Creating Customer Value, Satisfaction,  and Loyalty Marketing Management, 13 th  ed 5
Chapter Questions <ul><li>What are customer value, satisfaction, and loyalty, and how can companies deliver them? </li></u...
Ritz Carlton - Famous for its Exceptional Service
Figure 5.1 Organizational Charts
What is Customer Perceived Value? <ul><li>Customer perceived value  is the difference between the prospective customer’s e...
Figure 5.2 Determinants of  Customer Perceived Value Image benefit Psychological cost Personnel benefit Energy cost Servic...
Steps in a Customer Value Analysis  <ul><li>Identify major attributes and benefits that customers value </li></ul><ul><li>...
 
What is Loyalty? <ul><li>Loyalty  is a deeply held commitment to re-buy or re-patronize a preferred product or service in ...
Top Brands in Customer Loyalty <ul><li>Avis </li></ul><ul><li>Google </li></ul><ul><li>L.L. Bean </li></ul><ul><li>Samsung...
The Value Proposition The whole cluster of  benefits the company promises  to deliver
Raising Customer Expectations
Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor Competitive Performance
J.D. Power Rates  Customer Satisfaction
Single Key Question of Net Promoter “How likely is it that you would recommend this product or service to a friend or coll...
 
World class companies used NPS
<ul><li>Customer Satisfaction </li></ul><ul><li>Customer Loyalty </li></ul><ul><li>Company’s Profit </li></ul>
What is Quality? Quality  is the totality of features and characteristics of a product or  service that bear on its  abili...
Conformance  V.S.  Performance
Maximizing Customer Lifetime Value Customer  Profitability Customer  Equity Lifetime Value
Figure 5.3 The 150 – 20 Rule
Figure 5.4 Customer-Product Profitability Analysis
Estimating Lifetime Value <ul><li>Annual customer revenue: $500 </li></ul><ul><li>Average number of loyal years: 20 </li><...
What is Customer Relationship Management? <ul><li>CRM  is the process of carefully managing detailed information about ind...
Framework for CRM Identify prospects and customers Differentiate customers by needs  and value to company Interact to impr...
Harrah’s targets hundreds of segments
CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Fo...
Focus  on  CRM
Customer Retention <ul><li>Acquisition of customers can cost five times more than retaining current customers. </li></ul><...
Figure 5.5  The Customer  Development Process Prospects Suspects Disqualified First-time customers Repeat customers Client...
Creating Customer Evangelists
Steps for Creating  Customer Evangelists <ul><li>Customer plus-delta </li></ul><ul><li>Napsterize your knowledge </li></ul...
Database Key Concepts <ul><li>Customer database </li></ul><ul><li>Database marketing </li></ul><ul><li>Mailing list </li><...
Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes
Don’t Build a Database When <ul><li>The product is a once-in-a-lifetime purchase </li></ul><ul><li>Customers do not show l...
Perils of CRM <ul><li>Implementing CRM before creating a customer strategy </li></ul><ul><li>Rolling out CRM before changi...
Marketing Debate <ul><li>Online vs. Offline Privacy? </li></ul><ul><li>Take a position: </li></ul><ul><li>Privacy is a big...
Marketing Discussion <ul><li>Choose a business and show how </li></ul><ul><li>you would go about developing a  </li></ul><...
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Marketing Management Chapter 5.ppt

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Marketing Management Chapter 5.ppt

  1. 1. Creating Customer Value, Satisfaction, and Loyalty Marketing Management, 13 th ed 5
  2. 2. Chapter Questions <ul><li>What are customer value, satisfaction, and loyalty, and how can companies deliver them? </li></ul><ul><li>What is the lifetime value of customers? </li></ul><ul><li>How can companies cultivate strong customer relationships? </li></ul><ul><li>How can companies both attract and retain customers? </li></ul><ul><li>What is database marketing? </li></ul>
  3. 3. Ritz Carlton - Famous for its Exceptional Service
  4. 4. Figure 5.1 Organizational Charts
  5. 5. What is Customer Perceived Value? <ul><li>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. </li></ul>
  6. 6. Figure 5.2 Determinants of Customer Perceived Value Image benefit Psychological cost Personnel benefit Energy cost Services benefit Time cost Product benefit Monetary cost Total customer benefit Total customer cost
  7. 7. Steps in a Customer Value Analysis <ul><li>Identify major attributes and benefits that customers value </li></ul><ul><li>Assess the qualitative importance of different attributes and benefits </li></ul><ul><li>Assess the company’s and competitor’s performances on the different customer values against rated importance </li></ul><ul><li>Examine ratings of specific segments </li></ul><ul><li>Monitor customer values over time </li></ul>
  8. 9. What is Loyalty? <ul><li>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. </li></ul>
  9. 10. Top Brands in Customer Loyalty <ul><li>Avis </li></ul><ul><li>Google </li></ul><ul><li>L.L. Bean </li></ul><ul><li>Samsung (mobile phones) </li></ul><ul><li>Yahoo! </li></ul><ul><li>Canon (office copiers) </li></ul><ul><li>Land’s End </li></ul><ul><li>Coors </li></ul><ul><li>Hyatt </li></ul><ul><li>Marriott </li></ul><ul><li>Verizon </li></ul><ul><li>KeySpan Energy </li></ul><ul><li>Miller Genuine Draft </li></ul><ul><li>Amazon </li></ul>
  10. 11. The Value Proposition The whole cluster of benefits the company promises to deliver
  11. 12. Raising Customer Expectations
  12. 13. Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor Competitive Performance
  13. 14. J.D. Power Rates Customer Satisfaction
  14. 15. Single Key Question of Net Promoter “How likely is it that you would recommend this product or service to a friend or colleague?” Use 0-10-point scale 0-6 are Marketers than subtract Detractors 7-8 are deemed Passively satisfied 9-10 are Promoter (Net Promoter Score-NPS)
  15. 17. World class companies used NPS
  16. 18. <ul><li>Customer Satisfaction </li></ul><ul><li>Customer Loyalty </li></ul><ul><li>Company’s Profit </li></ul>
  17. 19. 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.
  18. 20. Conformance V.S. Performance
  19. 21. Maximizing Customer Lifetime Value Customer Profitability Customer Equity Lifetime Value
  20. 22. Figure 5.3 The 150 – 20 Rule
  21. 23. Figure 5.4 Customer-Product Profitability Analysis
  22. 24. Estimating Lifetime Value <ul><li>Annual customer revenue: $500 </li></ul><ul><li>Average number of loyal years: 20 </li></ul><ul><li>Company profit margin: 10 </li></ul><ul><li>Customer lifetime value: $1000 </li></ul>
  23. 25. What is Customer Relationship Management? <ul><li>CRM is the process of carefully managing detailed information about individual customers and all customer touchpoints to maximize customer loyalty. </li></ul>
  24. 26. Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer
  25. 27. Harrah’s targets hundreds of segments
  26. 28. CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on high-profit customers
  27. 29. Focus on CRM
  28. 30. Customer Retention <ul><li>Acquisition of customers can cost five times more than retaining current customers. </li></ul><ul><li>The average customer loses 10% of its customers each year. </li></ul><ul><li>A 5% reduction to the customer defection rate can increase profits by 25% to 85%. </li></ul><ul><li>The customer profit rate increases over the life of a retained customer. </li></ul>
  29. 31. Figure 5.5 The Customer Development Process Prospects Suspects Disqualified First-time customers Repeat customers Clients Members Partners Ex-customers
  30. 32. Creating Customer Evangelists
  31. 33. Steps for Creating Customer Evangelists <ul><li>Customer plus-delta </li></ul><ul><li>Napsterize your knowledge </li></ul><ul><li>Build the buzz </li></ul><ul><li>Create community </li></ul><ul><li>Make bite-size chunks </li></ul><ul><li>Create a cause </li></ul>
  32. 34. Database Key Concepts <ul><li>Customer database </li></ul><ul><li>Database marketing </li></ul><ul><li>Mailing list </li></ul><ul><li>Business database </li></ul><ul><li>Data warehouse </li></ul><ul><li>Data mining </li></ul>
  33. 35. Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes
  34. 36. Don’t Build a Database When <ul><li>The product is a once-in-a-lifetime purchase </li></ul><ul><li>Customers do not show loyalty </li></ul><ul><li>The unit sale is very small </li></ul><ul><li>The cost of gathering information is too high </li></ul>
  35. 37. Perils of CRM <ul><li>Implementing CRM before creating a customer strategy </li></ul><ul><li>Rolling out CRM before changing the organization to match </li></ul><ul><li>Assuming more CRM technology is better </li></ul><ul><li>Stalking, not wooing, customers </li></ul>
  36. 38. Marketing Debate <ul><li>Online vs. Offline Privacy? </li></ul><ul><li>Take a position: </li></ul><ul><li>Privacy is a bigger issue in the </li></ul><ul><li>online world than in the offline world. </li></ul><ul><li>or </li></ul><ul><li>2. Consumers receive more benefit </li></ul><ul><li>than risk from marketers knowing </li></ul><ul><li>their personal information. </li></ul>
  37. 39. Marketing Discussion <ul><li>Choose a business and show how </li></ul><ul><li>you would go about developing a </li></ul><ul><li>quantitative formulation that captures </li></ul><ul><li>the concept of customer lifetime value. </li></ul>
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