Creating Customer Value,: Satisfaction, And Loyalty

Creating Customer Value, Satisfaction, and Loyalty Tutored by : Prof. Sunil D’ Anto

Learning Agenda • What are customer value, satisfaction, and loyalty, and how can companies deliver them? • What is the lifetime value of customers? • How can companies cultivate strong customer relationships? • How can companies both attract and retain customers? • What are the pros and cons of database marketing?

HDFC Offers an Assortment of Services to Satisfy its Customers

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. • 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 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 the 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

Personnel benefit

Energy cost

Image benefit

Psychological cost

Applying Value Concepts A firm can improve its offers in three ways: 1. By improving the economic, functional, and psychological benefits of its product, services, people, and/or image. 2. By reducing the buyer’s nonmonetary costs by lesser time, energy, and psychological investment. 3. By reducing the product’s monetary cost to the buyer.

What is Loyalty? Loyalty is a deeply held commitment to rebuy or re-patronize a preferred product in the future despite situational influences and marketing efforts having the potential to cause switching behavior.

Top Brands in Customer Loyalty

The Value Proposition

The whole cluster of benefits the company promises to deliver

Delivering Superior Value Customer Value Management (CVM) by Tata Steel through a crossfunctional joint team of the company and the customer has succeeded in delivering superior customer value

Measuring Satisfaction* Periodic Surveys

Customer Loss Rate

Mystery Shoppers Monitor Competitive Performance * customer’s feelings of pleasure that’s result from comparing a products’ perceived performance (or outcome) visà-vis her expectations

J.D. Power Rates Customer Satisfaction

Managing Customers Dealing with negative experiences and recovering customer goodwill: 1. Set up a 7-day, 24-hour toll-free hotline to receive and act on customer complaints. 2. Contact the complaining customer as quickly as possible to avoid negative word of mouth. 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.

What is Quality?

Quality is the totality of features and characteristics of a product that bear on its ability to satisfy stated or implied needs.

Maximizing Customer Lifetime Value

Customer Profitability (CPA)

Customer Equity**

Pareto’s 80:20 rule

Lifetime Value (CLV*)

*CLV describes the net present value of the stream of future profits expected over the customer’s lifetime purchases. ** the sum of lifetime values of all customers.

Estimating Lifetime Value • • • •

Annual customer revenue: Rs.5000 Average number of loyal years: 20 Company profit margin: 10% Customer lifetime value: Rs.10000

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

CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet”

Upsell / Crosssell

Grow or terminate low-profit customers Focus more effort on highprofit customers

Customer Retention • Acquisition of customers can cost five times more than retaining current customers. • The average organisation 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

RETENTION DYNAMICS (The Marketing Funnel)

Steps for Creating Customer Evangelists

• Customer plus-delta • Napsterizing your knowledge into the network • Build the buzz • Create community • Make bite-size chunks • Create a cause

Database Key Concepts • Customer database • Business database • Database marketing • Data warehouse (methodical process to • Mailing list capture, store, query & analyse data)

• Data mining (extraction of useful, relevant, updated information)

Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes

Perils of CRM • Implementing CRM before creating a customer strategy • Rolling out CRM before changing the organization to match • Assuming more CRM technology is better • Stalking, not wooing, customers!

Value re-loaded