Marketing 101 chapter2 building customer satisfaction
BUILDING CUSTOMER SATISFACTION THROUGH QUALITY, SERVICE AND VALUE… MBA-Marketing 101 CHAPTER 2
An excerpt from the book: “ Our goal as a company is to have customer service that is not just the best, but LEGENDARY… ” by : Sam Walton “ The only job security anybody has in this company comes from quality, productivity, and satisfied customers… ” by: Lee Iacocca “ Customers are value - maximizers …”
How To Win Customers and Out-performing Competitors: Customer-centered Companies Key Points in Building Customers: quality service cleanliness value
WHAT ARE CUSTOMER VALUE AND SATISFACTION? CUSTOMER VALUE- is that buyers will buy from a firm that they perceive to offer the highest customer delivered value… CUSTOMER SATISFACTION - is a form of expectation of value on some factors like wide array of products, excellent brand quality ( reliability, durability and performance ), moderate prices, good services and personnel and corporate image. These leads to customer ´s perception on satisfaction and its repurchasing probability…
WHAT IS CUSTOMER DELIVERED VALUE? It is the difference between total customer value and total customer cost. TOTAL CUSTOMER VALUE – Is the bundle of benefits customers expect from a given product or service. TOTAL CUSTOMER COST – Is the bundle of costs customers expect to incur in evaluating, obtaining, and using the product or service.
DETERMINANTS OF CUSTOMER DELIVERED VALUE: PRODUCT VALUE SERVICES VALUE PERSONNEL VALUE IMAGE VALUE TOTAL CUSTOMER VALUE MONETARY COST TIME COST ENERGY COST PSYCHIC COST TOTAL CUSTOMER COST CUSTOMER DELIVERED VALUE
Delivered Value can be measured as a difference or ratio: EXAMPLE: Total Customer Value is $20,000 Total Customer Cost is - 6,000 Delivered Value is $ 4,000 ( difference) Ratio is 1.25 Ratio that are used to compare offers are often called “ Value/Price ratios.” Theory therefore is, “the higher delivered value is offered, the higher is the customer’s incentive/ benefit to purchase.
Why buyers did not choose suppliers who offered high delivered value? Buyers is under order of buying lowest price. For this reason, he is explicitly prevented from making a choice based on delivered value. The buyer is retiring soon and maximizing personal benefit and placing no weight on company benefit. The buyer enjoys a long –term friendship with the favored supplier. Note: buyer’s operate under various constraints and occasionally make choices that give more weight to their personal than to the company’s benefit.
Implications on Delivered Value Maximization: 1. Seller must assess the total customer value and total customer cost associated with each competitors offer to know how his or her own offer stacks up. Seller who is at a delivered - value disadvantage has two alternatives . She can try to either increase total customer value or decrease total customer cost . She can reduce the price, simplify the ordering and delivery process or absorb some buyer risk by offering a warranty.
CUSTOMER SATISFACTION : SATISFACTION – is a persons feeling of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his / her expectations. Short of expectation = dissatisfied customer Matches expectation = highly satisfied or delighted customer
How do buyers form their expectation? INFLUENCERS of BUYER’S EXPECTATIONS: * past buying experience * friends * associates advice * marketers * competitors ‘ information and promises Buyer’s satisfaction is a function of the product’s perceived performance and the buyer’s expectation…
What high satisfaction can do? FACT: “High satisfaction or delight creates an emotional affinity with the brand, not just a rational preference . The result is high customer loyalty…” Most companies are aiming for TCS: - TOTAL - CUSTOMER - SATISFACTION The challenge of implementing TCS “ is to create a company culture in which everyone within the company aims to delight the customer… ”
HOW TO ACHIEVE HIGHLY SATISFIED CUSTOMERS? “ Customerizing ” – defined as to make a company more responsive to its customers and to be able to attract new one by practicing a strong customer orientation. Tracking customer ’ s expectations, perceived company performance and customer satisfaction. Companies should also monitor their competitors ’ performance . Customer satisfaction must be a goal and a marketing tool. Focusing on service and support. By improving manufacturing processes or investing more on R&D.
TOOLS FOR TRACKING AND MEASURING CUSTOMER SATISFACTION: Complaint and suggestion systems Customer satisfaction surveys Ghost shopping Lost customer analysis
CAUTIONS in Measuring Customer Satisfaction: In conducting surveys, spell out every elements in detail. Company must also realize that two customers can rate “ highly satisfied” for different reasons. One may be easily satisfied most of the time and the other might be hard to please but was pleased on this occasion. Companies should also note that managers and salespeople can manipulate their ratings on customer satisfaction. If customers know that the company will go out of its way to please customers, some of them may express high dissatisfaction(even if satisfied) in order to receive more concessions.
DELIVERING CUSTOMER VALUE and SATISFACTION... Concepts of Value Chain and Value Delivery System: Value Chain - is a tool for identifying ways to create more customer value. Every firm is a collection of activities that are performed to design ,produce , market, deliver, and support its product . Firm Infrastructure Human resource management Technology development Procurement Inbound Operation Outbound Marketing Service logistics logistics and sales . Primary activities
Core Business Process : ● New- product realization process All the activities involved in researching , developing and launching new high-quality products quickly and within the budget. ● Inventory management process Involved in developing and managing the inventory levels of raw materials, semi-finished materials, and finished goods so that adequate supplies are available and costs of overstocks are low. ● Order-to-remittance process Involved in receiving and approving orders, shipping the goods on time, and collecting payments. ● Customer service process Involved in making it easy for customers to reach the right parties within the company receive quick and satisfactory service, answers, and resolutions of problems.
VALUE DELIVERY NETWORK : many companies have partnered with specific suppliers and distributors to create a superior value –delivery network in its operation to serve with competitive advantages for its customers and competitors. Figure 2-4 Levi Strauss’ Value-Delivery Network Order Order Order Order Delivery Delivery Delivery Delivery Competition is between networks, not companies. The winner is the company with the better network . Du Pont (Fibers) Milliken (Fabric) Levi’s (Apparel) Sears (Retail) Customer
How can companies both attract and retain customers? Computing the Cost of Lost Customers ( customer defection rate) * There are 4 Steps to Process / Reduce : 1.) Define and measure its retention rate. 2.) Distinguish the causes of customer attrition and identify those that can be managed better . 3.) Estimate how much profit it loses when it loses customers. 4.) Figure out how much it would cost to reduce the defection rate.
B. The Need for Customer Retention: “ Losing profitable customers can dramatically impact a firms profit…” Therefore , one of the marketers main task is customer retention. The key to retaining customers is relationship marketing. To keep the customers happy, marketers can add financial or social benefits to products, and/or create structural ties between themselves and their customers. “ The cost of attracting a new customer is estimated to be 5x the cost of keeping a current customer happy.”
Two Ways to Strengthen Customer Retention: 1.) Erect high switching barriers 2.) Deliver high customer satisfaction. RELATIONSHIP MARKETING- embraces all the steps on creating a strong customer loyalty . It undertakes to know and serve better the company’s valued individual customers.
RELATIONSHIP MARKETING: THE KEY ● The Customer-Development Process Inactive or ex-customers Partners Advocates Clients Repeat customers First-time customers
Five(5) Levels of Company Investment in Customer-Relationship Building : Basic marketing Reactive marketing- Accountable marketing Proactive marketing Partnership marketing
Marketing Tools to Develop Stronger Customer Bonding and Satisfaction: Adding Financial Benefits a. Frequency marketing program b. Club marketing program Adding Social Benefits - individualizing / personalizing customer relationships Adding Structural Ties - may supply customers with special equipment or computer linkages that help customers manage their orders , payroll, inventory, and so on…
SOCIAL ACTIONS AFFECTING BUYER-SELLER RELATIONSHIPS: Good Things: Initiate positive phone calls Make recommendations Candor in language Use phone Show appreciation Make service suggestions Use “we” problem-solving language Get to problems Use jargon/shorthand Personality problems aired Talk of “our future together” Routinize responses Accept responsibility Plan the future Bad Things: Make only callbacks Make justifications Accommodate language Use correspondence Wait for misunderstandings Wait for service requests Use “owe-us” legal language Only responds to problems Use long-winded communications Personality problems hidden Talk about making good on the past Fire drill/ emergency responsiveness Shift blame Rehash the past
CUSTOMER PROFITABILITY PROFITABLE CUSTOMER - Is a person, household , or company that lifetime yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing that customer. Company’s Profitability Depends on 3 ELEMENTS:
How can companies practice Total Quality Marketing? Implementing TOTAL QUALITY MANAGEMENT (TQM) is an organization-wide approach to continuously improving the quality of all the organization’s processes, products, and services. the drive to produce goods that are superior to the world markets has led some countries and groups of countries to establish prize that are awarded to companies that exemplify the best quality practices and improvements like giving ISO9000 certificates. QUALITY is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.
Total Quality is the key to value creation and customer satisfaction… According to Daniel Beckham : Marketers who do not learn the language of quality improvement , manufacturing, and operations will become as obsolete as buggy whips. The days of functional marketing are gone. We can no longer afford to think of ourselves as market researchers , advertising people, direct marketers, strategists – we have to think of ourselves as customer satisfiers - customer advocates focused on whole processes.
Responsibilities of a Marketing Manager: They must participate in formulating strategies and policies designed to help the company win through total excellence . They must deliver marketing quality alongside production quality . Each marketing activity like market research, sales training, advertising, customer service and so on must be performed to high standards. “ In all of these activities , Marketers must work closely with the company’s other departments”