop, and maintain customer sales?


OBJECTIVE 1

What is customer value? How do

consumers use it to make decisions?

DEFINED


Customer Value is the difference

between the benefits a customer receives and

the total cost

incurred from acquiring,

using, and disposing

of a product.

EXPLAINED


Customer Value

Perceived Benefits

Perceived Costs

Perceived Benefits

APPLIED


PRODUCT BENEFITS

Benefits

APPLIED


PRODUCT COSTS

Costs

Maintenance

APPLIED


CUSTOMER VALUE

Service Benefits

Brand Benefits

Product Benefits

Price &OtherCosts

Customer Value


OBJECTIVE 2

When are customers satisfied? What are

the benefits of having satisfied

customers?

DEFINED


Customer Satisfaction is the

degree to which a product

meets or exceeds customer

expectations.

EXPLAINED


Customer Satisfaction

EXPLAINED



– A negative experience will result in the person being dissatisfied, and given the opportunity, they will defect to another product/service.

– With a neutral experience, the person can be satisfied because the product met expectations (barely); if another option presents itself, however, they will likely switch to a competing product.

– A positive experience will result in the person being delighted by the experience and product loyalty will be created.

APPLIED


CUSTOMER SATISFACTION

APPLIED


MEASURING CUSTOMER SATISFACTION


Internal External

JD PowerACSI

APPLIED


CUSTOMER LOYALTY

Degrees of Loyalty

No Loyalty

APPLIED


CUSTOMER LOYALTY

Consumers exhibit different degrees of loyalty. Some hold no loyalty to brands, instead, selecting the lowest price each time. Others exhibit loyalty to 2-3 different brands, choosing one based on varying criteria (“what am I in the mood for this time?”). But there are some buyers who exhibit high degrees of loyalty to specific brands and will only purchase that brand. Companies attempt to ensure that highly loyal customers remain that way, while at the same time encouraging those who exhibit loyalty some of the time, to become highly loyal.

Loyal customers are considered profitable customers, but they may not be the most profitable – nor are a company’s largest customers (those who purchase the most products) the most profitable. Large customers usually require additional resources and expect deals and promotions in order to remain a customer.

APPLIED


CUSTOMER LIFETIME VALUE

The present value of all profits expected to be earned in the future from a customer.

Customer Lifetime

Value=

Average Purchases per Year

X Profit Margin -

Cost to Service the Customer

APPLIED


CUSTOMER RETENTION

Current Customers

New Customers

Former Customers

APPLIED


CUSTOMER RETENTION

Companies seek to attract new customers in the hopes of growing their customer base and replacing customers who have defected. This is especially the case for those with low customer satisfaction ratings.

While recruiting new customers will always be important, taking care of current customers (to minimize defections) can be more profitable.

Old adage: It costs less to keep an existing customer than it does to recruit a new customer.

THINK

ABOUT

IT


SERVICE RECOVERY PARADOX

Highly effective service recovery can result

in higher levels of customer satisfaction

than in cases where a service

failure did not exist.


OBJECTIVE 3

How do companies establish, develop,

and enhance mutually beneficial

relationships with customers?

DEFINED


Relationship Marketing is the

organizational commitment to developing and

enhancing long-term, mutually beneficial

relationships with

profitable or potentially

profitable customers.

EXPLAINED


RELATIONSHIP MARKETING

Customer Relationships

Loyalty

Retention

APPLIED


RELATIONSHIP MARKETING

Added Value

Reduced Anxiety

Sense of Belonging


OBJECTIVE 4

What activities establish, develop, and

maintain customer sales?

DEFINED


Customer Relationship

Management is comprised of the

activities that are used to establish,

develop, and maintain

customer sales.

EXPLAINED


Customer Relationship Management

External Processes

Internal Processes

Gather Information

Use Information

EXPLAINED


Customer Relationship Management

Customer relationship management (CRM) includes the external and internal actions that an organization takes to develop relationships with customers.

External processes are those efforts designed to develop and maintain the relationship with the customer, including the collection of pertinent information from customers.

Internal processes are the management of information regarding customers through the use of specialized information processing systems. This process includes using the information collected from customers, as well as information on customers that the company already possess (such as sales volume, etc.)

APPLIED


DEVELOPING A RELATIONSHIP WITH CUSTOMERS INVOLVES A 4-STEP PROCESS

1. Identify customers – Includes collecting information about customers. This step has the company collecting standard information (demographics) and also seeking to determine purchase amounts. With this information, a company can often tailor additional product offerings to fit the customer’s needs.2. Differentiate customers – The key element in this step is to separate profitable (or potentially profitable) customers from those who create a loss. The company is trying to determine which customers are the most valuable.3. Establish dialogue – Here the company is establishing some type of interaction in order to improve customer relationships. These efforts can be undertaken on a personal level or via automated processes (such as websites requesting members to join).4. Customize products – After learning as much as possible about the customer, companies are then able to develop customized offerings. This provides customers with more valuable solutions and also builds goodwill.


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6 copyright © 2012 pearson education, inc. publishing as prentice hall6-1 value for customers

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