MARKETING STRATEGY

5 Creating

Customer Value, Satisfaction, and Loyalty

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Organizational Chart

Successful marketing companies follow the chart where customers are at the top; next in importance are front line people who meet, serve, and satisfy customers; under them are middle managers, whose job is to support the front-line people; and at the base is top management, whose job is to hire and support middle managers.Even managers at every level must be personally involved in knowing, meeting and serving customers

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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.

Total customer Value: perceived momentary value of the bundle of economic, functional and psychological benefits customers expect from a given offering.

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Loyalty

A deeply held commitment to re-buya 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 the

company promisesto deliver (BMW – ‘The ultimate

driving machine’, Red Bull – ‘Giving winds’)

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Total Customer Satisfaction

Satisfaction: is a person’s feelings (attitudes) of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his / her expectations.

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Measuring Satisfaction

One key to customer retention is customer satisfaction; a satisfied customer stays loyal, longer, buys more, talks favorably, and is less price sensitive.

Periodic surveys; respondents are asked questions

Monitor Customer loss rate; contact customers who have stopped buying

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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Quality

Conformance to requirements Performance level (e.g. Lexus provides

higher performance quality than a Hyundai; better ride, faster, lasts longer)

However, both may offer the same conformance quality if all units deliver the promised quality.

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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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Maximizing Customer Lifetime Value

Customer profitability: is a person, household, or company that over time yields sufficient revenue.

Customer equity: the consumer’s objective assessment of the utility of an offering based on perceptions. The more loyal the customers are, the higher the customer equity.

Lifetime value

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Framework for CRM

Stronger bonds with their customers Identify prospects and customers; maintain reach

customer database. Differentiate customers by needs and value to

company; spend proportionately more effort on the most valuable customers.

Interact to improve knowledge about individual needs and to build stronger relationships.

Customize products, services and messages for each customer

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CRM Strategies (cont/d)

Reduce rate of defection; selecting and training employees to be knowledgeable and friendly increases the likelihood that all questions from customers will be answered satisfactorily

Increase long life; being involved with the company Enhance share of wallet; sells more of a product and

other supplement products Terminate low-profit customers or make them more

profitable Focus more effort on high-profit customers

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Table 5.1 Mass vs. One-to-One MarketingMass 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

More companies recognize the importance of satisfying and retaining customers.

Acquisition of customers can cost 5 times more than retaining current customers.

The customer profit rate increases over the life of a retained customer.

The average company loses 10% of its customers every year.

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Describing Market Dynamics; How easily & often customers can enter and leave

Prospects can be converted into first-time customers then into repeat and then into clients (special and knowledgeable treatment)

Permanent capture markets; Once a customer always a customer

Simple retention markets; customers can be lost after each period

Customer migration markets; customers can leave and come back

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Building Loyalty

Different levels of investment in customer relationship building

Basic: the SP simply sells the product Reactive: sells and encourages the customer( by calling

for questions, comments or complaints) Accountable: check if the product is meeting

expectations, give suggestions for improvement Proactive: the SP calls customers from time to time with

suggestions and new products Partnership: work continuously with its large customers

to improve performance

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Database Key Concepts

Customer database: collection of comprehensive information about customers

Database marketing: building, maintaining & using customer database

Mailing list: set of names, addresses & telephone numbers

Business database: business customers’ past purchases – volume, prices & profits

Data warehouse: personnel can capture, query, and analyze the data

Data mining: mktg statisticians can extract useful information about individuals, trends and segments from the mass of data

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Using the Database

To identify prospects through response features To target offers by setting up criteria describing

the ideal target market To deepen loyalty by remembering customer

preferences To reactivate customers by sending birthday and

anniversary cards To avoid mistakes