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Marketing Management, 14th Edition

Kotler Philip, Keller Kevin Lane

Creating Long-Term Loyalty Relationships

Course Instructor
Mihai ichindelean

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 the marketers
maximize it?
How can companies attract and retain the right customers and
cultivate strong customer relationships?

CUSTOMER PERCEIVED VALUE

What is customer perceived value?

The difference between the prospective customers evaluation


of all the benefits and costs of an offering and the perceived
alternatives.

CUSTOMER BENEFITS AND COSTS

Total customer benefit is the perceived monetary value of


the bundle of economic, functional, and psychological
benefits customers expects from a given market offering
because of the product, service, people, and image.

Total customer cost is the perceived bundle of costs


customers expect to incur in evaluating, obtaining, using,
and disposing of given market offering, including monetary,
time, energy, and psychological costs.

DETERMINANTS OF 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

CUSTOMER VALUE ANALYSIS


Steps in a Customer Value Analysis

Identify major attributes and benefits that customers value


Assess the qualitative (relative) importance of different attributes
and benefits
Assess the companys and competitors performances on the
different customer values against rated importance (benchmark)

Examine ratings of specific segments

Monitor customer values over time

Delivering high customer value => value proposition (consists of the whole
cluster of benefits the company promises to deliver; thus being more than
the core positioning of the offerings)

E.g.Volvo http://www.youtube.com/watch?v=MAW1E0Zuex0

CUSTOMER LOYALTY
What is 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
Behavioral Loyalty
Attitudinal Loyalty
Determinants of Loyalty - Trust and Satisfaction
What is Trust? (Shared Values, Effective Communication and Opportunistic
Behavior)

CUSTOMER SATISFACTION
What is Customer Satisfaction?
A Persons Feeling of pleasure or disappointment that results from comparing a
products perceived performance (or outcome) to expectations.
How do customers form their expectation?
=> Learning process (direct learning past buying experiences and/or indirect
learning friends advice, marketers and competitors information).

MONITORING CUSTOMERS SATISFACTION

Monitoring Customers Satisfaction

Periodic Surveys
Customer Churn Rate
Mystery Shoppers
Monitor Competitive Performance

CUSTOMER COMPLAINS

Dealing with Customer Complains


Studies (pg. 154) show that about 25% of the customer are dissatisfied
with the companys offering, but only 5% complain.
Out of the complaining customers, 54% - 70% will do business with
the company if their complain was solved (positive WOM 5 people).
Dissatisfied customers which have not complained tell 11 people
(average) about their negative client experience (negative WOM).
=> Recover customers good-will through: 24 hour toll-free telephone
line, contact the complaining customer as soon as possible, use
customer service people who are empathic, solve the complain
(company cares about the customer)

PRODUCT AND SERVICE QUALITY

What is Product and Service Quality?


Represents all features and characteristics of a
product or service that can satisfy stated or implied
needs.
Impact of Quality:
High Quality Customer Satisfaction Companys
Profitability

CUSTOMER LIFETIME VALUE

Maximizing Customer Lifetime Value


80 20 Rule (Profit - Customer)
A profitable customer is a person, household, or
company that over time yields a revenue stream
exceeding the companys cost stream for attracting,
selling, and serving that customer.
Lifetime stream differs from one-time transaction

CUSTOMER LIFETIME VALUE


Relationship Marketing understood through the Client Relationship Lifetime Cycle

Relationship Intensity

Relationship Length
Acquisition PhaseRetention Phase Re(winning) Phase

CUSTOMER LIFETIME VALUE

CLV

=
m = estimated profit margin (for a t period)
i = discount rate
n = estimated lifetime (before company ends up)
r = retention rate (1-r churn rate)
AC = acquisition cost

CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationships Management (CRM)


Is the process of carefully managing detailed information about individual
customers and all customer touch points to maximize loyalty.
A customer touch point is any occasion on which a customer encounters the
brand and product (learning process).
=> Customer specific information => customize market offerings, services,
programs, and media.

CUSTOMER RELATIONSHIP MANAGEMENT

CRM Framework
Identify prospects and customers
Differentiate customers by needs and value for
the company
Interact to improve knowledge
Customize for each customer

CUSTOMER RELATIONSHIP MANAGEMENT

CRM Strategies
Reduce the rate of defection
Increase Longevity
Enhance share of wallet
Terminate low-profit customers
Focus more effort on high-profit customers

CUSTOMER RETENTION

Customer Retention

Acquisition of customers can cost five 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.

LOYALTY PROGRAMS

Loyalty Programs

Thanks!