5
Creating Long-term Loyalty
Relationship
Figure 5.1 Organizational Charts
What is Customer Perceived Value?
Customer perceived value is the
difference between the prospective
customer’s evaluation of all the benefits
and all the costs of an offering and the
perceived alternatives.
Figure 5.2 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
Steps in a Customer Value Analysis
• Identify major attributes and benefits
that customers value
• Assess the qualitative importance of
different attributes and benefits
• Assess the company’s and competitor’s
performances on the different customer
values against rated importance
• Examine ratings of specific segments
• Monitor customer values over time
Choice Process and Implications
Low price
Buyer Retirement
Long-term friendship
Delivering High Customer Value
Loyalty : 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 Promised
benefits.
Top Brands in Customer Loyalty
• Google • Land’s End
• L.L. Bean • Coors
• Samsung (mobile • Hyatt
phones) • Marriott
• Yahoo! • Verizon
• Canon (office • KeySpan Energy
copiers) • Miller Genuine Draft
• Amazon
Total Customer Satisfaction
Satisfaction????
Measuring Satisfaction And
Influences
Periodic
Periodic Surveys
Surveys
Customer
Customer Loss
Loss Rate
Rate
Mystery
Mystery Shoppers
Shoppers
Monitor
Monitor Competitive
Competitive Performance
Performance
Product and Service Quality and
Impact
Quality is the totality of features and
characteristics of a product or
service that bear on its
ability to satisfy
stated or implied needs.
Maximizing Customer Lifetime Value
Customer
Profitability
Customer Lifetime
Equity Value
Figure 5.3 The 150–20 Rule
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-13
Figure 5.3 Customer-Product
Profitability Analysis
Measuring Lifetime Value
??????
Attracting & Retaining Customers
• Acquisition of customers can cost five times
more than retaining current customers.
• The average customer 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.
Building Loyalty
Interact Closely With Customers
Develop Frequency Programs
Create Institutional Ties
What is Customer Relationship
Management?
CRM is the process of carefully
managing detailed information about
individual customers and all customer
touchpoints to maximize
customer loyalty.
Framework for CRM
Identify prospects and customers
Differentiate customers by needs
and value to company
Interact to improve knowledge
Customize for each customer
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-19
CRM Strategies
Reduce
Reduce the
the rate
rate of
of defection
defection
Increase
Increase longevity
longevity
Enhance
Enhance “share
“share of
of wallet”
wallet”
Terminate
Terminate low-profit
low-profit customers
customers
Focus
Focus more
more effort
effort on
on high-profit
high-profit
customers
customers
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5-20
Marketing Discussion
Choose a business and show how
you would go about developing a
quantitative formulation that captures
the concept of customer lifetime value.