Creating Long-term Loyalty Relationships

Customer Value, Satisfaction, and Loyalty

Holistic Marketing
•Inform
•Engage
•Energize
 Traditional Organization vs.
Customer-Oriented Organization
Customer Perceived Value

Customer-
Economic perceived Value

Evaluating

Functional Obtaining

Using

Psychological Disposing
Total Customer Total Customer
Benefit Cost
 Customer- perceived
value

Total customer Total customer

benefit cost

Determinants Product Monetary

benefit cost
of Customer
Services Time
Perceived Value benefit cost

Personal Energy
benefit cost

Image Psychological
benefit cost
 Customer Loyalty
“A deeply held commitment to rebuy or
repatronize a preferred product or
service in the future despite situational
influences and marketing efforts having
the potential to cause switching
behavior.”
-- Oliver
 Value Proposition
Consists of the whole cluster of
benefits the company promises to
deliver; it is more than the core
positioning of the offering.
 Value Delivery System
Includes all the experiences the
customer will have on the way to
obtaining and using the offering. At
the heart of a good value delivery
system is a set of core business
processes that help deliver distinctive
consumer value.
Apple MacBook

Apple has great value propositions for every

product, but one that is particularly impressive is
its statement for the MacBook. In this witty
example, Apple emphasizes how lightweight its
product is (its biggest differentiator), while also
speaking to how advanced its technology is.
That Apple...always "light years ahead" (even in
marketing.)
Value Proposition
Volvo
Core positioning:
• Safety

Other benefits:
• Good performance
• Design
• Environmentally friendly
 Satisfaction
A person’s feelings of pleasure or
disappointment that result from
comparing a product’s perceived
performance to (or outcome) to
expectations.
 Customer Satisfaction

Expectations
Customer Expectations

Previous purchases
Friends advice
Marketers’ / competitors
Expectations
Monitoring Satisfaction
Influence of
Customer Satisfaction

Measurement
Techniques
i.e. ACSI

Customer
Complaints
Measurement Techniques
Customer Loss Rate

Surveys

Mystery Shopper
Influence of Customer Satisfaction

Customer satisfaction

Speed of communication
 Customer Complaints
54% - 70%
5% Buy again if resolved Tell 5
Complain people
95%
If resolved quickly
25%
Dissatisfied
95% Tell 11
Stop buying people
Product and Service Quality
Performance Conformance
Maximizing Customer Lifetime Value

20% of 80% of
Customers Profits

Customers
 Customer Profitability

Customer Profitability Analysis

Profitable

Customer Lifetime Value

Unprofitable
 A Profitable Customer

A person, household, or company that

over time yields a revenue stream
exceeding by an acceptable amount the
company’s cost stream for attracting,
selling, and serving that customer.
 Attracting and Retaining Customers
•Companies seeking to expand profits and
sales must invest time and resources
searching for new customers.
•To generate leads, they advertise in media
that will reach new prospects, and send
direct mail and e-mails to possible new
prospects, send their salespeople to
participate in trade shows where they might
find new leads, purchase names from list
brokers, and so on.
Reducing Defection
•It is not enough to attract new customers;
the company must also keep them and
increase their business.
•Too many companies suffer from high
customer churn (also known as customer
attrition) . Adding customers here is like
adding water to a leaking bucket.
To reduce defection:

Define and measure retention rate

Distinguish the causes of customer attrition
and identify those that can be managed better
Compare the lost customer’s lifetime value to
the cost of reducing defection rate
Customer Retention
Acquiring new customers costs

5x more
than retaining current customers The average company loses

10%
Of its customers yearly

Reducing customer defections by 5% can

increase profits from

25% to 85%
Retention Dynamics

The Marketing Funnel

 Building Loyalty
Interact with customers

Create institutional ties

Develop loyalty programs

Cultivating Customer Relationships
Customer Information

Differentiate
Customize
Personalize
Share
Customer Relationship Management (CRM)

Personalizing Marketing

Customer Empowerment

Customer Reviews & Recommendations

 One-to-One Marketing
Identify prospects Differentiate
and customers customers

Interact with Customize

each customer
Customer Empowerment

Brand Evangelists
Customer Reviews/Recommendations
Create Buzz

Negative reviews

Customer ratings
Customer Complaints
 Databases & Database Marketing
Customer databases
• Name, address, telephone #
• Purchase history
• Demographics
• Psychographics
• Mediagraphics
Data mining

Data Warehouses