Chapter 3

Building
Customer
Satisfaction,
Value,
and Retention
PowerPoint by Yu Hongyan
Business School of jJilin University
Prof.Yu Hongyan,JLU

Agenda

Deliver customer value and

satisfaction.
Factors to make a high performance
business.
How to attract and retain customers.
How to improve both customer and
company profitability.
Prof.Yu Hongyan,JL

1. Customer Value and

Satisfaction

Customers seek to maximize value by:

estimating which offer (product/firm)

delivers the most value
forming an expectation of value and
acting upon it (purchase)
evaluating their usage experience against
the expectations

Satisfaction results when expectations

are equaled or surpassed.
Prof.Yu Hongyan,JL

1. Customer Value and Satisfaction

(contd)

Customer Value

Figure 2-1: Determinants of Customer Delivered Value

Prof.Yu Hongyan,JL

1. Customer Value and Satisfaction

(contd)

Discussion Scenario
Sales declined of Wal-Mart since
some Depot opened in your
University
What specific changes might you
make in your business to increase the
total customer value offered, or to
decrease the total costs incurred?
Prof.Yu Hongyan,JL

1. Customer Value and Satisfaction

(contd)

Satisfaction
Satisfaction is defined as . . .
a persons feelings of pleasure or
disappointment resulting from comparing a
products perceived performance (or outcome)
in relation to his or her expectations.

Prof.Yu Hongyan,JL

1. Customer Value and Satisfaction

(contd)

To maximize satisfaction . . .

Dont exaggerate the product /

services capabilities in advertising or
other communications

Dissatisfaction will result

FTC may become involved???

Dont set expectations too low

Market size will be limited

Prof.Yu Hongyan,JL

1. Customer Value and Satisfaction

(contd)
Per
fo

rma

nce

Strong
Satisfaction
Low

s
n
o
i
t
a
t
c
e
Exp
Satisfied or
Neutral

s
n
o
i
t
a
t
c
e
Exp

Low

Dissatisfaction
Per
form
a

Market Size
Prof.Yu Hongyan,JL

nce

Satisfaction Tradeoffs

High

High
8

1. Customer Value and Satisfaction

(contd)

The definition of loyalty

Most of companies aim for high

customer satisfaction, which creates
an emotional bond with the
brand, not just a rational
preference.
The result is high customer loyalty

Prof.Yu Hongyan,JL

ACSI

Prof.Yu Hongyan,JL

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2. High Performance
Business
Set strategies to
satisfy key...

Stakeholders

By improving
critical business...
and
aligning...

Figure 2-2:
The HighPerformance
Business

Processes

Resources

Organization

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3. Customer Retention
On the Lands
End Web site,
customers can
click a button
to chat with a
service
representative

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3. Customer Retention
(contd)

Reducing customer churn

(defection) is highly desirable

Define and measure retention rate

Identify causes of attrition
Estimate profit lost from customer
defection (customer lifetime value)
Estimate cost to reduce defection;
take appropriate action
Prof.Yu Hongyan,JL

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3. Customer Retention
(contd)

Discussion Scenario

A company lost 6.5% of its 48,000 clients last

year solely due to missed delivery deadlines.
Each account averaged $35,000 in annual
revenues. Acquiring a new customer costs $125,
five times more than it costs to satisfy / retain
existing clients.

(1)alculate how much profit is being lost annually,

assuming an 8% profit margin.
(2) Calculate and compare the acquisition cost to what
it would cost to retain/satisfy clients.

Prof.Yu Hongyan,JL

14

3. Customer Retention
(contd)
Drivers of Customer
Equity

Brand
Equity

Customer
Focus

Value
Equity

Relationship Equity

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3. Customer Retention
(contd)
Customer Development

Suspects

First-time

Prospects customers

Disqualified
prospects

Repeat
customers

Clients

Inactive or
ex-customers

Prof.Yu Hongyan,JL

Advocates Partners

Why
Process
?
16

4. Strong Customer Bonds

Keys to Success

Adding Financial
Benefits
Adding Social
Benefits
Adding Structural
Ties

Frequency
programs
Club
memberships

Prof.Yu Hongyan,JL

17

4. Strong Customer Bonds

(contd)
The U.S. Harley
Davidson site
promotes the
benefits of
joining H.O.G.
(Harley Owners
Group)

Prof.Yu Hongyan,JL

18

4. Strong Customer Bonds

(contd)
Keys to Success

Adding Financial
Benefits
Adding Social
Benefits
Adding Structural
Ties

Personalize
customer
relationships
Give an example of
a local business
that has added
social benefits

Prof.Yu Hongyan,JL

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4. Strong Customer Bonds

(contd)
Keys to Success

Adding Financial
Benefits
Adding Social
Benefits
Adding Structural
Ties

Create long-term
contracts
Charge less for
ongoing purchases
Link product to
long-term service

Prof.Yu Hongyan,JL

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Prof.Yu Hongyan,JL

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4. Strong Customer Bonds

(contd)

20
80
3
0

20% of your customers

Generate 80% of your profit

Half of your profit is lost
serving the bottom 30%
of your customer base
Prof.Yu Hongyan,JL

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Review

Customer Value, satisfaction and

loyalty
high-performance businesses
How to attract & retain customers
Customer Bonds

Prof.Yu Hongyan,JL

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