Customer satisfaction

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Customer satisfaction

  1. 1. Meaning♦ Satisfaction is a feelings of pleasure ordisappointment resulting from comparing a product ‘sperceived performance in relation to his expectations. ♦ Customer Satisfaction is a measure of how productsand services supplied by a company meet or surpasscustomer expectation. It is seen as a key performanceindicator within business ♦The provision of goods or services which fulfill thecustomers expectations in terms of quality and service,in relation to price paid.♦ Customer satisfaction results when an exchangemeets the needs and expectations of the buyer
  2. 2. Customer Value- Customers estimate which offer willdeliver the most value. They are the value-maximizes.Customer deliver Value is the difference between totalcustomer value & total customer cost. Total Customervalue is the bundle of benefits customers expect from agiven product. Total Customer Cost is the bundle ofcosts customers expect to incur in evaluating, obtaining,using & disposing of the product.Customer perceived Value is the difference betweenthe prospective customer’s evaluation of all the benefits& all the costs of an offering and the perceivedalternatives.Customer Loyalty- loyalty is created only whencustomers perceive fairness, equity and transparency inhis relationship with the seller.
  3. 3. Customer delivered value Total Total customer customer value cost Product value Monetary cost Service value Time costPersonnel value Energy cost Image value Psychic cost Determinants of Customer Delivered Value
  4. 4. Tools for tracking & Measuring satisfactionMeasuring Satisfaction is the toughest of thejobs of a marketer.♦Complaint & suggestion Systems- A customer-centered organization makes it easy for customers toregister suggestions & complaints. Customer-centeredcompanies – P&G, GE, whirlpool establish hotlines withtoll-free numbers, they are also using websites.♦Customer satisfaction surveys- studies show thatonly one out of every four purchases, dissatisfiedcustomers will complain. Most customers will buy lessor switch suppliers. Cos. Measure of customersatisfaction directly by conducting periodic surveys.
  5. 5. They send questionnaires /make telephone calls to arandom sample of recent customers, ask additionalquestions to measure repurchase intention andwillingness to recommended the co. & brand.♦Ghost Shopping- companies hire persons to pose aspotential buyers to report on strong and weak pointsexperienced in buying the company’s competitor’sproducts. ♦Lost customer analysis- Companies contactcustomers who have stopped buying / switched toanother supplier to learn why this happened. IBM
  6. 6. elivering Customer Value & Satisfaction company only win by creating & delivering superior value inyper competition. A company needs to use the concepts ofalue chain & a value-delivery network to succeed.Value Chain: a tool for identifying ways to create more custalue.very firm is a collection of activities that are performed to de oduce, market, deliver & support its product. ne strategically value-creating activities consist of five primctivities & four support activities. imary activities represents the sequence of bringing materito the business (inbound), converting them into final produc perations), shipping out final products (outbound), marketin em (marketing & sales and servicing them (service).
  7. 7. Support activities (procurement, Technologydevelopments, human resource management, & firminfrastructure) are handled in certain specialized depatts.The firm task is to examine its cost & performance ineach value creating activity & to look for ways to improveit. Success of the firm depends on each depart.Performs its work & activities of departments arecoordinated.To solve the problem of value chain the emphasis mustbe on smooth management of core business processesIt Include:♦New-product realization♦Inventory management♦Customer acquisition & retention♦Customer service♦Order-to-remittance
  8. 8. Firm Infrastructure MarginSupport Human ResourceActivities Technology development Permanent Inbound Service Logistics Operations Outbound Marketing & sales Margin logistics Primary Activities
  9. 9. Value-Delivery Network- also known as supply chainfirm needs to look for competitive advantagesbeyond its own operation, into the value chains of itssuppliers, distributors to customers.Attracting customers- to please the customers is atough task. They are smarter, price conscious, moredemanding, less forgiving & approached morecompetitors. Cos. have to spend a considerable time& resources searching for new customers. Customeracquisition requires substantial skills in leadgeneration, lead qualification, account conversion.♦Developments of ads Direct mails, phone calls &participation in trade shows to reach new prospects, ♦ Produce a list of suspects, interweaving them,check their financial standings & graded them.
  10. 10. ♦ Pick the hot, presentations, answering objections& negotiating final terms.Computing the Cost of lost CustomersMany cos. are suffering from very high customerdefection rate. There are some steps to reduce this.=The co. must define & measure it retention rate.= Co. must distinguish the causes of customerattrition & identify those that can be managed better.Eg. 14% customer lost due to out of business,16%switched because they found better product,15% found cheaper product, 55% left due to poorsupply/quality. Co. needs to examine the %ages ofcustomers who defect from different reasons.= Co. needs to estimate how much profits it losesdue to customer defection. Eg.♦A Co. had 64,000 accounts. It lost 5% of its
  11. 11. accounts this year due to poor service. This was aloss of 3,200 accounts (.05*64000).The average lost account represented a $40,000 lossin revenue. So the co. lost $ 128,000,000 in revenue(3,200*$40,000). The companies profit margin is10%the co. lost $12,800,000 (.10*$128,000,000) thisyear. Because the customers left permanently, thecompany ‘s actual loss over time is much greater.= The co. needs to figure out how much it wouldcost to reduce the defection rate. = different companies successfully using varioustools to retain customers.♦The key customer retention is customersatisfaction. A highly satisfied customer:- stay loyal longer- buys more as the co. introduces new products and
  12. 12. -Talks favorably about the company and products.-Pay less attention to competing brands & ads, lesssensitive to price.-Offers product or service ideas to the company.Some Interesting facts bearing on customerretention■ Acquiring new customers can cost five times morethan the costs involved in retaining currentcustomers.■ The average company loses 10% of its customerseach year.■ A 5% reduction in the customer defection rate canincrease profits by 25% to 85%, depending on theindustry.■The customer profit rate tend to increase over thelife of the retained customer.
  13. 13. Marketing Memo- To create effective retentionprograms, marketing need to identify patterns amongcustomer defections. This analysis should start withinternal records, such as sales logs, pricing records,& customer survey results. The next step isextending defection research to outside sources,such as statistics from trade associations. Somequestion may be ask: ■ Do customers defect atdifferent rates during rates during the year?■ Does retention vary by office, region, salesrepresentative, or distributor?■ What is the relationship b/w retention rates &changes in prices?■What happen to lost customers & where do they go■What are the retention norms for your industry?■ Which co. in your industry retentions customers
  14. 14. Measuring Customer Life-time value (CLV)■CLV describes the present value of the stream offuture profits expected over the customer’s life timepurchases. The co. must subtract from the expectedrevenues the expected costs of attracting, selling &servicing that customer. Eg. Suppose company’sacquisition cost of new customer:Cost of an average sales call (including all expenses)= Rs.200Average no. of sales calls to convert an average prospects into acustomer = x5Cost of attracting a new customer = Rs.1000now, suppose the co estimates average customer lifetime value:Average customer revenue = Rs.5000Average no. of loyal Years = x3Company profit margin = 10%So, Customer Lifetime Value = Rs.1500This co. is spending more to attract new customers.
  15. 15. Customer Relationship Management (CRM)
  16. 16. Suspects Relationship Marketing: The DisqualifiedProspects Key prospectsFirst timecustomers Repeatcustomers Inactive or ex-customers Clients Members Customer-Development ProcessAdvocates Partners
  17. 17. Five different levels of investment in Customer-relationship building: ■ Basic marketing: simply sell the product. ■ Enactive marketing: sells the product &encourages the customer to call if he has questions,comments, or complaints. ■ Accountable Marketing: sales person phones thecustomer short time after the sale to check whetherthe product is meeting expectations. Salespersonalso asks about the any suggestions. ■ Proactive marketing: Salesperson contacts thecustomer from time to time with suggestions aboutimproved product uses or helpful new products. ■ Partnership marketing: co. works continuouslywith the customer to discover ways to performbetter.

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