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Kotler • KellerPhillip Kevin Lane
Marketing Management • 14e
Creating Long-term Loyalty Relationships
Chapter 5
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Discussion Questions1. What are customer value, satisfaction, and
loyalty, and how can companies deliver them?
2. What is the lifetime value of customers, and how can marketers maximize it?
3. How can companies attract and retain the right customers and cultivate strong customer relationships?
4. What are the pros and cons of database marketing?
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Customer Value, Satisfaction, and Loyalty
Holistic Marketing• Inform• Engage• Energize
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Figu
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5.1 Traditional Organization vs.
Customer-Oriented Organization
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Customer Perceived Value
Total Customer Cost
Total Customer Benefit
Customer-perceived Value
Functional
Economic
Psychological
Evaluating
Obtaining
Using
Disposing
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Figu
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5.2
Customer- perceived
value
Total customer benefit
Total customer cost
Product benefit
Monetary cost
Services benefit
Timecost
Personal benefit
Energy cost
Imagebenefit
Psychologicalcost
Determinants of Customer Perceived Value
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Value Concepts - Caterpillar
Worth to farmer:$20,000
Cost to produce: $14,000
Profit Price Customer Value
$6,000 $20,000 -0-
5,000 19,000 $1,000
4,000 18,000 2,000
3,000 17,000 3,000
2,000 16,000 4,000
1,000 15,000 5,000
-0- 14,000 6,000
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Choice Processes and Implications
Lowest purchase price wins.
Friends with salesperson
Defined
“A deeply held commitment to rebuy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.”
-- Oliver
Customer Loyalty
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Value Proposition
Core positioning: • Safety
Volvo
Other benefits: • Good performance• Design• Environmentally friendly
Defined
A person’s feelings of pleasure or disappointment that result from comparing a product’s perceived performance to (or outcome) to expectations.
Satisfaction
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Customer Satisfaction
Expectations
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Customer Expectations
Expectations
Previous purchasesFriends advice
Marketers’ / competitors
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Monitoring Satisfaction
Customer Complaints
Measurement Techniques
Influence of Customer Satisfaction
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Measurement Techniques
Customer Loss Rate
Mystery Shopper
Surveys
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Influence of Customer Satisfaction
Customer satisfaction
Speed of communication
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Customer Complaints
25%Dissatisfied
5%Complain
95%Stop buying
54% - 70%Buy again if resolved
95%If resolved quickly
Tell 5 people
Tell 11people
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Product and Service Quality
Performance Conformance
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Maximizing Customer Lifetime Value
20% of Customers
80% of Profits
Customers
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Customer Profitability
Customer Lifetime Value
Customer Profitability Analysis
Profitable
Unprofitable
Defined
A person, household, or company that over time yields a revenue stream exceeding by an acceptable amount the company’s cost stream for attracting, selling, and serving that customer.
A Profitable Customer
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Figu
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5.3
Customer-Product Profitability Analysis
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Cultivating Customer Relationships
Customer Information
• Differentiate
• Customize
• Personalize
• Share
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Customer Relationship Management (CRM)
Personalizing Marketing
Customer Empowerment
Customer Reviews & Recommendations
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Personalizing Marketing
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One-to-One MarketingDifferentiate customers
Interact with each customer
Customize
Identify prospects and customers
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Customer Empowerment
Brand Evangelists
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Customer Reviews/Recommendations
Customer ratings
Negative reviews
Create Buzz
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Customer RetentionAcquiring new customers costs
5x morethan retaining current customers The average company loses
10%Of its customers yearly
Reducing customer defections by 5% can increase profits from
25% to 85%
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Attracting and Retaining Customers
Reduce Defections1.Define and measure2.Determine causes3.Compare CLV to costs
Retention Dynamics
Manage customer base
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Figu
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5.4 The Marketing Funnel
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Building Loyalty
Develop loyalty programs
Interact with customers
Create institutional ties
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Databases & Database MarketingCustomer databases• Name, address, telephone #• Purchase history• Demographics• Psychographics• Mediagraphics
Data Warehouses
Data mining