1.
Creating Customer Value,
Satisfaction,
and Loyalty
Prepared By,
Mr. Nishant Agrawal

2.
Chapter Questions
• What are customer value, satisfaction, and
loyalty, and how can companies deliver
them?
• What is the lifetime value of customers?
• How can companies cultivate strong
customer relationships?
• How can companies both attract and retain
customers?
• What is database marketing?

3.
Ritz Carlton - Famous for its
Exceptional Service

4.
Figure 5.1 Organizational Charts

5.
What is Customer Perceived Value?
•Consumers are better educated and informed than ever
•Customer perceived value is the difference between
the prospective / future customer’s evaluation of all the
benefits and all the costs of an offering and the perceived
alternatives.

6.
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
• TCB is perceived value of economic, functional and psychological benefits customer
expect from market offering.
• TCC is perceived bundle of costs customers expect to incur in evaluating , obtaining,
using given market offering , energy and psychological costs.

7.
Steps in a Customer Value Analysis
1. Identify major attributes and benefits that customers
value
2. Assess the qualitative importance of different attributes
and benefits
3. Assess the company’s and competitor’s performances
on the different customer values against rated
importance
4. Examine ratings of specific segments
5. Monitor customer values over time

8.
What is Loyalty?
Loyalty is a deeply held commitment to re-buy
a preferred product or service in the future
despite situational influences and marketing
efforts having the potential to cause switching
behavior.

9.
The Value Proposition
The whole cluster of
benefits the
company promises
to deliver

10.
Total Customer Satisfaction
• Satisfaction is person’s feeling of pleasure or
disappointment that result from comparing product’s
perceived performance to expectation.
• Performance falls short of expectation customer is dissatisfied.
• If it matches expectation customer is satisfied.

11.
Measuring Satisfaction
Periodic SurveysPeriodic Surveys
Customer Loss RateCustomer Loss Rate
Monitor Competitive
Performance
Monitor Competitive
Performance

12.
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)

13.
World class companies used NPS

14.
Customer Satisfaction
Customer Loyalty
Company’s Profit

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.
Marketing and Total Quality

17.
Maximizing Customer Lifetime Value
Customer
Profitability
Customer
Equity
Lifetime
Value

18.
Customer-Product Profitability Analysis
What can company do for customer 2 & 3 ?
•It can raise the price of less profitable product or eliminate them
•It can try to sell customer 2 & 3 its profit making products.

19.
Customer Lifetime Value
(Formula Page No: 116)
• CLV described net present value of stream of
future profits expected over customer’s lifetime
purchase.

20.
What is Customer Relationship Management?
• CRM is the process of carefully managing detailed
information about individual customers and all
customer touchpoints to maximize customer loyalty.
• CRM enables companies to provide excellent real time
customer service through effective use of individual
account information.

21.
Personalizing Marketing
• It is about making sure the brand and its marketing are
relevant as possible to as many customer as possible – a
challenge , given that no two customers are identical.
• E commerce companies looking to attract and retain
customers are discovering that personalization goes beyong
creating customized information.

22.
Framework for CRM
Identify prospects and customers
(maintain your customer database)
Differentiate customers by needs &
value to company
Interact to improve knowledge
Customize for each customer

23.
Harrah’s
targets
hundreds of
segments

24.
Reducing Defection
• It is not enough to attract new customer; company must also
keep them and increase business.
• Too many companies suffer from high customer churn or
defection.
• Ex. Telecom MNP introduce in India
• To Reduce defection rate companies must
• Define and measure defection rate
• Differentiate causes of customer attrition and identify those that can be
managed better
• Compare lost customer’s lifetime value to cost of reducing defection rate

25.
Retention Dynamics (page No 122)
• Main steps in attracting and retaining customers in terms of
funnel and some questions to measure progress through the
funnel.
• The marketing funnel identifies the % of potential target market
at each stage in decision process, from merely aware to high
loyal.
• Customer must move through each stage to become loyal.

26.
Managing the customer base
Reduce the rate of defectionReduce the rate of defection
Increase longevityIncrease longevity
Enhance “share of wallet”Enhance “share of wallet”
Terminate low-profit
customers
Terminate low-profit
customers
Focus more effort on
high-profit customers
Focus more effort on
high-profit customers

27.
Building Loyalty
• Creating a strong , tight connection to customer is dream of
any marketer and often the key to long term marketing
success.
• Following sections explain 3 types of marketing activities
companies are using to improve loyalty and retention.
1. Interacting with customers
2. Developing Loyalty Programs
3. Creating institutional Ties

28.
Customer Retention
• Acquisition of customers can cost five times more than
retaining current customers.
• The average customer loses 10% of its customers each
year.
• A 5% reduction to the customer defection rate can
increase profits by 25% to 85%.
• The customer profit rate increases over the life of a
retained customer.

29.
Figure 5.5 The Customer
Development Process
Prospects
Suspects
Disqualified
First-time
customers
Repeat
customers Clients Members
Partners
Ex-customers

30.
Creating Customer Evangelists

31.
Steps for Creating
Customer Evangelists
• Customer plus-delta
• Napsterize your knowledge
• Build the buzz
• Create community
• Make bite-size chunks
• Create a cause

32.
Database Key Concepts
• Customer database
• Database marketing
• Mailing list
• Business database
• Data warehouse
• Data mining

33.
Using the Database
To identify prospectsTo identify prospects
To target offersTo target offers
To deepen loyaltyTo deepen loyalty
To reactivate customersTo reactivate customers
To avoid mistakesTo avoid mistakes

34.
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

35.
Perils of CRM
• Implementing CRM before creating a customer
strategy
• Rolling out CRM before changing the organization to
match
• Assuming more CRM technology is better
• Stalking, not wooing, customers

36.
Marketing Debate
 Online vs. Offline Privacy?
Take a position:
1. Privacy is a bigger issue in the
online world than in the offline world.
or
2. Consumers receive more benefit
than risk from marketers knowing
their personal information.

37.
Marketing Discussion
 Choose a business and show how
you would go about developing a
quantitative formulation that captures
the concept of customer lifetime value.

38.
Assignments
1. What are the techniques used for monitoring
customer satisfaction?