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
Energy cost
benefit

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 re-

buy 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
cross-
functional 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) vis-
à-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

Pareto’s 80:20 rule

Customer
Profitability (CPA)

Customer Lifetime
Equity** 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 /

Cross-
sell

Grow or terminate low-profit

customers

Focus more effort on high-

profit 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