3 Creating Customer Value & Customer Relationships Building Profitable Long Term Customer Value

Customer Value, Satisfaction, and LoyaltyHolistic MarketingInformEngageEnergize

TraditionalXCustomer-centered To Win Customers and .Beat Competition!!!

Traditional Organization vs. Customer-Oriented Organization

Difference between what a customer gets from a product, and what he or she has to give in order to get it. the only value your company will create is the value that comes from your customers, the ones that you have now and ones you will have in the future.

Customer Value

Customer perceived value - difference between Prospective customers evaluation of all the benefits and all Costs of an offering and the perceived alternatives.Total Customer Benefit- monetary value of benefits customer expects from market offering.Total Customer Cost- cost customer expect to incur in evaluating, obtaining, using & disposing market offering.Customer Value

Determinants of Customer Perceived Value

Steps in Customer Value AnalysisIdentify features & benefits customers valueAssess qualitative importanceof attributes & benefitsAssess companys and competitors performance on different values against rated performanceExamine ratings of specific segmentsMonitor customer values over tme

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.Value Proposition cluster of benefits company promises to the customer.Customer Loyalty

Degree of satisfaction provided by the goods or services of a firm as measured by the number of repeat customers.DissatisfiedSatisfiedDelightTotal Customer Satisfaction

ExpectationsCustomer Satisfaction

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Dissatisfied51015

Satisfied104.42

Delighted1533

Category 44.52.85

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Customer ExpectationsExpectationsPrevious purchasesFriends adviceMarketers / competitors

Measuring SatisfactionPeriodic SurveysCustomer Loss RateMystery ShoppersMonitor Competitive Performance

Customer Complaints25%Dissatisfied5%Complain95%Stop buying54% - 70%Buy again if resolved95%If resolved quicklyTell 5 peopleTell 11people

Satisfaction will also depend on Quality

PerformanceConformance

What is Quality?Totality of features and characteristics of products or services that satisfy stated or implied needsProduct or ServiceMeets or exceeds= or >Expectations

Correctly identifying customers needs and requirementsCommunicate customer expectations properly to product designersBe sure orders are filled correctly and on timeProvide customers with proper instructions, training, and technical assistanceStay in touch with customers after the saleGather customer ideas for improvements and convey them to the appropriate departmentsMarketers Roles in Delivering Quality

Total profit (or loss) estimated to result from an ongoing business relationship with a customer over the life of relationship.Pareto Law (80:20 Rule) For most of the events, roughly 80% effects come from 20% of the causes.Profitable Customer- a customer who over the time yields the revenue stream that exceeds by an acceptable amount the companies cost stream, for attracting/selling & servicing that customer.Customer Lifetime Value

CustomersMaximizing Customer Lifetime Value

Customer-Product Profitability Analysis

CRM is the process of carefully managing detailed information about individual customers and all customer touch points to maximize customer loyalty.Customer Touch Points- Any association on which a customer encounters with a brand or a product from actual experience to personal or mass communication to casual observation.

What is Customer Relationship Management?

Identify prospects and customersOne-to-One MarketingDifferentiate customersInteract with each customerCustomize

Identify prospects and customersDifferentiate customers by needs and value to companyInteract to improve knowledgeCustomize for each customerOne-to-One Marketing

Increasing Value of Customer BaseReduce the rate of defectionIncrease longevityEnhance share of walletTerminate low-profit customersFocus more effort on high-profit customers

Customer RetentionAcquiring new customers costs 5x morethan retaining current customersThe average company loses10%Of its customers yearlyReducing customer defections by 5% can increase profits from 25% to 85%The customer profit rate increases over the life of a retained customer

Attracting and Retaining CustomersReduce DefectionsDefine and measureDetermine causesCompare CLV to costsManage customer baseRetention Dynamics

The Marketing Funnel

Disqualified ProspectsPotentialsProspects1st-TimeCustomerRepeatCustomerClientsMembersAdvocatesPartnersInactive or Ex-Customers

Interact with customersCreate institutional tiesDevelop loyalty programsBuilding Loyalty

Databases & Database MarketingCustomer databasesName, address, telephone #Purchase historyDemographicsPsychographicsMediagraphicsData miningData Warehouses

Customer databasean organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for marketing purposes.Database marketingthe process of building, maintaining, and using customer databases and other databases to make contact, facilitate transactions, and build customer relationships. Customer Database and Database Marketing

Data warehouseorganized data where marketers can capture, query, and analyze it to draw inferences about an individual customers needs and responses.Dataminingstatisticians extract useful information about individuals, trends, and segments from the mass of data.Data Warehouse and Datamining

Identify the best prospectsMatch a specific offer with a specific customer as a way to sell, cross-sell, and up-sellDeepen customer loyalty by remembering preferences and offering relevant incentives and informationReactivate customer purchasingAvoid serious mistakesDatabase Uses

Large investmentDifficulty in getting everyone to be customer orientedNot all customers want an ongoing relationshipAssumptions behind CRM may not always hold trueDownside of Database Marketing and CRM

The product is a once-in-a-lifetime purchaseCustomers do not show loyaltyThe unit sale is very smallThe cost of gathering information is too high

Dont Build a Database When