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Creating Customer Value,

Satisfaction and Loyalty


Session 10
Subhadip Roy
Organizational Charts
eBay epitomizes the
Customer-Oriented Model
Determinants of Customer-Delivered
Value

Total
Product Personal
customer
value value
value
Customer-
delivered
value
Total
Monetary Energy
customer
cost cost
cost
Loyalty

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 Value Proposition

The cluster of benefits the company promises to deliver


Measuring Satisfaction

Periodic Surveys

Customer Loss Rate

Mystery Shoppers

Monitor competitive
performance
Maruti and Customer Satisfaction
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.
Quality

Conformance Performance
quality quality
Total Quality Management

TQM is an organization-wide
approach to continuously
improving the quality of
all the organization’s processes,
products, and services.
Maximizing Customer Lifetime Value

Customer
Profitability

Customer Lifetime
Equity Value
Customer-Product Profitability
Analysis
Estimating Lifetime Value

• Annual customer revenue: $500


• Average number of loyal years: 20
• Company profit margin: 0.10
• Customer lifetime value: $1000
Drivers of Customer Equity

Value
Equity

Brand Relationship
Equity Equity
Customer Relationship Management
Framework for CRM

Identify prospects and customers

Differentiate customers by needs


and value to company

Interact to improve knowledge

Customize for each customer


CRM Strategies

Reduce the rate of defection

Increase longevity

Enhance “share of wallet”

Terminate low-profit
customers

Focus more effort on


high-profit customers
Mass vs. One-to-One Marketing
Mass One-to-One
• Average customer • Individual customer
• Customer anonymity • Customer profile
• Standard product • Customized market
• Mass production offering
• Mass distribution • Customized
• Mass advertising production
• One-way message • Economies of scope
• Share of customer
• Economies of scale
Don Peppers and Martha Rogers, The One to One Future, 1993
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.
Describing Market Dynamics

Permanent Simple Customer


Capture Retention Migration
Markets Markets Markets
The Customer-Development
Process
Suspects

Prospects Disqualified

First-time Repeat
customers customers Clients Members

Partners
Ex-customers
Customer Loyalty Pyramid

More
Value,
Less
Customers
Levels of Relationship Marketing
Forming Strong Customer Bonds

Add financial
benefits

Add social
benefits

Add structural
ties
Database Key Concepts

• Customer database • Business database


• Database marketing • Data warehouse
• Mailing list • Data mining
Increasing Customer Share
Requirements
Using the Database

To identify prospects

To target offers

To deepen loyalty

To reactivate customers

To avoid mistakes
Thank You, Class

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