This document discusses building long-term customer loyalty relationships. It defines key concepts like customer value, satisfaction and loyalty. It also discusses estimating customer lifetime value and maximizing it through customer relationship management. Companies can attract and retain customers by reducing defection, increasing longevity, focusing on high-value customers, and implementing loyalty programs. Database marketing allows targeting offers to improve loyalty, but it may not be suitable for all products or customers.

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?
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3. Harrah’s Builds Relationships
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4. Figure 5.1 Customer-Orientations
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5. Dell Reestablished
Its Commitment to Value
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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.
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7. Figure 5.2 Determinants of
Customer Perceived Value
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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
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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
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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
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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
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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
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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
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24. Loyalty Programs
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25. Database Key Concepts

Customer database

Database marketing

Mailing list

Business database

Data warehouse

Data mining
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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