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Creating Customer
Value and Customer
Relationships
Figure 4.1 Customer-Orientations
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What is
Customer Perceived Value?
Customer perceived value is the
difference between the prospective
customers evaluation of all the benefits
and all the costs of an offering and a
comparison with the perceived
alternatives.
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Figure 4.2 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
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Steps in a
Customer Value Analysis
1.
2.
3.
4.
5.
Identify major attributes and benefits that
customers value
Assess the qualitative importance of different
attributes and benefits
Assess the companys and competitors
performances on the different customer
values against rated importance
Examine ratings of specific segments
Monitor customer values over time
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What is Loyalty?
Loyalty is a deeply held commitment to rebuy or re-patronize a preferred product or
service in the future despite situational
influences and marketing efforts having the
potential to cause switching behavior.
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Measuring Satisfaction
Periodic surveys
Customer loss rate
Mystery shoppers
Monitor competitive performance
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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.
Conformance quality
Performance quality
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Customer Profitability
A profitable customer is a person, household
or company that over time yields a revenue
stream exceeding by an acceptable amount
the companys cost stream for attracting,
selling, and serving that customer.
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Figure 4.3 Customer-Product
Profitability Analysis
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Maximizing Customer Lifetime Value
Customer lifetime value describes the net
present value of the stream of future profits
expected over the customers lifetime
purchases. And from it then expected costs of
attracting and selling that customer is
subtracted.
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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.
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Framework for CRM
1.
2.
3.
4.
Identify prospects and customers: Dont go
after everyone.
Differentiate customers by needs and value
to company (ABC costing, customer lifetime
value)
Interact to improve knowledge
Customize for each customer
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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
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Reducing Defection
1.
2.
3.
Define and measure its retention rate
Distinguish the causes of customer exit and
identify the ones that can be managed
Compare the lost customers lifetime value to
the costs of reducing the defection rate.
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Figure 4.4 The Marketing Funnel
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Loyalty Programs, Win-Backs
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Using the Database
To identify prospects
To target offers
To deepen loyalty
To reactivate customers
To avoid mistakes
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Dont 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
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