1. Visual Model: Creating
Customer Value,
Satisfaction and Loyalty
Chapter 5
Raymund C. Piñon
Marketing Management V57
April 27, 2010

2. Rationale
 The 3rd important task of Modern Marketing:

3. Objectives
At the end of the presentation, the participants should
be able to understand concepts related to the 3rd
marketing task of CONNECTING WITH CUSTOMERS
1. Customer Value, Customer Satisfaction,
Customer Loyalty and how we deliver them?
2. What is the lifetime value of customers?
3. How can companies cultivate strong customer
relationships?
4. How can companies both attract and retain
customers?
5. What is database marketing?

4. To Win Customers and
….Beat Competition!!!
Customer-centered
X Traditional

5. To Win Customers and
….Beat Competition!!!
Total
Customer
Satisfaction
Build
Create and Deliver Customer
Superior Customer Value Loyalty

6. Customers’ Perceived Value
Customers are value maximizers
Total Total Delivered
Benefits Costs Value
Product Money
Service Time
Personnel Effort
Image Psychological

7. Steps in Customer Value Analysis
Identify features & benefits Assess company’s
that customers value Assess qualitative importance and competitors’
of attributes & benefits performance on different
values against rated
performance
Examine ratings of specific segments Monitor customer values over time

8. Delivering High Customer Value
Value Proposition Value Delivery System

9. To Win Customers and
….Beat Competition!!!
Total
Customer
Satisfaction
Build
Create and Deliver Customer
Superior Customer Value Loyalty

10. Total Customer Satisfaction
Perceived Buyer’s
Performance Expectation Satisfaction
_ =

11. Total Customer Satisfaction
Satisfaction Depends on Quality

12. What is Quality?
 Totality of features and characteristics of products or services
that satisfy stated or implied needs
Product or Service Expectations
Meets or exceeds
= or >

13. Total Customer Satisfaction
Influence of Customer Satisfaction

14. Total Customer Satisfaction
Monitoring Customer Satisfaction
Periodic Surveys
Customer Loss Rate
Mystery Shopper
Competitors’ Performance

15. Total Customer Satisfaction
Satisfaction is Related to Loyalty

16. To Win Customers and
….Beat Competition!!!
Total
Customer
Satisfaction
Build
Create and Deliver Customer
Superior Customer Value Loyalty

17. Customer Lifetime Value
Art of attracting and keeping profitable customers

18. Maximizing Customer Lifetime Value
Customer Profitability
Customer Equity Lifetime Value

19. Maximizing Customer Lifetime Value
Customer Profitability Analysis
C1 C2 C3
Highly
P1 + + + profitable
product
Profitable
P2 + product
Unprofitable
P3 - - product
Highly
P4 - unprofitable
product
High-profit Mixed-bag Losing
customer customer customer

20. Maximizing Customer Lifetime Value
Customer Profitability Analysis
Customer Portfolios
• acquaintances
• friends
Activity-Based Costing • partners
Or
• Diversify portfolio
to manage risk

21. Maximizing Customer Lifetime Value
Measuring Customer Lifetime Value
Year Year Year Year Year Year Year Year
0 1 2 3 4 5 6 7
Number of Customers
Revenue per Customer
Variable Cost per Customer
Margin per Customer
Acquisition Cost per Customer
Total Cost or Profit
Present Value

22. Cultivating Customer Relationships

23. Customer Relationship Management
Focuses on attracting and keeping right customers,
and satisfying their needs
Process of carefully managing
detailed information
about individual customers
and all customer “touch points”
to maximize customer loyalty

24. Customer Relationship Management
Key to retaining customers is relationship marketing
2. Differentiate customers in terms of:
1. Identify prospects and customers a. Their needs
b. Their value to your company
3. Interact with individual customers to 4. Customize products, services
improve knowledge about needs and and messages to each customer
build stronger relationships

25. Customer Relationship Management
Increasing Value of Customer Base
1. Reduce customer defection
2. Increase longevity of relationship
3. Enhance growth potential
of each customer
4. Make low-profit
customers profitable
or weed out
5. Focus on high-value customers

26. Customer Relationship Management
Attracting and Retaining Customers
Reducing Defections Retention Dynamics

27. Partners
Advocates
Members
Clients
Repeat Inactive or
Customer Ex-Customers
1st-Time
Customer
Prospects
Disqualified
Potentials Prospects

28. Customer Relationship Management
Building Customer Loyalty
Interacting with Customers Creating Loyalty Programs
Personalizing Marketing Creating Institutional Ties

29. Customer Database and
Database Management
Customer Database
Data Warehousing
Data Mining

30. Customer Database and
Database Management
Choose which customers
Identify prospects receive a particular offer Deepen loyalty
Reactivate customer purchases Avoid mistakes

31. Summary
The 3rd important marketing task of
CONNECTING WITH CUSTOMERS
1. Customer Value, Customer Satisfaction,
Customer Loyalty and how we deliver them
2. Lifetime value of customers
3. How companies cultivate strong customer
relationships
4. How companies attract and retain customers
5. Database marketing

32. Win Customers, Beat Competition Customer Lifetime Value
Satisfaction
Equity
= Profitability
+ Lifetime Value
Perceived Expectation
Benefits
Customer Relationship Management
B
-
C
= Attract and Retain Customers
DV
Customer Database & Database Mgt
Value
Proposition Value Delivery
System
Customer Value Loyalty