5

Creating Customer Value,

Satisfaction,
and Loyalty

Marketing Management, 13th ed

 Chapter Questions
• What are customer value, satisfaction, and
loyalty, and how can companies deliver them?
• What is the lifetime value of customers?
• How can companies cultivate strong customer
relationships?
• How can companies both attract and retain
customers?
• What is database marketing?
Building Customer Value, Satisfaction
and Loyalty
• Customer Perceived Value
• Total Customer Satisfaction
• Monitoring Satisfaction
• Product and Service Quality
 Customer Perceived Value

Customer perceived value is the

difference between the prospective
customer’s evaluation of all the benefits
and all the costs of an offering and the
perceived alternatives.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-4

Figure 5.2 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

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 company’s and competitor’s
performances on the different customer
values against rated importance
• Examine ratings of specific segments
• Monitor customer values over time
 Choices and Implications

• The buyer might be under orders to buy

at lowest price
• The buyer will retire before the
company realizes that product is
expensive to operate
• The buyer enjoys a long term friendship
with company
 Delivering high customer value

• Loyalty
• is 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
• Value Proposition
• Consists of the whole cluster of benefits the company
promises to deliver
• The Value Delivery System
• Includes all the experiences the customer will have on the
way to obtaining and using the offering
.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-8

 Top Brands in Customer Loyalty

• Avis • Land’s End

• Google • Coors
• L.L. Bean • Hyatt
• Samsung (mobile • Marriott
phones) • Verizon
• Yahoo! • KeySpan Energy
• Canon (office • Miller Genuine Draft
copiers) • Amazon
 Total Customer Satisfaction

• The extent to which a product’s

perceived performance matches
buyer’s expectations

• Companies strive to create branded

experience

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-10

 Monitoring Satisfaction

• Measurement techniques
• Periodic surveys
• Customer loss rate
• Mystery shoppers
• Monitor competitive performance
• Influence of Customer Satisfaction
• Customer Complaints

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-11

 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

Impact of Quality

Total Quality
 Maximizing Customer Lifetime Value

• Customer profitability
• Customer Profitability Analysis
• The company estimate all revenue coming from customers,
less all cost

• Customer Portfolios
• Measuring Customer Lifetime value
• Net present value of the future profit expected over the customer’s
lifetime purchases
 Customer equity

• Value equity
• Objective assessment of the utility of an offering based on
perception of its benefits relative to its cost

• Brand equity
• Subjective and intangible assessment of brand above and beyond
its objectively perceived value

• Relationship equity
• Tendency to stick with the brand above and the objective and
subjective assessment of its worth
 Cultivating Customer
Relationships
CRM is the process of carefully managing detailed
information about individual customers and all
customer touch points to maximize customer loyalty.
 Framework for one-to-one
Marketing
One to One Marketing
• Identify your prospects and customers
• Do not go after everyone. Build maintain mine a rich customer
database with information derived from all the channels and
customer touch points

• Differentiate customers in terms of their needs and

value to the company
• Spend more effort on the most valuable customers
 Framework for one-to-one
Marketing
• Interact with individual customers to improve
your knowledge about their individual needs
and to build stronger relationships
• Build and formulate customized offering that are
communicated in a personalized ways

• Customize product services and messages

to each customers
 Framework for one-to-one
Marketing
Winning companies improve the value of their
customers by excelling the strategies like

• Reduce the rate of defection

• Increase longevity
• Enhance “share of wallet”
• E.g Harley-Davidson
• Terminate low-profit customers
• Focus more effort on high-profit customers
 Attracting and Retaining Customers

Interesting facts that bear on 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.
 Building Loyalty

• Interacting with customers

• Developing loyalty programs
• Personalizing marketing
• Creating Institutional Ties
 Customer Databases and Database
Marketing

• Customer • Business
database database
• Database • Data warehouse
marketing • Data mining
• Mailing list
 Using the Database

• To identify prospects
• To target offers
• To deepen loyalty
• To reactivate customers
• To avoid mistakes
 Don’t 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
 Perils of CRM

• Implementing CRM before creating a

customer strategy
• Rolling out CRM before changing the
organization to match
• Assuming more CRM technology is
better
• Stalking, not wooing, customers