Building Customer Satisfaction, Value, and Retention

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Building Customer Satisfaction, Value, and
Retention
Marketing Management
Dr. Zafer Erdogan
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Kotler on Marketing

• It is no longer enough to satisfy customers.
  You must delight them.

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Defining Customer Value and Satisfaction

• Customer Perceived Value (CPV)
• Difference between
• Total customer value
• Total monetary value of economic, functional and
  psychological benefits associated with a product
  offering
• Total customer cost
• Total cost of evaluating, obtaining, using, and
  disposing of a given product offering

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Figure 3.1 Determinants of Customer Delivered
Value
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Defining Customer Value and Satisfaction

• Total Customer Satisfaction
• Satisfaction-feelings of pleasure or
  disappointment
• Expectations vs. perceived performance
• Customer Expectations
• Formed by past experiences, friends, marketers,
  competitors information and promises
• Delivering High Customer Value
• Value proposition-whole cluster of promises
  offered
• Value-delivery system-communications and channel
  experiences offered to customers
• Measuring Satisfaction

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Tools for Tracking and Measuring Customer
Satisfaction
Complaint and suggestion systems Customer satisfaction surveys Ghost Shopping Lost customer analysis A customer-centered organization makes it easy for customers to register suggestions and complaints. Some customer-centered companies establish hot lines with toll-free numbers. Companies are also using Web sites and e-mail for quick, two-way communication. Although customers are dissatisfied with one out of every four purchases, less than 5 percent will complain. Most customers will buy less or switch suppliers. Responsive companies measure customer satisfaction directly by conducting periodic surveys. Hire people to pose as potential buyers and report on positive and negative experiences. Contacting customers that have switch to competitors offerings and learn why this has happened
See text for complete table
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Delivering Customer Value and Satisfaction

• In a hypercompetitive environment of these days,
  winning companies need to create and deliver
  superior value.
• Value Chain (Michael Porter)
• Every firm is a collection of activities
• Primary activities inbound logistics-operations-o
  utbound logistics-marketing and sales-services
• Support activities procurement-tech
  development-HRM-firm infrastructure
• The task is to examine costs and performances of
  each value-creating activity and look for ways to
  improve it.
• Benchmarking-Best of class practices of best
  companies

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Figure 3.3 The Generic Value Chain
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Delivering Customer Value and Satisfaction

• The firms success depends not only each dept
  performance but also how well they are
  coordinated
• Usually, every dept cares their interest not the
  firms
• Solution!
• Emphasis on Core Business Processes such as
• The market sensing process
• The new offering realization process
• The customer acquisition process
• The customer relationship management process
• The fulfillment management process

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Delivering Customer Value and Satisfaction

• The Value Delivery Network (Supply Chain)
• Companies need to look beyond their operations to
  gain competitive advantage
• by partnering with their suppliers and
  distributors to create superior Supply Chain

Levi Strausss Value-Delivery Network
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Attracting and Retaining Customers

• Partner relationship management (PRM)
• Implies working with partners
• Customer relationship management (CRM)
• Process of managing detailed info about each
  customer and carefully managing all the customer
  touch-points with the aim of maximizing their
  loyalty.

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Attracting and Retaining Customers

• Attracting Customers
• Computing the Cost of Lost Customers
• Customer churn, gain customers only to lose many
  others like adding water to a leaking pot
• Customer defection rate, the rate at which
  companies lose customers
• Lifetime value, the present value of the profit
  stream could have been realized if the customer
  had not defected prematurely.

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Attracting and Retaining Customers

• Measuring Customer Lifetime Value (CLV)
• CLVAnnual customer revenue (x) Av. number of
  loyal years (x) company profit margin
• So, do we need for Customer Retention?
• Yes!
• Acquiring a new customer costs 5 times more
• The average company loses 10 of its customers
• 5 reduction in the defection rate can increase
  profits by 25-85
• The customer profit rate tends to increase over
  the life of the retained customer

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VIDEO CASE CUT IT OUT

• Please read the case before coming to class which
  is on p.88 !..