creating customer value, satisfaction and loyalty chapter: 5
TRANSCRIPT
Customer Perceived Value
“ It is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives”
Total customer value is the perceived monetary value of the bundle of economic, functional and psychological benefits customer expect from a market offering ( product value+service value+personnel value+image value)
Total customer cost : Monetary cost+Time cost+Energy cost+Psychic cost
Total Customer Satisfaction
Satisfaction is a feeling of pleasure that results from comparing product’s perceived performance with one’s expectations
Actual < Expected = Dissatisfaction
Actual > Expected = Delight
Actual = Expected = Satisfaction
Maximising customer Value
• The 80 : 20 principle• The concept of profitable customer –
whose revenue stream exceeds cost of servicing him
• Customer profitability analysis : different tiers
• Customer life time value: net present value of stream of future profits expected over the customer’s lifetime purchases
Cultivating Customer Relationships
• Mass customisation – ability of firm to meet requirements of each and every customer
• CRM: process of managing detailed information about customers and managing “customer touch point” to ensure customer loyalty
Attracting, Retaining and Growing Customers
Suspects(Potentials) Prospects First time customers Repeat customers Clients Members Advocates Partners
At any point customers – from first timers to partners can become inactive or ex-customers
Building Loyalty
1. Basic marketing: Sales men simply sells product2. Reactive marketing: Sales men sells product and
encourages customer to call up in case of any queries3. Accountable marketing: Sales men rings up the
customer asking for problems, suggestions and improvements
4. Proactive marketing: Salesmen contacts customer from time to time with suggestions about improved product used or new products
5. Partnership marketing: Company works continuously with customers to help improve their performance
Forming strong customer bonds
1. Adding financial benefits – e.g. Frequent flier program
2. Adding social benefits – e.g. TTL’s customer loyalty program
3. Adding structural ties – e.g. Magazine’s subscription
Customer database and Database marketing
Customer database is an organised collection of comprehensive information about individual customer or prospects that is accessible and actionable for marketing purpose
Database marketing is the process of building, maintaining and using customer databases and other databases for the purpose of contracting, transacting and building customer relationships
Cultural factors
Consumer behavior is influenced by culture, subculture and social class
Culture is values, rituals, beliefs that are passed from generation to generation
Subculture is alternate culture that moves parallel to culture in the same or opposite direction
Social stratification : SEC in India – Socioeconomic classification – on the basis of education and occupation of the chief wage earner – A1, A2,B1,B2, C,D,E1,E2
In rural areas SEC is based on occupation of the chief wage earner and the type of house – R1 to R4
Social factors
Reference groups - groups with which person has direct or indirect contact which affects his behaviour
Memberships groups – groups having direct influencePrimary groups - continuous and informal interactionSecondary groups – Less continuous and formal interactionAspiration group – hope to joinDissociative groups – whose values person rejectsFamily : blood or legal linkageFamily of orientation : Parents and siblingsFamily of Procreation: One’s spouse and kids
Personal factors
• Age and stage in the life cycle
• Occupation and economic circumstance
• Personality and self concept
- personality is set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli
• Lifestyle and values
Key psychological processes
Motivation:
• Sigmund Freud’s theory :”Psychological forces shaping people’s behaviour are largely unconscious”
• Maslow’s theory: “Human needs are arranged in an hierarchy”
• Herzeberg’s theory: “Dissatisfiers and Satisfiers”
Perception
• Selective Attention
• Selective distortion
• Selective retention
• Subliminal perception
Learning
• Permanent change in individual’s behaviour that rises from experience
• It is an interplay of drives, stimuli, cues, responses and reinforcement
Memory
• Short term – temporary repository of information
• Long term memory – permanent repository of information
Associative network memory model
• Long term memory has a set of nodes an links
• Nodes are stored information connected by links that vary in strength
• Nodes becomes activated when external information is encoded or internal information is retrieved from long term memory
The buying decision process : Five stage model
1. Problems Recognition – triggered by internal or external stimuli
2. Information search – sources of information - personal,commercial,public,experimental
3. Evaluation of alternatives – purchase intention – affected by attitude of others and unanticipated situational factors
4. Purchase decisions5. Post purchase behaviour – post purchase
satisfaction and post purchase dissonance
Purchase decisions
Noncompensatory models of consumer choice – the negative aspects of a product are not off set by its positive aspects as in compensatory models
Types of choice heuristics:1. Conjunctive : consumer sets minimum acceptable
cutoff for each attribute and choose the first option that meets the minimum requirements
2. Lexicographic : consumer chooses the best brand on the basis of its perceived most important attribute
3. Elimination by aspect: consumer compares brands on attribute selected probabilistically – based on attribute's importance
Level of Consumer Involvement
1. Elaboration Likelihood model : Central route and peripheral route to persuasion
2. Variety seeking buying behaviour
Business market v/s Consumer market
• Few and larger buyers• Close supplier –customer relationships• Professional purchasing• Several buying influences• Multiple sale calls• Derived demand• Fluctuating demand• Geographically concentrated buyers• Direct purchasing
Participants in business buying process
• Initiators
• Users
• Influencers
• Deciders
• Approvers
• Buyers
• Gatekeepers
Stages of buying process
1. Problem recognition2. General need recognition and product
specification3. Supplier search4. E-procurement5. Proposal solicitation6. Supplier selection7. Order routine specification8. Performance review
Levels of Market Segmentation
• Segment Marketing
• Niche Marketing
• Local Marketing
• Customerisation
Segmenting consumer markets
• Geographic Segmentation
• Demographic Segmentation
• Psychographic segmentation
• Behavioural segmentation : Occasions, Benefits, User status,Usage rate, Buyer readiness stage, Loyalty status, Attitude
Segmenting Business markets
• Demographic : Industry, company size, Location• Operating variables: Technology, User or
nonuser status, customer capabilities• Purchasing approaches: purchasing function,
power structure, nature of existing relationships, purchase polices, purchasing criteria
• Situational factors: urgency, specific application, size of order
• Personal characteristics: buyer seller similarity, attitudes towards risk, loyalty