Chapter 5 by kaye olivar v53

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Chapter 5 by kaye olivar v53

  1. 1. TOP 10 Learning Questions for Chapter 5: Creating Customer Value, Satisfaction and Loyalty Reainki A. Olivar Dec 16, 2010 Kayeolivar.blogspot.com
  2. 2. <ul><li>Modern Customer-Oriented Organization Chart </li></ul><ul><li>Horizontal Organization Chart </li></ul><ul><li>Hierarchical Organization Chart </li></ul><ul><li>Traditional Organization Chart </li></ul><ul><li>Vertical Organization Chart </li></ul>1. What kind of organization chart does a manager considers when he doesn’t believe that the customer is the company’s only “true profit”? 1 Kayeolivar.blogspot.com
  3. 3. Organizational Charts 2 Traditional Organization Chart Modern Customer-Oriented Organization Chart Kayeolivar.blogspot.com
  4. 4. Modern Customer – Oriented Organizational Chart <ul><li>A pyramid with the president on top, management in the middle and frontline people and customers at the bottom is already obsolete. </li></ul><ul><li>Successful Marketing companies invert the chart. At the top are customers; next in importance are frontline people who meet, serve, and satisfy customers; under them are the middle managers, whose job is to support the frontline people so they can serve customers well; and at the base is top management, whose job is to hire and support good middle managers. We have added customers along the sides to indicate that mangers at every level must be personally involved in knowing, meeting and serving customers. </li></ul>3 Kayeolivar.blogspot.com
  5. 5. 1. What kind of organization does a manager considers when he believe that the customer is the company’s only “true profit” ? <ul><li>Modern Customer-Oriented Organization Chart </li></ul><ul><li>Horizontal Organization Chart </li></ul><ul><li>Hierarchical Organization Chart </li></ul><ul><li>Traditional Organization Chart </li></ul><ul><li>Pyramid Organization Chart </li></ul>4 Answer Kayeolivar.blogspot.com
  6. 6. 2. ________ is the difference between the prospective customer’s evaluation and perceived alternatives. <ul><li>Total Customer Benefit </li></ul><ul><li>Customer-Perceived Value </li></ul><ul><li>Customer-Perceived Alternatives </li></ul><ul><li>Total Customer Value </li></ul><ul><li>Total Customer Cost </li></ul>5 Kayeolivar.blogspot.com
  7. 7. Customer-Perceived Value 6 Kayeolivar.blogspot.com 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
  8. 8. Customer-Perceived Value: <ul><li>CPV 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>7 Kayeolivar.blogspot.com
  9. 9. Steps in Customer Value Analysis <ul><li>Identify major attributes and benefits that customer 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 Kayeolivar.blogspot.com
  10. 10. <ul><li>Total Customer Benefit </li></ul><ul><li>Customer-Perceived Value </li></ul><ul><li>Customer-Perceived Alternatives </li></ul><ul><li>Total Customer Value </li></ul><ul><li>Total Customer Cost </li></ul>9 2. ________ is the difference between the prospective customer’s evaluation and perceived alternatives. Kayeolivar.blogspot.com Answer
  11. 11. 3. Which of the following is not part of the steps in Customer Value Analysis? <ul><li>Identifying the major attributes and benefits that customers value. </li></ul><ul><li>Assess the qualitative and insignificant attributes and features. </li></ul><ul><li>Assess the company’s and competitors’ performance on the different customer values against their rated importance. </li></ul><ul><li>Examine how customers in a specific segment rate the company’s performance against specific competitor. </li></ul><ul><li>Monitor customer values over time. </li></ul>10 Kayeolivar.blogspot.com
  12. 12. The Steps in Customer Value Analysis: <ul><li>Identify the major attributes and benefits that customers value </li></ul><ul><li>- Customers are asked what attributes, benefits, and performance levels they look for in choosing a product. </li></ul><ul><li>Assess the quantitative importance of the different attributes and benefits </li></ul><ul><li>- Customers are asked to rate the importance of the different attributes and benefits. If their ratings diverge too much, the marketer should cluster them into different segments. </li></ul>11 Kayeolivar.blogspot.com
  13. 13. <ul><li>Assess the company’s and competitors’ performance on the different customer values against their rated importance </li></ul><ul><li>- Customers describe where they see the company’s and competitors’ performances on each attribute and benefit. </li></ul><ul><li>4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor on an individual attribute or benefit basis </li></ul><ul><li>- If the company’s offer exceeds the competitor’s offer on all iportant atrributes and benefits, the company can charge a hihger price, or it can charge the same price and gain more market. </li></ul>The Steps in Customer Value Analysis: 12 Kayeolivar.blogspot.com
  14. 14. <ul><li>Monitor customer values over time </li></ul><ul><li>- The company must periodically redo its studies of customer values and competitors’ standings as the economy, technology, and features change. </li></ul>The Steps in Customer Value Analysis: 13 Kayeolivar.blogspot.com
  15. 15. 3. Which of the following is not part of the steps in Customer Value Analysis? <ul><li>Identifying the major attributes and benefits that customers value. </li></ul><ul><li>Assess the qualitative and insignificant attributes and features. </li></ul><ul><li>Assess the company’s and competitors’ performance on the different customer values against their rated importance. </li></ul><ul><li>Examine how customers in a specific segment rate the company’s performance against specific competitor. </li></ul><ul><li>Monitor customer values over time. </li></ul>14 Kayeolivar.blogspot.com Answer
  16. 16. 4. What is the one key to Customer Retention? <ul><li>Good Quality Product </li></ul><ul><li>Promotions </li></ul><ul><li>Customer Satisfaction </li></ul><ul><li>Customer desired </li></ul><ul><li>None of the above </li></ul>15 Kayeolivar.blogspot.com
  17. 17. Measuring Satisfaction 16 Mystery Shopper Customer Loss Rate Monitor Competitive Performance Periodic Surveys Kayeolivar.blogspot.com
  18. 18. Monitoring Satisfaction <ul><li>A company could be wise to measure customer satisfaction regularly, because one key to customer retention is customer satisfaction. </li></ul><ul><li>A highly satisfied customer generally stays loyal longer, buys more as the company introduces new products & upgrades existing products, talks favorably to others about the company and its products, pay less attention to competing brands and cost less to serve than new customers because transactions can become routine. </li></ul>17 Kayeolivar.blogspot.com
  19. 19. 4. What is the one key to Customer Retention? <ul><li>Good Quality Product </li></ul><ul><li>Promotions </li></ul><ul><li>Customer Satisfaction </li></ul><ul><li>Customer desired </li></ul><ul><li>None of the above </li></ul>18 Kayeolivar.blogspot.com Answer
  20. 20. 5. What is best conducted with the tools of accounting techniques called activity-based costing (ABC)? <ul><li>Customer Portfolios </li></ul><ul><li>Customer Lifetime Value </li></ul><ul><li>Customer Profitability Analysis </li></ul><ul><li>Customer Relationship Management </li></ul><ul><li>All of the above </li></ul>19 Kayeolivar.blogspot.com
  21. 21. Customer Product Profitability Analysis 20 Customers Products Kayeolivar.blogspot.com P1 + + + Highly Profitable Product C1 C2 C3 P2 + Profitable Product P3 - - Losing Product P4 + - Mixed-bag Product High-profit Customer Mixed-bag Customer Losing Customer
  22. 22. Customer Profitability Analysis <ul><li>Customer Profitability Analysis (CPA) is a useful type of profitability analysis. </li></ul><ul><li>Customers are arrayed along the columns & products along the rows. Each cell contains a symbol representing the profitability of selling that product to that customer. Customer 1 is very profitable; he buys two profitable products (P1 & P2). Customer 2 yields a picture of mixed profitability; he buys one profitable product (P1) and one unprofitable product (P3). Customer 3 is a losing customer because he buys one profitable product (P1) and two unprofitable products (P3 & P4). </li></ul>21 Kayeolivar.blogspot.com
  23. 23. 5. What is best conducted with the tools of accounting techniques called activity-bases costing (ABC)? <ul><li>Customer Portfolios </li></ul><ul><li>Customer Lifetime Value </li></ul><ul><li>Customer Profitability Analysis </li></ul><ul><li>Customer Relationship Management </li></ul><ul><li>All of the above </li></ul>22 Kayeolivar.blogspot.com Answer
  24. 24. 6. What is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize customer loyalty? <ul><li>Customer Touch Point </li></ul><ul><li>Customer Satisfaction Indicator </li></ul><ul><li>Customer Relationship Management </li></ul><ul><li>Customer Process Development </li></ul><ul><li>Customer Retention </li></ul>23 Kayeolivar.blogspot.com
  25. 25. Framework of CRM 24 Identify prospects & customers Differentiate customers by needs & value to company Interact to improve knowledge Customize for each customer Kayeolivar.blogspot.com
  26. 26. CRM Strategies <ul><li>Focus more effort on high-profit customers </li></ul>25 Enhance “share of wallet” Increase longevity Terminate low-profit customers Reduce the rate of defection Kayeolivar.blogspot.com
  27. 27. Customer Relatonship Management (CRM) <ul><li>Customer Relationship Management enables companies to provide excellent real-time customer service through the effective use of individual account information. Based on what they know about each valued customer, companies can customize market offerings, services, programs, messages and media. </li></ul><ul><li>CRM is important because a major driver of company profitability is the aggregate value of the company’s customer base. </li></ul>26 Kayeolivar.blogspot.com
  28. 28. 6. What is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize customer loyalty? <ul><li>Customer Touch Point </li></ul><ul><li>Customer Satisfaction Indicator </li></ul><ul><li>Customer Relationship Management </li></ul><ul><li>Customer Process Development </li></ul><ul><li>Customer Retention </li></ul>27 Kayeolivar.blogspot.com Answer
  29. 29. 7. ________describes the net present value of the stream future profits expected over the customer’s lifetime purchases. <ul><li>Customer Value Formula </li></ul><ul><li>Customer Quantitative Framework </li></ul><ul><li>Customer Lifetime Value </li></ul><ul><li>Clients Suitability test </li></ul><ul><li>Customers Survey Analysis </li></ul>28 Kayeolivar.blogspot.com
  30. 30. Calculating Customer Lifetime Value <ul><li>CLV = </li></ul><ul><li>Where, p t = price paid by a customer at time t, </li></ul><ul><li>C t = direct cost of servicing the customer at time t, </li></ul><ul><li>I = discount rate or cost of capital for the firm, </li></ul><ul><li>r t = probability of customer repeat buying or being “alive” at time t, </li></ul><ul><li>AC = acquisition cost, </li></ul><ul><li>T = time horizon for estimating CLV </li></ul>29 (1 + i) t Kayeolivar.blogspot.com (p t – c t )r t AC
  31. 31. Calculating CLV <ul><li>CLV calculations provide a formal quantitative framework for planning customer investment and help marketers adopt a long-term perspective. One challenge in applying CLV concepts, however, is to arrive at reliable cost and estimates. </li></ul><ul><li>Marketers who use CLV concepts must also take into account the short-term, brand-building marketing activities that help increase customer loyalty. </li></ul>30 Kayeolivar.blogspot.com
  32. 32. 7. ________describes the net present value of the stream future profits expected over the customer’s lifetime purchases. <ul><li>Customer Value Formula </li></ul><ul><li>Customer Quantitative Framework </li></ul><ul><li>Customer Lifetime Value </li></ul><ul><li>Clients Suitability test </li></ul><ul><li>Customers Survey Analysis </li></ul>31 Kayeolivar.blogspot.com Answer
  33. 33. 8. Which of the following statements is TRUE? <ul><li>To reduce the defection rate, the company must: </li></ul><ul><li>Define and measure its retention rate </li></ul><ul><li>Distinguish the causes of customer attrition and identify those that can be managed better. </li></ul><ul><li>Compare the lost profit equal to the customer’s lifetime value from a lost customer to costs to reduce the defection rate. </li></ul><ul><li>None of the above </li></ul><ul><li>All of the above </li></ul>32 Kayeolivar.blogspot.com
  34. 34. REDUCING DEFECTION <ul><li>It is not enough to attract new customers; the company must keep them and increase their business. Too many companies suffer from high customer churn or defection. </li></ul><ul><li>To reduce defection rate, the company must: </li></ul><ul><li>Define and measure its retention rate. For a magazine, subscription renewal rate is a good measure of retention. For a college, it could be the first-to-second year retention rate or the class graduation rate. </li></ul>33 Kayeolivar.blogspot.com
  35. 35. REDUCING DEFECTION <ul><li>Distinguish the causes of customer attrition and identify those that can be managed better. Not much can be done about customers who leave the region or go out of business, but much can be done about those who leave because of poor service, shoddy products, or high prices. </li></ul><ul><li>Compare the lost profit equal to customer’s lifetime value from a lost customer to the costs to reduce the defection rate. As long as the cost to discourage defection is lower than the lost profit, the company should spend the money to try to retain the customer. </li></ul>34 Kayeolivar.blogspot.com
  36. 36. 8. Which of the following statements is TRUE? <ul><li>To reduce the defection rate, the company must: </li></ul><ul><li>Define and measure its retention rate </li></ul><ul><li>Distinguish the causes of customer attrition and identify those that can be managed better. </li></ul><ul><li>Compare the lost profit equal to the customer’s lifetime value from a lost customer to costs to reduce the defection rate. </li></ul><ul><li>None of the above </li></ul><ul><li>All of the above </li></ul>35 Kayeolivar.blogspot.com Answer
  37. 37. 9. Which of the following is not part in the process of attracting & retaining customers? <ul><li>Potentials </li></ul><ul><li>First-time Customers </li></ul><ul><li>Members </li></ul><ul><li>Customer Relation </li></ul><ul><li>Advocates </li></ul>36 Kayeolivar.blogspot.com
  38. 38. The Customer-Development Process 37 Suspects Prospects Disqualified Ex-Customers Repeat Customers Partners Members Clients First-time Customers Kayeolivar.blogspot.com
  39. 39. Retention Dynamics <ul><li>The starting point is everyone who might conceivably buy the product or service. These potentials are people or organizations who might conceivably have an interest in buying the company’s product or service, but may not have the means or intention buy. The next task is to identify which potentials are good prospects. </li></ul><ul><li>Marketing efforts can then convert the prospects into first-time customers and then into repeat customers and then into clients . The next challenge is to turn clients into members and turning them into advocates , customers who enthusiastically recommend the company and its products to others and the ultimate challenge is to turn advocates to partners . </li></ul>38 Kayeolivar.blogspot.com
  40. 40. 9. Which of the following is not part in the process of attracting & retaining customers? <ul><li>Potentials </li></ul><ul><li>First-time Customers </li></ul><ul><li>Members </li></ul><ul><li>Customer Relation </li></ul><ul><li>Advocates </li></ul>39 Kayeolivar.blogspot.com Answer
  41. 41. 10. These are the different ways in using database except. <ul><li>To decide which customers should receive a particular offer </li></ul><ul><li>To remove insignificant customers </li></ul><ul><li>To reactivate customer purchases </li></ul><ul><li>To avoid serious customer mistakes </li></ul><ul><li>To deepen customer loyalty </li></ul>40 Kayeolivar.blogspot.com
  42. 42. Using the DATABASE <ul><li>To avoid mistakes </li></ul>41 To deepen loyalty To target offers To reactivate customers To identify prospects Kayeolivar.blogspot.com
  43. 43. Five Ways of Using Databases: <ul><li>To identify prospects – Many companies generate sales leads by advertising their product or services. The ads generally contain a response feature, such as a business reply card or toll-fee phone number, and the company builds its database from customer responses. It sorts through the database to identify the best prospects, then contacts them by mail, phone or personal call to try to convert them into customers. </li></ul><ul><li>To decide which customers should receive a particular offer – Companies are interested in selling, up-selling and cross-selling their products and services. </li></ul>42 Kayeolivar.blogspot.com
  44. 44. <ul><li>Companies set up criteria describing the ideal target customer for a particular offer. Then they search their customer databases for those who most closely resemble the ideal type. </li></ul><ul><li>To deepen customer loyalty – Companies can build interest and enthusiasm by remembering customer preferences and by sending appropriate gifts, discount coupons and interesting reading material. </li></ul><ul><li>To reactivate customer purchases – Companies can install automatic mailing programs that send out birthday or anniversary card. The database can help company make attractive or timely offers. </li></ul>Five Ways of Using Databases: 43 Kayeolivar.blogspot.com
  45. 45. <ul><li>5. To avoid serious customer mistakes – A major bank confessed to a number of mistakes made by not using its customer database well. In one case, a bank gave a premium customer only standard service in another country. </li></ul>Five Ways of Using Databases: 44 Kayeolivar.blogspot.com
  46. 46. 10. These are the different ways in using database except. <ul><li>To decide which customers should receive a particular offer </li></ul><ul><li>To remove insignificant customers </li></ul><ul><li>To reactivate customer purchases </li></ul><ul><li>To avoid serious customer mistakes </li></ul><ul><li>To deepen customer loyalty </li></ul>45 Kayeolivar.blogspot.com Answer
  47. 47. TOP 10 Learning Questions for Chapter 5: Creating Customer Value, Satisfaction and Loyalty Reainki A. Olivar Dec 16, 2010 Kayeolivar.blogspot.com

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