Building Customer Satisfaction, Value, and Retention

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Building Customer
Satisfaction, Value,
and Retention

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Building Customer Satisfaction, Value, and Retention

  1. 1. Chapter 3 Building Customer Satisfaction, Value, and Retention PowerPoint by Karen E. James Louisiana State University - Shreveport
  2. 2. Objectives <ul><li>Understand how companies deliver customer value and satisfaction. </li></ul><ul><li>Identify the factors that make a high performance business. </li></ul><ul><li>Understand how companies attract and retain customers. </li></ul>
  3. 3. Objectives <ul><li>Realize how companies can improve both customer and company profitability. </li></ul><ul><li>Understand how companies can deliver total quality. </li></ul>
  4. 4. Customer Value <ul><li>Customers seek to maximize value by </li></ul><ul><ul><li>estimating which offer (product/firm) delivers the most value (CPV) </li></ul></ul><ul><ul><li>forming an expectation of value and acting upon it (purchase) </li></ul></ul><ul><ul><li>evaluating their usage experience against the expectations </li></ul></ul><ul><li>Satisfaction results when expectations are equaled or surpassed </li></ul>
  5. 5. Customer Perceived Value <ul><li>Perception of delivered value is a function of: </li></ul><ul><ul><li>Total customer costs </li></ul></ul><ul><ul><li>Total customer value </li></ul></ul><ul><li>Firms at a disadvantage must: </li></ul><ul><ul><li>Reduce perceptions of costs or enhance perceptions of value </li></ul></ul>
  6. 6. Customer Satisfaction <ul><li>Satisfaction is defined as . . . </li></ul><ul><ul><li>“a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.” </li></ul></ul>
  7. 7. Customer Satisfaction <ul><li>To maximize satisfaction . . . </li></ul><ul><ul><li>Don’t exaggerate the product / service’s capabilities in advertising or other communications </li></ul></ul><ul><ul><ul><li>Dissatisfaction will result </li></ul></ul></ul><ul><ul><ul><li>FTC may become involved </li></ul></ul></ul><ul><ul><li>Don’t set expectations too low </li></ul></ul><ul><ul><ul><li>Market size will be limited </li></ul></ul></ul>
  8. 8. High Performance Businesses <ul><li>Keys to Success </li></ul><ul><li>Stakeholders </li></ul><ul><li>Processes </li></ul><ul><li>Resources </li></ul><ul><li>Organization </li></ul><ul><li>Identify several stakeholder groups for your University </li></ul><ul><li>How might the needs of these groups conflict with each other? </li></ul>
  9. 9. High Performance Businesses <ul><li>Keys to Success </li></ul><ul><li>Stakeholders </li></ul><ul><li>Processes </li></ul><ul><li>Resources </li></ul><ul><li>Organization </li></ul><ul><li>New product development </li></ul><ul><li>Customer attraction and retention </li></ul><ul><li>Order fulfillment </li></ul><ul><li>Reengineering work flows </li></ul><ul><li>Building cross functional teams </li></ul>
  10. 10. High Performance Businesses <ul><li>Keys to Success </li></ul><ul><li>Stakeholders </li></ul><ul><li>Processes </li></ul><ul><li>Resources </li></ul><ul><li>Organization </li></ul><ul><li>Resources include labor, materials, machines, energy, and information </li></ul><ul><li>Outsourcing vs. ownership: Own and nurture core competencies </li></ul>
  11. 11. High Performance Businesses <ul><li>Keys to Success </li></ul><ul><li>Stakeholders </li></ul><ul><li>Processes </li></ul><ul><li>Resources </li></ul><ul><li>Organization </li></ul><ul><li>Organization refers to the organization’s policies, structures, and corporate culture </li></ul><ul><li>Corporate culture: shared experiences, stories, beliefs, and norms within an organization </li></ul>
  12. 12. Core Business Practices <ul><li>Market Sensing </li></ul><ul><li>Customer Acquisition </li></ul><ul><li>Customer Relationship Management </li></ul><ul><li>Fulfillment Management </li></ul><ul><li>New Offering Realization </li></ul>
  13. 13. Customer Retention <ul><li>Reducing customer churn (defection) is highly desirable </li></ul><ul><ul><li>Define and measure retention rate </li></ul></ul><ul><ul><li>Identify causes of attrition </li></ul></ul><ul><ul><li>Estimate profit lost from customer defection (customer lifetime value) </li></ul></ul><ul><ul><li>Estimate cost to reduce defection; take appropriate action </li></ul></ul>
  14. 14. Drivers of Customer Equity <ul><li>Brand Equity </li></ul><ul><li>Relationship Equity </li></ul><ul><li>Value Equity </li></ul>
  15. 15. Strong Customer Bonds <ul><li>Keys to Success </li></ul><ul><li>Adding Financial Benefits </li></ul><ul><li>Adding Social Benefits </li></ul><ul><li>Adding Structural Ties </li></ul><ul><li>Frequency programs </li></ul><ul><li>Club memberships </li></ul>
  16. 16. Strong Customer Bonds <ul><li>Keys to Success </li></ul><ul><li>Adding Financial Benefits </li></ul><ul><li>Adding Social Benefits </li></ul><ul><li>Adding Structural Ties </li></ul><ul><li>Personalize customer relationships </li></ul>
  17. 17. Strong Customer Bonds <ul><li>Keys to Success </li></ul><ul><li>Adding Financial Benefits </li></ul><ul><li>Adding Social Benefits </li></ul><ul><li>Adding Structural Tie </li></ul><ul><li>Create long-term contracts </li></ul><ul><li>Charge less for ongoing purchases </li></ul><ul><li>Link product to long-term service </li></ul>
  18. 18. 20 – 80 – 30 Rule <ul><li>20% of your customers </li></ul>Half of your profit is lost serving the bottom 30% of your customer base Generate 80% of your profit 30 80 20

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