To accompany A Framework for Marketing Management, 2nd Edition Slide 1 of 18©2003 Prentice Hall, Inc.

Chapter 3Chapter 3

Building Customer Building Customer Satisfaction, Value, Satisfaction, Value,

and Retentionand Retention

PowerPoint by Karen E. JamesPowerPoint by Karen E. JamesLouisiana State University - ShreveportLouisiana State University - Shreveport

To accompany A Framework for Marketing Management, 2nd Edition Slide 2 of 18©2003 Prentice Hall, Inc.

ObjectivesObjectives

Understand how companies deliver customer value and satisfaction.

Identify the factors that make a high performance business.

Understand how companies attract and retain customers.

To accompany A Framework for Marketing Management, 2nd Edition Slide 3 of 18©2003 Prentice Hall, Inc.

ObjectivesObjectives

Realize how companies can improve both customer and company profitability.

Understand how companies can deliver total quality.

To accompany A Framework for Marketing Management, 2nd Edition Slide 4 of 18©2003 Prentice Hall, Inc.

Customer ValueCustomer Value

Customers seek to maximize value by

– estimating which offer (product/firm) delivers the most value (CPV)

– forming an expectation of value and acting upon it (purchase)

– evaluating their usage experience against the expectations

Satisfaction results when expectations are equaled or surpassed

To accompany A Framework for Marketing Management, 2nd Edition Slide 5 of 18©2003 Prentice Hall, Inc.

Customer Perceived ValueCustomer Perceived Value

Perception of delivered value is a function of:

– Total customer costs– Total customer value

Firms at a disadvantage must:

– Reduce perceptions of costs or enhance perceptions of value

To accompany A Framework for Marketing Management, 2nd Edition Slide 6 of 18©2003 Prentice Hall, Inc.

Customer SatisfactionCustomer Satisfaction

Satisfaction is defined as . . .

“a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.”

To accompany A Framework for Marketing Management, 2nd Edition Slide 7 of 18©2003 Prentice Hall, Inc.

Customer SatisfactionCustomer Satisfaction

To maximize satisfaction . . .

– Don’t exaggerate the product / service’s capabilities in advertising or other communications Dissatisfaction will resultFTC may become involved

– Don’t set expectations too low Market size will be limited

To accompany A Framework for Marketing Management, 2nd Edition Slide 8 of 18©2003 Prentice Hall, Inc.

High Performance High Performance BusinessesBusinesses

Keys to Success

Stakeholders

Processes

Resources

Organization

Identify several stakeholder groups for your University

How might the needs of these groups conflict with each other?

To accompany A Framework for Marketing Management, 2nd Edition Slide 9 of 18©2003 Prentice Hall, Inc.

High Performance High Performance BusinessesBusinesses

Keys to Success

Stakeholders

Processes

Resources

Organization

New product development

Customer attraction and retention

Order fulfillment

Reengineering work flows

Building cross functional teams

To accompany A Framework for Marketing Management, 2nd Edition Slide 10 of 18©2003 Prentice Hall, Inc.

High Performance High Performance BusinessesBusinesses

Keys to Success

Stakeholders

Processes

Resources

Organization

Resources include labor, materials, machines, energy, and information

Outsourcing vs. ownership: Own and nurture core competencies

To accompany A Framework for Marketing Management, 2nd Edition Slide 11 of 18©2003 Prentice Hall, Inc.

High Performance High Performance BusinessesBusinesses

Keys to Success

Stakeholders

Processes

Resources

Organization

Organization refers to the organization’s policies, structures, and corporate culture

Corporate culture: shared experiences, stories, beliefs, and norms within an organization

To accompany A Framework for Marketing Management, 2nd Edition Slide 12 of 18©2003 Prentice Hall, Inc.

Core Business PracticesCore Business Practices

Market Sensing

Customer Acquisition

Customer Relationship Management

Fulfillment Management

New Offering Realization

To accompany A Framework for Marketing Management, 2nd Edition Slide 13 of 18©2003 Prentice Hall, Inc.

Customer RetentionCustomer Retention

Reducing customer churn (defection) is highly desirable

– Define and measure retention rate– Identify causes of attrition– Estimate profit lost from customer

defection (customer lifetime value)– Estimate cost to reduce defection; take

appropriate action

To accompany A Framework for Marketing Management, 2nd Edition Slide 14 of 18©2003 Prentice Hall, Inc.

Drivers of Customer EquityDrivers of Customer Equity

Brand Equity

Relationship Equity

Value Equity

To accompany A Framework for Marketing Management, 2nd Edition Slide 15 of 18©2003 Prentice Hall, Inc.

Strong Customer BondsStrong Customer Bonds

Keys to Success

Adding Financial Benefits

Adding Social Benefits

Adding Structural Ties

Frequency programs

Club memberships

To accompany A Framework for Marketing Management, 2nd Edition Slide 16 of 18©2003 Prentice Hall, Inc.

Strong Customer BondsStrong Customer Bonds

Keys to Success

Adding Financial Benefits

Adding Social Benefits

Adding Structural Ties

Personalize customer relationships

To accompany A Framework for Marketing Management, 2nd Edition Slide 17 of 18©2003 Prentice Hall, Inc.

Strong Customer BondsStrong Customer Bonds

Keys to Success

Adding Financial Benefits

Adding Social Benefits

Adding Structural Tie

Create long-term contracts

Charge less for ongoing purchases

Link product to long-term service

To accompany A Framework for Marketing Management, 2nd Edition Slide 18 of 18©2003 Prentice Hall, Inc.

20 – 80 – 30 Rule20 – 80 – 30 Rule

Half of your profit is lost serving the bottom 30% of your customer base

20% of your customers

Generate 80% of your profit

30

8020