e-marketing unit 2 2013/2014. creating customer value, satisfaction, & loyalty

E-MarketingUnit 2

MS. SAFAA S.Y. DALLOUL

2013/2014

Creating Customer Value, Satisfaction, & Loyalty

Customer Perceived Value

Consumers are more educated and informed than ever, and they

have the tools to verify companies' claims and seek out superior

alternatives.

How then do they ultimately make choices? Customers tend to be

value-maximizes.

Customer perceived value (CPV) 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 customers

expect from a given market offering.

Total customer cost is the bundle of costs customers expect to incur

in evaluating, obtaining, using, and disposing of the given market

offering, including monetary, time, energy, and psychic costs.


Customer perceived value is thus based on the difference between

what the customer gets and what he or she gives for different

possible choices.

The customer gets benefits and assumes costs.

Delivering High Customer Value Consumers have varying degrees of loyalty to specific brands,

stores, and companies.

Oliver defines loyalty as "A deeply held commitment to re-buy or

re- patronize a preferred product or service in the future despite

situational influences and marketing efforts having the potential

to cause switching behavior.

The key to generating high customer loyally is to deliver high

customer value.

Delivering High Customer Value The value proposition consists of the whole cluster of benefits the

company promises to deliver; it is more than the core positioning

of the offering.

For example, Volvo's core positioning has been "safety," but the

buyer is promised more than just a safe car; other benefits include

a long-lasting car, good service, and a long warranty period.

The value-delivery system includes all the experiences the

customer will have on the way to obtaining and using the offering.

Total Customer Satisfaction

Whether the buyer is satisfied after purchase depends on the

offer's performance in relation to the buyer's expectations.

In general, satisfaction is a person's feelings of pleasure or

disappointment resulting from comparing a product's perceived

performance (or outcome) in relation to his or her expectations.

Total Customer Satisfaction

If the performance falls short of expectations, the customer is

dissatisfied.

If the performance matches the expectations, the customer is

satisfied.

If the performance exceeds expectations, the customer is highly

satisfied or delighted.

Customer Expectations

How do buyers form their expectations?

From past buying experience, friends' and associates' advice, and

marketers' and competitors' information and promises.

Customer Expectations

If marketers raise expectations too high, the buyer is likely to be

disappointed. However, if the company sets expectations too low,

it won't attract enough buyers (although it will satisfy those who

do buy).

Some of today's most successful companies are raising

expectations and delivering performances to match.

Measuring Satisfaction

Many companies are systematically measuring customer

satisfaction and the factors shaping it.

For example, IBM tracks how satisfied customers are with each

IBM salesperson they encounter, and makes this a factor in each

salesperson's compensation.


A company would be wise to measure customer satisfaction

regularly because one key to customer retention is customer

satisfaction.

A highly satisfied customer generally stays loyal longer, buys more

as the company introduces new products and upgrades existing

products


Suppose customer satisfaction is rated on a scale from one to five.

At a very low level of customer satisfaction (level one), customers are likely to abandon the company and even bad-mouth it.

At levels two to four, customers are fairly satisfied but still find it easy to switch when a better offer comes along.

At level five, the customer is very likely to repurchase and even spread good word of mouth about the company.

The link between customer satisfaction and customer loyalty, however, is not proportional.


Periodic Surveys can track customer satisfaction directly.

Respondents can also be asked additional questions to measure repurchase intention and the likelihood or willingness to recommend the company and brand to others.

Companies can monitor the customer loss rare and contact customers who have stopped buying or who have switched to another supplier to learn why this happened.

A number of methods exist to measure customer satisfaction.


Companies can hire mystery shoppers to pose as potential buyers and report on strong and weak points experienced in buying the company's and competitors' products.

In addition to tracking customer value expectations and satisfaction, companies need to monitor their competitors' performance in these areas.

A number of methods exist to measure customer satisfaction.

Product and Service Quality

• Satisfaction will also depend on product and service quality.

• Quality is the totality of features and characteristics of a product

or service that bear on its ability to satisfy stated or implied needs.

• A company that satisfies most of its customers' needs most of the

time is called a quality company.

• Total quality is the key to value creation and customer satisfaction.

Product and Service Quality

Why do you think the TQM is an important?

Because total quality management is the key to value creati on and customer sati sfacti on.

Total Quality Management

• The quest to maximize customer satisfaction led some firms to adopt total quality management principles.

• Product and service quality, customer satisfaction, and company profitability are intimately connected.

Total quality management (TQM) is an organization-wide

approach to continuously improving the quality of all the

organization's processes, products, and services.

Total Quality Management

• Higher levels of quality result in higher levels of customer satisfaction, which support higher prices and (often) lower costs.

• Studies have shown a high correlation between relative product quality and company profitability.

Product Quality “Lead to” Company Profitability

Customer Relationship Management (CRM)

This is the process of managing detailed information about

individual customers and carefully managing all customer

"touch points" to maximize customer loyalty.

Attracting, Retaining, and Growing Customers

≡ Customers are becoming harder to please.

♦ They are smarter,

♦ More price conscious,

♦ More demanding,

♦ Less forgiving, and

♦ They are approached by many more competitors with equal or better

offers.

≡ It is not enough, however, to attract new customers; the

company must keep them and increase their business.

Building Loyalty

• How much should a company invest in building loyalty so that the costs do

not exceed the gains?

• We need to distinguish five different levels of investment in customer

relationship building:

Basic marketing. The salesperson simply sells the product.

Reactive marketing. The salesperson sells the product and

encourages the customer to call if he or she has questions,

comments, or complaints.

Building Loyalty

• We need to distinguish five different levels of investment in

customer relationship building:

Accountable marketing. The salesperson phones the

customer to check whether the product is meeting

expectations. The salesperson also asks the customer for

any product or service improvement suggestions and any

specific disappointments.

Building Loyalty



Proactive marketing. The salesperson contacts the customer

from time to time with suggestions about improved product

uses or new products.

Building Loyalty



Partnership marketing. The company works continuously

with its large customers to help improve their performance.

(General Electric, for example, has stationed engineers at

large utilities to help them produce more power.)

Building Loyalty

Most companies practice only basic marketing when their markets contain many customers and their unit profit

margins are small.

Discuss this Sentence

Creating Customer Value Online

Why do you think the customers purchasing from Online Store?

Creating Customer Value Online• Let’s face it. Customers do not come to shop at an online store

because it uses the latest technology or has stunning video and

graphics. They come hoping the store offers solutions to their

problems and needs. They are looking for value, as they see it!

• Customers arrive thinking in terms of activities and solutions, but too

often companies respond with products and services. While you may

be anxious to tell visitors about your product’s newest features or

your service’s great benefits, they simply want to know how you can

solve their problems.

Creating Customer Value Online• Companies who can help customers solve problems by

providing offerings which fulfill customer needs, not just a list

of features and benefits, will prevail because customers see

them as providing real value.

Value Chains Create Value

• Creating customer value is frequently illustrated as a value chain, a

series of steps that change raw inputs into finished goods and

services.

• A company creates value for its customers by adding unique features,

benefits, services, etc. at each step in this process.


• This is a linear value chain in that each step follows from the

previous one. Additions made at each step in the chain must be

seen by the customer as adding to the overall value to the

offering.


• The Changing Online Value Chain


• When moving online, the value chain changes from a linear flow of

physical goods and services to a multi-directional information flow.

• At each step in the production process, information is collected,

analyzed and distributed to others. Over and above the goods and

services themselves, this information can also be used to produce

real customer value.

Why the people purchase from online store

• Save time. Help people find the goods and services they want quickly

and easily.

• Lower risk. Provide complete information to help each customer make

the best buying decision for them.

• Things they love. Offer things people really want to have.

• Status. Create communities with special offerings not available to

everyone.


• All of these depend on having good information about products,

services, customers, markets and partners.

• Collecting, processing and distributing this information in ways your

customers find useful for themselves can be a powerful way to

create value.

Several ways to create customer value

• Releasing Trapped Value delivers increased efficiency. Creating more

efficient markets where people can find goods and services easier and

at better prices has been done many times online.

• eBay is a classic example which transformed the local Saturday garage

sale into a 24-hour worldwide marketplace.

• Providing new ways to do routine tasks also creates value, such as

offering immediate downloads for important documents rather than

have them sent by post.


• New-to-the-World Value creates something entirely new that

consumers will find useful and valuable. Who knew that we had to

carry a thousand songs in our pockets until the iPod™ was introduced

by Apple?

• Other ways to create new value include providing customized

offerings for each visitor, enabling people to build communities of

shared interests, and enabling collaboration among people separated

by time and distance.


• Combinations of different value creators can produce some of

the most powerful ways to create new value. The online world is

a flexible place where companies can try new offerings and

quickly see what works best.

• Combinations can be used to disrupt current pricing structures

while extending reach and access around the world.

Finding Places to Create Value

• Where does one go to find places to create value? An excellent place

is activities which are ready for a change from current practices such

as:

No one else is doing this

Unique experience for each visitor

Special prices, packaging, delivery

Use innovations from another business sector

Help frustrated consumers complete a process

Finding Places to Create Value

• Many of these activities also involve connections: within a company,

to outside partners, suppliers and competitors, and to customers.

Improving these connections with better information can create

lasting value.

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e-marketing unit 2 2013/2014. creating customer value, satisfaction, & loyalty

Documents

customer expectations

customer perceived value

high customer value

total customer satisfaction

total customer cost

perceived monetary value

value proposition

buyers expectations