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Chapter 3

Building Customer Satisfaction, Value, and Retention


PowerPoint by Karen E. James Louisiana State University - Shreveport
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 0 of 18

Objectives
Understand how companies deliver customer value and satisfaction.
Identify the factors that make a high performance business.

Understand how companies attract and retain customers.


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

Objectives
Realize how companies can improve both customer and company profitability.
Understand how companies can deliver total quality.

2003 Prentice Hall, Inc.

To accompany A Framework for Marketing Management, 2nd Edition

Slide 2 of 18

Customer 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


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

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

Customer Satisfaction
Satisfaction is defined as . . .
a persons feelings of pleasure or disappointment resulting from comparing a products perceived performance (or outcome) in relation to his or her expectations.

2003 Prentice Hall, Inc.

To accompany A Framework for Marketing Management, 2nd Edition

Slide 5 of 18

Customer Satisfaction
To maximize satisfaction . . .
Dont exaggerate the product / services capabilities in advertising or other communications
Dissatisfaction

will result FTC may become involved

Dont set expectations too low


Market
2003 Prentice Hall, Inc.

size will be limited


Slide 6 of 18

To accompany A Framework for Marketing Management, 2nd Edition

High Performance Businesses


Keys to Success
Stakeholders Processes Resources Organization
2003 Prentice Hall, Inc.

Identify several stakeholder groups for your University


How might the needs of these groups conflict with each other?
Slide 7 of 18

To accompany A Framework for Marketing Management, 2nd Edition

High Performance Businesses


Keys to Success
Stakeholders Processes Resources Organization
2003 Prentice Hall, Inc.

New product development


Customer attraction and retention Order fulfillment Reengineering work flows Building cross functional teams
Slide 8 of 18

To accompany A Framework for Marketing Management, 2nd Edition

High Performance Businesses


Keys to Success
Stakeholders Processes Resources Organization
2003 Prentice Hall, Inc.

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


Outsourcing vs. ownership: Own and nurture core competencies
Slide 9 of 18

To accompany A Framework for Marketing Management, 2nd Edition

High Performance Businesses


Keys to Success
Stakeholders Processes Resources Organization
2003 Prentice Hall, Inc.

Organization refers to the organizations policies, structures, and corporate culture


Corporate culture: shared experiences, stories, beliefs, and norms within an organization
Slide 10 of 18

To accompany A Framework for Marketing Management, 2nd Edition

Core Business Practices


Market Sensing
Customer Acquisition

Customer Relationship Management


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

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

Drivers of Customer Equity


Brand Equity
Relationship Equity

Value Equity

2003 Prentice Hall, Inc.

To accompany A Framework for Marketing Management, 2nd Edition

Slide 13 of 18

Strong Customer Bonds


Keys to Success
Adding Financial Benefits Adding Social Benefits Adding Structural Ties
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 14 of 18

Frequency programs
Club memberships

Strong Customer Bonds


Keys to Success
Adding Financial Benefits
Adding Social Benefits Adding Structural Ties
2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 15 of 18

Personalize customer relationships

Strong Customer Bonds


Keys to Success
Adding Financial Benefits
Adding Social Benefits Adding Structural Tie
2003 Prentice Hall, Inc.

Create long-term contracts


Charge less for ongoing purchases

Link product to long-term service


Slide 16 of 18

To accompany A Framework for Marketing Management, 2nd Edition

20 80 30 Rule

20 20% of your customers 80 Generate 80% of your profit 30 Half of your profit is lost
serving the bottom 30% of your customer base
Slide 17 of 18 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition