Connecting with

customers

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 Creating customer


value, satisfaction , and

loyalty

Created by Huda M. Abu Shanab

Supervised by Dr. Laith Alrubaiee

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  Building customer value,
satisfaction, and loyalty .
 Maximizing customer lifetime
value.
 Cultivating customer
relationships.
 Customer databases and
database marketing .

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  Building customer value,
satisfaction , and loyalty
As marketing experts Don Peppers and Martha Rogers says:
“Companies create its own value from the value of
their own customers , the ones they have now and the
ones they will have in the future” .
Businesses
Succeed by

Getting Growing
keeping

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customers
 Managers who believe the customer
is the company’s only true “profit
center”, consider the traditional
organization chart as below :

Top
management

Middle
management

Frontline people

customers
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 Successful marketing companies
invert the modern customer-
oriented organization chart as
below :

Customers

Frontline people
C C
U U
S Middle management S
T T
Top
O O
management
M M
E E
R R
S S
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  customer perceived value ( CPU )
customer-perceived value
Customer
perceived value is
the difference Total customer Total customer
between the benefit cost

prospective
customer’s Product benefit Monetary cost
evaluation of all
the benefits and
Services benefit Time cost
all the coast of an
offering and the
perceived Personnel benefit Energy cost

alternatives.
Image benefit Psychological cost

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 total customer benefit is the perceived
monetary value of the bundle of economic ,
functional , and psychological benefits customers
expect from a given market offering because of the
products, services, personnel, and image involved.

Total customer cost is the perceived bundle of

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

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 Applying value concepts
Customer value analysis
The steps in analysis are :

1) Identify the major attributes and benefits that customer

value.
2) assess the quantitative importance of the different attribute
and benefits.
3) assess the company’s and competitor’s performance on the
different customer values against their rated importance.
4) examine how customers in a specific segment rate the
company’s performance against a specific major competitor
on an individual attribute or benefit basis.
5) monitor customer values over time .

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 Choices and implications
The buyers operate under various constraints and
occasionally make choices that give more weight to
their personal benefits than to the company’s
benefit.
Such as:
- The buyer might be under orders to buy at lowest price.
- The buyer will retire before the deal is done.
- The buyer enjoys a long-term friendship with the salesperson .

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  Delivering high customer value

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.

The value proposition is a statement about the

experience customers will gain from the company’s market
offering and from their relationship with the supplier.

The value delivery system includes all the experiences

the customer will have on the way to obtaining and using
the offering .

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  total customer satisfaction

Satisfaction is a person’s feelings of

pleasure or disappointment that result
from comparing a product’s perceived
performance (or outcome) to their
expectations .

performance < expectation customer dissatisfied

performance = expectation customer satisfied
Performance > expectation customer highly satisfied

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  The company might be able to increase it’s
profitability by means other than increased
satisfaction , such as by improving
manufacturing processes or investing more in
R&D.

 beside satisfying customers, the company

has many stakeholders, including employees,
dealers, suppliers, and stockholders which
must also deliver them acceptable levels of
satisfaction.

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 Monitoring satisfaction
Many companies are systematically measuring
how well they treat their customers,
identifying the factors shaping satisfaction
and making changes in their operations and
marketing as a result .

Because one key to customer retention

Is customer satisfaction .

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  measurement techniques

many methods exists to measure customer satisfaction :

1) Periodic method can track customer satisfaction directly
and also ask additional , questions to measure repurchase
intention and the respondent’s likelihood or willingness to
recommend the company and brand to others.
2) customer loss rate companies can monitor their
customer loss rate and contact customers who have stopped
buying or who have switched to another supplier to find out why.
3) Mystery shoppers companies hire them to pose as
potential buyers and report on strong and weak points
experienced in buying the company’s and competitor’s products.

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 Influence of customer satisfaction

For customer-centered companies ,customer

satisfaction is both a goal and a marketing tool.

Companies need to be especially concerned today

with their customer satisfaction level because
the internet provides a tool for consumers to
quickly spread bad word of mouth-as well as
good word of mouth-to the rest of the world.

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  Customer complaints
Studies of customer dissatisfaction ,shows that
customers are dissatisfied with their products
about 25% of the time but that only 5%
complain.
Other 95% either :
- Feel complaining is not worth the effort .

- They do not know how or to whom to complain

and they just stop buying.

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 The following procedures can help to recover
customer goodwill:

1) Set up a 7day ,24hours toll-free “hotline” to receive

and act on customer complaints.
2) Contact the complaining customer as quickly as
possible.
3) Accept responsibility for the customer’s
disappointment ,don’t blame the customer.
4) Use customer-service people who are empathic.
5) Resolve the complaint swiftly and to the customer’s
satisfaction .

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  product and service quality
Quality is the totality of features and
characteristics of a product or service Quality is the key
to value creation
that bear on its ability to satisfy stated and customer
or implied needs . satisfaction.

 Impact of quality :

Product & Customer

Service satisfaction
quality

Company
profitability

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  Total quality
Marketers play several roles in helping their companies define and
deliver high-quality goods and services to target customers.
1) They bear the major responsibility for correctly identifying the
customer needs and requirement.
2) They must communicate customer expectation properly to product
designers.
3) They must make sure that customer’s orders are filled correctly
and on time.
4) They must check that customer have received proper instruction
,training, and technical assistance in the use of the product.
5) They must stay in touch with customers after the sale to ensure
that they satisfied and remain satisfied.
6) They must gather customer ideas for product & service
improvement & convey them to the appropriate departments.

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 Maximizing customer lifetime value
 Customer profitability :
A profitable customer is a person, household ,or company that over
time yields a revenue stream that exceeds by an acceptable
amount the company’s cost stream for attracting , selling , and
servicing that customer.

$10,000-
8,000 - + the 150-20 rule says the 20%
6,000 - 150
4,000 - % most profitable customers
2,000 -
0 -
generate as much as 150% of
-2,000 -
-4,000 -
100
%
the profits of a company , the
-6,000 - 20% least profitable lose
100% of the profits .
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1 2 3 4 5 6 7 8 9 10
  Customer profitability analysis CPA

Is best conducted with the tools of an accounting technique called

activity-based coasting (ABC), the company estimates all
revenue coming from customer, less all costs .
customers

c1 c2 c3
Highly
P1 + + + profitable
product
products
Profitable
P2 + product
unprofitable
P3 - - product
Highly
P4 - unprofitable
product
Highly- Mixed- losing
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customer customer
  Customer portfolios

There are two perspective :

1) That a firm’s portfolios consists of a
combination of a “acquaintances” , “friends” ,
and “parents” that are constantly changing .
2) By comparing the individuals who make up the
firm’s customer portfolio to the stocks that
make up an investment portfolio.

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 Measuring customer lifetime value

Customer lifetime value (CLV) describes the net

present value of the stream of future profits expected
over the customers lifetime purchases .
Calculating CLV is a method that can measure CLV
which provide a formal quantitative framework for
planning customer investments & help marketers adopt
along-term perspective.
t (pt – ct) rt

CLV = ∑ ( 1+i) - AC Example in the book

Pages 172-173
t=0

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  cultivating customer relationship
 Customer relationship management (CRM)
is the process of carefully managing detailed
information about individual customers and all
customer “touch points” to maximize customer
loyalty .
Customer touch point is any occasion an which a
customer encounters the brand and the product –
from actual experience to personal or mass
communications to casual observation.

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  One-to-one marketing

1) Identify your prospects and customers.

2) Differentiate customers in terms of (1) their
needs and (2) their value to your company.
3) Interact with individual customers to improve
your knowledge about their individual needs
and to build stronger relationships.
4) Customize products, services, and
messages to each customer.

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 Increasing value of the customers
base
 Reducing the rate of customer defection.
 Increasing the longevity of the customer relationship.
 Enhancing the growth potential of each customer
through “share-of wallet “ , cross-selling , and up-
selling.
 Making low-profit customers more profitable or
terminating them.
 Focusing disproportionate effort on high-value
customers.

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  attracting and retaining
customers
Companies seeking to expand their profit and sales
must spend considerable time and resources
searching for new customers.

To generate leads ads and place them in media

send direct mail and make phone calls

They develop send their salespeople to participate in trade

purchases names from list brokers

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  Reducing defection
To reduce the defection rate, the company
must:
1- define and measure it’s retention rate.
2- distinguish the cause of customer attrition and
identify those that can be managed better.
3- compare the lost profit equal to the customer’s
lifetime value from a lost customer to the costs to
reduce the defection rate.

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 potentials

 Retention dynamics prospects Disqualified

prospects

This chart shows First-time

customers

the main steps

in the process Repeat
customers
of attracting and
retaining clients

customers : Inactive or
Ex-customers

members

advocates

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30
 Some interesting facts that bear on customer
retention:

1) Acquiring new customers can cost five times more than

satisfying and retaining current customers.
2) The average company loss 10% of it’s customers each
year.
3) A 5% reduction in the customer defection rate can
increase profit by 25% to 85% depending on the
industry.
4) The customer profit rate tends to increase over the life of
the retained customer due to increased purchases ,
referral , and price premiums and reduced operating
costs to services.

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 Building loyalty
 Create superior products , services, and experiences for the target
market.
 Get cross-departmental participation in planning and managing the
customer satisfaction and retention process.
 Integrate the “voice of the customer” to capture their stated and
unstated needs or requirements in all business decisions.
 Organize and make accessible a database of information on
individual customer needs, preferences, contacts, purchases
frequency, and satisfaction .
 Make it easy for customers to reach appropriate company personnel
and express their needs, perceptions, and complaints.
 Assess the potential of frequency programs and club marketing
programs.
 Run award programs recognizing outstanding employees.

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  Interacting with customers
It could be by:
1) Listening to customers.
2) To be a customer advocate.
3) As much as possible, take the customer’s side
on issues.
4) Understanding their point of view.

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  Developing loyalty programs
1) Frequency programs ( FPs ) :
They are designed to provide rewards to customers
who by frequently and in substantial amounts.
2) Club membership programs :
Can be open to everyone who purchases a product
or service ,or it can be limited to an affinity group
or to those willing to pay a small fee.

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  Personalizing marketing
customers clients

1) May be nameless to the 1) Cannot be nameless to

institution. the institution.
2) Are served as part of the 2) Are served on an
mass or as part of larger individual basis.
segments.
3) Are served by anyone 3) Are served by the
who happens to be professional assigned to
available . them.
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 Win-backs
Its often easier to re attract ex-customers than to
find new ones.

The key is to analyze the causes of customer

defection through exit interviews and lost-
customer surveys and win back only those who
have strong profit potential.

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 Customer database and database
marketing
A customer database is an organized collection of
comprehensive information about individual customers or
prospects that is current , accessible, and actionable for
such marketing purposes as lead graduation, lead
qualification, sale of a product or service or maintenance of
customer relationships.
Database marketing is the process of building, maintaining
and using customer databases and other databases
( products, suppliers, resellers) to contact , transact, and
build customer relationships.

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 Customer database
The difference between a customer mailing list and
customer database:
customer mailing list :
Is simply a set of names, addresses, and telephone
numbers.
customer database:
Contains much more information accumulated through
customer transactions, registration information ,
telephone queries, cookies, and every customer
contact.

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A customer database contains :

1) Consumer’s past purchases

2) Demographics (age, income, family members,
birthdays)
3) Psychographics (activities, interests, and
opinions)
4) Media graphics (preferred media)
5) Other useful information.

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 A business database contains :

 Business customer’s past purchases.

 Past volumes, prices, and profits.
 Buyer team member names ,ages , birthdays, hobbies,
and favorite foods.
 Statues of current contracts.
 An estimate of the supplier’s share of the customer’s
business .
 Competitive suppliers.
 Assessment of competitive strengths and weaknesses
in selling and servicing the account .
 Relevant buying practices ,patterns, and policies .

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Data warehouse and data mining

A data warehouse: is where marketers can

capture, query, and analyze it to draw
inferences about an individual customer’s needs
and responses.
Through data mining, marketing satisfaction can
extract useful information about individual’s,
trends, and segments from the mass of data.

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 Ways of uses the database :

1) To identify prospects.
2) To decide which customers should receive a
particular offer.
3) To deepen customer loyalty.
4) To reactivate customer purchases.
5) To avoid serious customer mistakes .

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 The downside of database marketing and CRM

Four problems can prevent a firm from using CRM:

1) Is that building and maintaining a customer database
requires a large investment in computer hardware
database software, analytical programs, communication
links, and skilled personnel.
Building a customer database would not be worthwhile in the
following cases:
(a) When the product is a once-in-a-lifetime purchase.
(b) When customers show little loyalty to a brand.
(c) When the unit sale is very small.
(d) When the cost of gathering information is too high.

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 2) Is the difficulty of getting everyone in the company
to be customer oriented and to use the available
information.
3) Is that not all customers want a relationship with
the company, and they may resent knowing that
the company has collected that much personal
information about them.
4) Is that the assumptions behind CRM may not
always hold true.

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 four main perils of CRM:

1) Implementing CRM before creating customer

strategy.
2) Rolling out CRM before changing the
organization to match.
3) Assuming more CRM technology is better.
4) Stalking not wooing, customers.

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 The end

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