Creating Customer Value and Customer

Relationships

Chapter Questions

What are customer value, satisfaction, and

loyalty, and how can companies deliver them?
What is the lifetime value of customers and
how can marketers maximize it?
How can companies attract and retain
customers and cultivate strong customer
relationships?
What are the pros and cons of database
marketing?

Eureka Forbes Gift of a Smile

Customer-Orientations

Customer Perceived Value

Customer perceived value is the difference
between the prospective customers
evaluation of all the benefits and all the costs
of an offering and the perceived alternatives.

Determinants of
Customer Perceived Value
Total customer benefit

Total customer cost

Product benefit

Monetary cost

Services benefit

Time cost

Personal benefit

Energy cost

Image benefit

Psychological cost

Applying Value Concepts

A firm can improve its offers in three ways:
1. By improving the economic, functional,
and psychological benefits of its product,
services, people, and/or image.
2. By reducing the buyers nonmonetary
costs by lesser time, energy, and
psychological investment.
3. By reducing the products monetary cost
to the buyer.

Steps in a
Customer Value Analysis

Identify major attributes and benefits that

customers value
Assess the qualitative importance of different
attributes and benefits
Assess the companys and competitors
performances on the different customer values
against rated importance
Examine ratings of specific segments
Monitor customer values over time

What Is Loyalty?
Loyalty is a deeply held commitment to rebuy or re-patronize a preferred product or
service in the future despite situational
influences and marketing efforts having the
potential to cause switching behavior.

Delivering Superior Value

Customer Value Management (CVM) by Tata
Steel through a cross-functional joint team of
the company and the customer has succeeded
in delivering superior customer value

Measuring Satisfaction

Periodic surveys
Customer loss rate
Mystery shoppers
Monitor competitive performance

Managing Customers
Dealing with negative experiences and recovering
customer goodwill:
1. Set up a 7-day, 24-hour toll-free hotline to
receive and act on customer complaints.
2. Contact the complaining customer as quickly as
possible to avoid negative word of mouth.
3. Accept responsibility for the customers
disappointment; dont blame the customer.
4. Use customer service people who are empathic.
5. Resolve the complaint swiftly and to the
customers satisfaction.

What is 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.

Maximizing Customer Lifetime Value

Customer Profitability
Customer Equity
Lifetime Value

Customer-Product Profitability
Analysis

Estimating Lifetime Value

Annual customer revenue:Rs.500

Average number of loyal years: 20
Company profit margin: 10
Customer lifetime value: Rs1000

What Is
Customer Relationship Management?
CRM is the process of carefully managing
detailed information about individual
customers and all customer touch points to
maximize customer loyalty.

Framework for CRM by Don

Peppers and Martha Rogers

Identify prospects and customers

Differentiate customers by needs and
value to company
Interact to improve knowledge
Customize for each customer

Customer Reviews and

Recommendations
The strongest influence on consumer choice
remains recommended by relative/friend.
With increasing mistrust of some companies
and their advertising, online customer ratings
and reviews and recommendations from
consumers are playing an important role.
Bloggers who review products or services,
online retailers who add their own
recommendations have also become important.

Attracting and
Retaining Customers

Reduce the rate of defection

Increase longevity
Enhance share of wallet
Terminate low-profit customers
Focus more effort on high-profit customers

The Marketing Funnel

Loyalty Programs

Copyright 2013 Dorling Kindersley (India) Pvt Ltd. Authorized adaptation from
the United States edition of Marketing Management, 14e.

Database Key Concepts

Customer database
Database marketing
Mailing list

Business database
Data warehouse
Data mining

Using the Database

To identify prospects
To target offers
To deepen loyalty
To reactivate customers
To avoid mistakes

Dont Build a Database When

The product is a once-in-a-lifetime purchase

Customers do not show loyalty
The unit sale is very small
The cost of gathering information is too high

For Review

What are customer value, satisfaction, and

loyalty, and how can companies deliver them?
What is the lifetime value of customers and
how can marketers maximize it?
How can companies attract and retain
customers and cultivate strong customer
relationships?
What are the pros and cons of database
marketing?