Building Customer

1
Chapter 3

• Building Customer
• Satisfaction, Value,
• and Retention

2
Defining Values and Satisfaction

• Customer Delivered Value difference between
  total customer value and total customer cost
• Satisfaction persons feelings of pleasure or
  disappointment resulting from comparing a
  products perceived performance in relation to
  his/her expectations.

3
Customer Delivered Value

• Total customer value
• Product value
• Service value
• Personnel value
• Image value

• Total customer cost
• Monetary cost
• Time cost
• Energy cost
• Psychic cost (Cognitive dissonance)

4
Implications of customer value analysis

• The customer can use value-price ratios to
  compare offers.
• The seller knows where he ranks in the buyers
  mind.
• Assumption Customers will buy from whoever
  offers the highest delivered value

5
Does this model (assumption) work in reality?

• Not all the time as
• Customer is locked by contract.
• Customer adheres to cheaper price
• L-T relations with other suppliers

6
Customer Satisfaction

• Perceived performance VS Expectation
• Expectation is based on past buying experience,
  friends advice, marketers and competitors
  information and promises.

7
Tools for Tracking and Measuring Satisfaction

• Complaint and suggestion systems e.g. MK Suki
• Customer satisfaction surveys
• Ghost Shopping e.g. Chesters Grill
• Lost customer analysis (Exit interviews, Customer
  loss rate)

8
Delivering Customer Value and Satisfaction

• Value chain
• Core business processes include
• - Market sensing
• - New product realization
• - Customer acquisition
• - Customer Relationship Management (CRM)
• - Fulfillment management
• Value-delivery networkvalue chains of
  stakeholders

9
Attracting and Retaining Customers

• Is the cost of attracting a new customer higher
  than the cost of retaining a customer?

Statistically, the cost of attracting a new
customer is estimated to be 5 times the cost of
keeping a current customer happy.
10
Attracting and Retaining Customers (2)

• Attracting customers
• Importance of customer retention
• Retaining Computing the cost of lost customers
• Measuring Customer Lifetime Value
• Relationship marketing

11
Attracting and Retaining Customers (3)

• Attracting customers harder than b4
• Importance of customer retention
• Highly satisfied customer buys more of the
  companys product.
• He/she carries good word-of-mouth.
• He/she pays less attention to competing brands.
• He/she costs less to serve than new cust.

12
Retaining Computing the cost of lost customers

• Easy way to calculate the cost of lost customers
  is on pp.73.
• 4 steps to reduce the cost of lost customers.
• 1st Define and measure the retention rate
• 2nd Distinguish the causes of customer attrition
  and identify the customers that can be managed
  better

13
Retaining Computing the cost of lost customers
(2)

• 4 steps to reduce
• 3rd Estimate how much profit the company loses
  when it loses customers
• Customer Lifetime Value (CLV) the present value
  of the profit stream that the company would have
  realized on a customer had not defected
  prematurely.

14
Retaining Computing the cost of lost customers
(3)

• 4 steps to reduce
• 4th figure out how much it would cost to reduce
  the defection rate
• Cost lt lost profit, adopt the plan

Measuring CLV

• Read pp.75-76

15
Relationship Marketing
Suspects

Prospects
1st-time customers
Repeat Custs
Clients
Advo
Prtnrs
Disqualified prospects
Inactive or Ex-customers
16
5 Levels in Customer-Relationship Building

• Basic marketing transactional marketing
• Reactive marketing customer activates sales
• Accountable marketing company activates sales
• Proactive marketing company foresees what
  customer wants
• Partnership marketing company and customer work
  2gether to achieve the best result for both

17
Questions???

• If a companys profit margin is small, and the
  company has many customers what level of
  customer-relationship building should be adopted
  by this company?

18
3 Customer Value-Building Approaches

• Adding financial benefits
• Frequency marketing program (FMPs) e.g. Thai
  Airway's mileage cards, DTACs points, Citibanks
  monthly points
• Club Marketing e.g. Lancomes membership cards,
  Dokyas membership cards

19
3 Customer Value-Building Approaches (2)

• Adding Social Benefits to recognize the name and
  wants of each individual customer/client
• e.g. Pizza Hut tries to personalize service
• Adding Structural Ties to force customers to
  repeat purchase
• e.g. providing special equipment

20
Customer Profitability

• A profitable customer is a person, household, or
  company that over time yields a revenue stream
  that exceeds by an acceptable amount the
  companys to attract them.

21
Customer Profitability (2)

• 20/80 rule the top 20 of the customers may
  generate as much as 80 of the companys profits
• 20/80/30 rule the top 20 of customers generate
  80 of the company profits, half of which are
  lost serving the bottom 30 of unprofitable
  customers
• Implication Fire the worst customers to increase
  profits

22
Implementing TQM

• Total quality management (TQM) is an
  organization wide approach to continuously
  improving the quality of all the organizations
  processes, products, and services.

23
Quality

• Quality is totality of features and
  characteristics of products or service which can
  satisfy customers expressed or implied needs.
• 1. Performance Quality
• 2. Conformance Quality

24
To deliver high quality of products or services

• Correctly identify customers needs.
• Communicate customers need to product designers.
• Fill in the order correctly and on time.
• Check for customers correct use of the product.
• Stays in touch with customers.
• Convey product or service improvement idea to the
  appropriate department.