1. Building Customer Satisfaction, Value, and Retention
Marketing Management
Building Customer Satisfaction, Value, and Retention
Dr. Zafer Erdogan

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

3. Defining Customer Value and Satisfaction
Customer Perceived Value (CPV)
Difference between
Total customer value
Total monetary value of economic, functional and psychological benefits associated with a product offering
Total customer cost
Total cost of evaluating, obtaining, using, and disposing of a given product offering

4. Figure 3.1: Determinants of Customer Delivered Value

5. Defining Customer Value and Satisfaction
Total Customer Satisfaction
Satisfaction-feelings of pleasure or disappointment
Expectations vs. perceived performance
Customer Expectations
Formed by past experiences, friends’, marketers’, competitors’ information and promises
Delivering High Customer Value
Value proposition-whole cluster of promises offered
Value-delivery system-communications and channel experiences offered to customers
Measuring Satisfaction

6. Tools for Tracking and Measuring Customer Satisfaction
Complaint and suggestion systems:
Customer satisfaction surveys:
Ghost Shopping:
Lost customer analysis
A customer-centered organization makes it easy for customers to register suggestions and complaints. Some customer-centered companies establish hot lines with toll-free numbers. Companies are also using Web sites and for quick, two-way communication.
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.
Hire people to pose as potential buyers and report on positive and negative experiences.
Contacting customers that have switch to competitors’ offerings and learn why this has happened
See text for complete table

7. Delivering Customer Value and Satisfaction
In a hypercompetitive environment of these days, winning companies need to create and deliver superior value.
Value Chain (Michael Porter)
Every firm is a collection of activities
Primary activities: inbound logistics-operations-outbound logistics-marketing and sales-services
Support activities: procurement-tech development-HRM-firm infrastructure
The task is to examine costs and performances of each value-creating activity and look for ways to improve it.
Benchmarking-Best of class practices of best companies

8. Figure 3.3: The Generic Value Chain

9. Delivering Customer Value and Satisfaction
The firms success depends not only each dept performance but also how well they are coordinated
Usually, every dept cares their interest not the firm’s
Solution!
Emphasis on Core Business Processes such as
The market sensing process
The new offering realization process
The customer acquisition process
The customer relationship management process
The fulfillment management process

10. Delivering Customer Value and Satisfaction
The Value Delivery Network (Supply Chain)
Companies need to look beyond their operations to gain competitive advantage
by partnering with their suppliers and distributors to create superior Supply Chain
Levi Strauss’s Value-Delivery Network

11. Attracting and Retaining Customers
Partner relationship management (PRM)
Implies working with partners
Customer relationship management (CRM)
Process of managing detailed info about each customer and carefully managing all the customer “touch-points” with the aim of maximizing their loyalty.

12. Attracting and Retaining Customers
Attracting Customers
Computing the Cost of Lost Customers
Customer churn, gain customers only to lose many others like adding water to a leaking pot
Customer defection rate, the rate at which companies lose customers
Lifetime value, the present value of the profit stream could have been realized if the customer had not defected prematurely.

13. Attracting and Retaining Customers
Measuring Customer Lifetime Value (CLV)
CLV=Annual customer revenue (x) Av. number of loyal years (x) company profit margin
So, do we need for Customer Retention?
Yes!
Acquiring a new customer costs 5 times more
The average company loses 10% of its customers
5% reduction in the defection rate can increase profits by 25-85%
The customer profit rate tends to increase over the life of the retained customer

14. VIDEO CASE: CUT IT OUT
Please read the case before coming to class which is on p.88 !..