Philip Kotler, Kevin Lane Keller-Marketing Management, 14th Edition-Prentice Hall (2012)

1. 5
Creating Long-Term
Loyalty Relationships
1

2. Chapter Questions

What are customer value, satisfaction, and
loyalty, and how can companies deliver them?

What is the lifetime value of customers and
how can marketers maximize it?

How can companies attract and retain
customers and cultivate strong customer
relationships?

What are the pros and cons of database
marketing?
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-2

3. Harrah’s Builds Relationships
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 1-3

4. Figure 5.1 Customer-Orientations
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-4

5. Dell Reestablished
Its Commitment to Value
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-5

6. What is
Customer Perceived Value?

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.
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-6

7. Figure 5.2 Determinants of
Customer Perceived Value
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-7
Image benefit Psychological cost
Personal benefit Energy cost
Services benefit Time cost
Product benefit Monetary cost
Total customer benefit Total customer cost

8. Caterpillar Maximizes
Customer Value
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-8

9. Steps in a
Customer Value Analysis

Identify major attributes and benefits that
customers value

Assess the qualitative importance of different
attributes and benefits

Assess the company’s and competitor’s
performances on the different customer values
against rated importance

Examine ratings of specific segments

Monitor customer values over time
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-9

10. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-10
What is Loyalty?
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.

11. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-11
Top Brands in Customer Loyalty

Apple iPhone

Clairol

Samsung

Mary Kay

Grey Goose

Clinique

Avis

Wal-Mart

Google

Amazon

Bing

J.Crew

AT&T Wireless

Discover Card

Verizon Wireless

Cheerios

12. Establishing Value
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-12

13. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-13
Measuring Satisfaction

Periodic surveys

Customer loss rate

Mystery shoppers

Monitor competitive performance

14. Managing Customers
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-14

15. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-15
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.

16. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-16
Maximizing Customer Lifetime Value
Customer Profitability
Customer Equity
Lifetime Value

17. Figure 5.3 Customer-Product
Profitability Analysis
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-17

18. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-18
Estimating Lifetime Value

Annual customer revenue: $500

Average number of loyal years: 20

Company profit margin: 10

Customer lifetime value: $1000

19. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-19
What is
Customer Relationship Management?
CRM is the process of carefully managing
detailed information about individual
customers and all customer touch points to
maximize customer loyalty.

20. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-20
Framework for CRM

Identify prospects and customers

Differentiate customers by needs and value to
company

Interact to improve knowledge

Customize for each customer

21. Amy’s Maximized Word of Mouth
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-21

22. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-22
Attracting and
Retaining Customers

Reduce the rate of defection

Increase longevity

Enhance share of wallet

Terminate low-profit customers

Focus more effort on high-profit customers

23. Figure 5.4 The Marketing Funnel
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-23

24. Loyalty Programs
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-24

25. Database Key Concepts

Customer database

Database marketing

Mailing list

Business database

Data warehouse

Data mining
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-25

26. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-26
Using the Database

To identify prospects

To target offers

To deepen loyalty

To reactivate customers

To avoid mistakes

27. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-27
Don’t Build a Database When

The product is a once-in-a-lifetime purchase

Customers do not show loyalty

The unit sale is very small

The cost of gathering information is too high

28. For Review

What are customer value, satisfaction, and
loyalty, and how can companies deliver them?

What is the lifetime value of customers and
how can marketers maximize it?

How can companies attract and retain
customers and cultivate strong customer
relationships?

What are the pros and cons of database
marketing?
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-28