5-1 marketing management 5 creating customer value, satisfaction, and loyalty

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5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

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Page 1: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-1

MARKETING MANAGEMENT

5 Creating

Customer Value, Satisfaction, and

Loyalty

Page 2: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-2

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 both attract and retain

customers?

Page 3: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-3

A Customer-Oriented Model?

Page 4: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-4

The Value Proposition

The cluster of benefits thecompany promises to deliver

Page 5: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-5

Measuring Satisfaction

Periodic SurveysPeriodic Surveys

Customer Loss RateCustomer Loss Rate

Mystery ShoppersMystery Shoppers

Monitor competitive performance

Monitor competitive performance

Page 6: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

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Loyalty

A commitment to re-buy

or re-patronize a product

or service in the future.

Page 7: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-7

Building Loyalty

Partnership

Proactive

Accountable

Reactive

Basic

Page 8: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-8

Maximizing Customer Lifetime Value

Customer Profitability

Customer Equity

LifetimeValue

Page 9: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-9

Customer-Product Profitability Analysis

Page 10: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-10

Estimating Lifetime Value

• Annual customer revenue: $500

• Average number of loyal years: 20

• Company profit margin: 10

• Customer lifetime value: $1000

Page 11: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-11

Framework for CRM

Identify prospects and customers

Differentiate customers by needs and value to company

Interact to improve knowledge

Customize for each customer

Page 12: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

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CRM Strategies

Reduce the rate of defectionReduce the rate of defection

Increase longevityIncrease longevity

Enhance “share of wallet”Enhance “share of wallet”

Terminate low-profit customers

Terminate low-profit customers

Focus more effort on high-profit customersFocus more effort on high-profit customers

Page 13: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-13

Customer Retention

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

• The average customer loses 10% of its 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.

Page 14: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

5-14

Customer-Development Process

Prospects

Suspects

Disqualified

First-timecustomers

Repeatcustomers Clients Members

PartnersEx-customers

Page 15: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

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Reducing Customer Defection

• Define and measure retention rate.

• Distinguish causes of customer attrition.

• Estimate profit loss associated with loss

of customers.

• Assess cost to reduce defection rate.

• Gather customer feedback.

Page 16: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

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Forming Strong Customer Bonds

Add financialbenefits

Add socialbenefits

Add structuralties

Page 17: 5-1 MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

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Activity

Choose a business and show how

you would go about developing a

quantitative formulation that captures

the concept of customer lifetime value.