Figure 5.4 shows the main steps in attracting and retaining customers in terms of a funnel. The marketing funnel identifies the percentage of the potential target market at each stage in the decision process, from merely aware to highly loyal. Consumers must move through each stage before becoming loyal customers. Some marketers extend the funnel to include loyal customers who are brand advocates or even partners with the firm.
Value and Satisfaction
– The customer’s evaluation of the difference
between benefits and costs.
– Customers often do not judge values and
costs accurately or objectively.
– Product’s perceived performance relative to
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
Determinants of Customer-Delivered
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.
The Value Proposition
The whole cluster of benefits the
company promises to deliver
Framework for CRM
Identify prospects and customers
Differentiate customers by needs
and value to company
Interact to improve knowledge
Customize for each customer
Reduce the rraattee ooff ddeeffeeccttiioonn
EEnnhhaannccee ““sshhaarree ooff wwaalllleett””
Focus more effort on
Mass vs. One-to-One Marketing
• Average customer
• Customer anonymity
• Standard product
• Mass production
• Mass distribution
• Mass advertising
• One-way message
• Economies of scale
• Individual customer
• Customer profile
• Customized market
• Economies of scope
• Share of customer
• Acquisition of customers can cost 5 times
more than retaining current customers.
• The average company 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.