Kotler Mktman 11ce Ch03

Chapter 3 Building Customer Satisfaction, Value, and Retention

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Kotler on Marketing It is no longer enough to satisfy customers. You must delight them.

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Chapter Objectives • In this chapter, we will address the following questions: – What are customer value and satisfaction, and how can companies deliver them? – What makes a high-performance business? – How can companies both attract and retain customers? – How can companies improve both customer and company profitability? – How can companies practice total quality management?

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Defining Customer Value and Satisfaction • Customer Perceived Value (CPV) – Total customer value – Total customer cost

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Figure 3.1: Determinants of Customer Delivered Value

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Defining Customer Value and Satisfaction • Total Customer Satisfaction – Satisfaction

• Customer Expectations • Delivering High Customer Value – Value proposition – Value-delivery system

• Measuring Satisfaction 3-6 Copyright 2004 © Pearson Education Canada Inc.

Table 3.1: Tools for Tracking and Measuring Customer Satisfaction

Complaint and A customer-centered organization makes it easy for customers to register suggestions and complaints. Some suggestion customer-centered companies—P&G, General Electric, systems: Whirlpool—establish hot lines with toll-free numbers. Companies are also using Web sites and e-mail for quick, two-way communication.

Customer satisfaction surveys:

Studies show that although customers are dissatisfied with one out of every four purchases, less than 5 percent will complain. Most customers will buy less or switch suppliers. Responsive companies measure customer satisfaction directly by conducting periodic surveys. While collecting customer satisfaction data, it is also useful to ask additional questions to measure repurchase intention and to measure the likelihood or willingness to recommend the company and brand to others.

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Would you feel more brand loyalty for a company that tried to immediately resolve a complaint via E-mail, or a company that had a customer service representative call within two business days to resolve the problem over the phone? 3-8 Copyright 2004 © Pearson Education Canada Inc.

Premier Dell.com is a special business-oriented part of the Dell Web site that allows customers to interact with Dell and customize all phases of doing business with Dell.

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The Nature of High Performance Business • High-performance business

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Figure 3.2: The High Performance Business

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The Nature of High Performance Business • Stakeholders • Processes • Resources – Core competency – Distinctive capabilities

• Organization and Organizational Culture – Organization – Corporate culture – Scenario analysis 3-12 Copyright 2004 © Pearson Education Canada Inc.

Can you name a company that has changed the public’s perception of their corporate culture? Has this effectively rehabilitated that company’s image?

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Delivering Customer Value and Satisfaction • Value Chain – Value chain

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Figure 3.3: The Generic Value Chain

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Delivering Customer Value and Satisfaction – Benchmarks

• Core Business Processes – – – –

The market sensing process The new offering realization process The customer acquisition process The customer relationship management process – The fulfillment management process 3-16 Copyright 2004 © Pearson Education Canada Inc.

Delivering Customer Value and Satisfaction • The Value Delivery Network (Supply Chain)

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Figure 3.4: Levi Strauss’s ValueDelivery Network

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Attracting and Retaining Customers • Partner relationship management (PRM) • Customer relationship management (CRM)

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Saturn has gained a customer loyalty rate of more than 60% by fundamentally changing the buyer-seller relationship. Can you think of another company that has made a change of similar magnitude? Have they had similar results? 3-20 Copyright 2004 © Pearson Education Canada Inc.

Attracting and Retaining Customers • Attracting Customers • Computing the Cost of Lost Customers – Customer churn – Customer defection rate – Lifetime value

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On the Lands’ End Web site, customers can click a button to talk with a customer service representative

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Attracting and Retaining Customers • The Need for Customer Retention • Measuring Customer Lifetime Value (CLV) • Customer Relationship Management (CRM): The Key – Customer equity – Three drivers of customer equity • Value equity • Brand equity • Relationship equity Copyright 2004 © Pearson Education Canada Inc.

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Figure 3.5: The CustomerDevelopment Process

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Attracting and Retaining Customers • Five levels of investment in customer relationship building – – – – –

Basic marketing Reactive marketing Accountable marketing Proactive marketing Partnership marketing 3-25 Copyright 2004 © Pearson Education Canada Inc.

Figure 3.6: Levels of Relationship Marketing

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Attracting and Retaining Customers • Forming Strong Customer Bonds: The Basics – Cross-departmental participation – Integrate the Voice of the Customer into all business decisions – Create superior offering for the target market 3-27 Copyright 2004 © Pearson Education Canada Inc.

Attracting and Retaining Customers – Organize and make accessible a database of customer information – Make it easy for customers to reach the appropriate personnel – Reward outstanding employees

• Adding Financial Benefits – Frequency programs (FPs) 3-28 Copyright 2004 © Pearson Education Canada Inc.

The H.O.G. Web site presents the benefits of joining.

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Attracting and Retaining Customers • Adding Social Benefits

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Table 3.2: Social Actions Affecting Buyer-Seller Relationships

Good Things

Bad Things

Initiate positive phone calls Make recommendations Candour in language Use phone Show appreciation Make service suggestions Use “we” problem-solving language Get to problems Use jargon or shorthand Personality problems aired Talk of “our future together” Routinize responses Accept responsibility Plan the future

Make only callbacks Make justifications Accommodative language Use correspondence Wait for misunderstandings Wait for service requests Use “owe-us” legal language Only respond to problems Use long-winded communications Personality problems hidden Talk about making good on the past Fire drill and emergency responsiveness Shift blame Rehash the past 3-31

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Attracting and Retaining Customers • Adding Structural Ties – Create long-term contracts – Charge lower price to high volume customers – Turn product into long-term service

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Customer Profitability, Company Profitability, and Total Quality Management • Measuring Profitability – Profitable customer

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Figure 3.7: Customer-Product Profitability Analysis

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Figure 3.8: Allocating marketing investment according to customer value

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Customer Profitability, Company Profitability, and Total Quality Management • Increasing Company Profitability – Competitive advantage

• Implementing TQM – Total Quality Management • Quality

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