Chapter 2 Building Customer Satisfaction, Value, and Retention by Chapter 2 Building Customer Satisfaction, Value, and Retention by Ung Veasna, DBA candidate

Customer Delivered Value What the customer gets (total customer value) What the customer gives (total customer cost).

Defining Customer Value and Satisfaction Customer Perceived Value (CPV) Total customer value Total customer cost

Determinants of Customer Delivered Value Image value Personnel value Services value Product value Total customer value Customer delivered value Monetary cost Time cost Energy cost Psychic cost Total customer cost

Defining Customer Value and Satisfaction Total Customer Satisfaction Satisfaction Customer Expectations Delivering High Customer Value Value proposition Value-delivery system Measuring Satisfaction

Satisfied Customers: Are loyal longer Buy more (new products & upgrades) Spread favorable word-of-mouth Are more brand loyal (less price sensitive) Offer feedback Reduce transaction costs

The Nature of High Performance Business

High Performance Business Stake- holders Set strategies to satisfy key... Processes By improving critical business... Resources Organization and aligning...

The Nature of High Performance Business Stakeholders Processes Resources Core competency Distinctive capabilities Organization and Organizational Culture Organization Corporate culture Scenario analysis

Delivering Customer Value and Satisfaction Value Chain Value chain Benchmarks

Delivering Customer Value and Satisfaction The Generic Value Chain Firm infrastructure Out- bound Logistics Inbound Logistics Opera- tions Market- ing and sales Margin Primary Activities Support Activities Human resource management Technology Development Procurement Serv- ice

Delivering Customer Value and Satisfaction Core Business Processes The market sensing process The new offering realization process The customer acquisition process The customer relationship management process The fulfillment management process

Delivering Customer Value and Satisfaction The Value Delivery Network (Supply Chain)

Customer Development Suspects Prospects Clients Advocates Partners First-time customers Repeat customers Clients Advocates Partners Inactive or ex-customers Disqualified prospects

Attracting and Retaining Customers Partner relationship management (PRM) Customer relationship management (CRM)

Attracting and Retaining Customers Attracting Customers Computing the Cost of Lost Customers Customer churn Lifetime value

Attracting and Retaining Customers The Need for Customer Retention Measuring Customer Lifetime Value (CLV) Customer Relationship Management (CRM): The Key Customer equity Three drivers of customer equity Value equity Brand equity Relationship equity

Attracting and Retaining Customers Five levels of investment in customer relationship building Basic marketing Reactive marketing Accountable marketing Proactive marketing Partnership marketing

Figure 3-6: Levels of Relationship Marketing

Attracting and Retaining Customers Forming Strong Customer Bonds: The Basics Cross-departmental participation Integrate the Voice of the Customer into all business decisions Create superior offering for the target market

Attracting and Retaining Customers Organize and make accessible a database of customer information Make it easy for customers to reach the appropriate personnel Reward outstanding employees Adding Financial Benefits Frequency programs (FPs)

Attracting and Retaining Customers Adding Social Benefits

Attracting and Retaining Customers Adding Structural Ties Create long-term contracts Charge lower price to high volume customers Turn product into long-term service

Competitive advantage The Profit Triangle Profit Value creation Internal operations Competitive advantage

Value Relationships Good management practice leads to () added value and employee satisfaction Adding value  Customer satisfaction Customer satisfaction  repeat business Repeat business  profitability/growth Profits/growth  stockholder wealth Stockholder wealth  investment

Quality #1 Quality is what the customer says it is! Quality is conformance to customer requirements. #1

The Importance of Quality and Customer Satisfaction Quality…the degree of excellence or superiority of an organization’s goods and services. Not only includes the physical traits of product but also: Customer Satisfaction…the ability of a good or service to meet or exceed the buyer’s needs and expectations. “Quality and customer satisfaction directly affect company profitability and are critical to organization’s continued existence.”

Total Quality Management (TQM) …an approach that involves all employees in continually improving products and work processes to achieve customer satisfaction to achieve world class performance. Deming… “better quality and lower prices with a little ingenuity in marketing will create a market.”

TQM and the Marketing Mix TQM and Product Strategy… involves selection of tangible and intangible characteristics of product that meets the needs of a target customer. Guarantees of quality that you stand behind.

TQM and Distribution Strategy… Developed “Value Link” to reduce inventory cost and improve supply distribution. Same day shipping is key into product distribution.

TQM and Promotional Strategy… Accuracy in advertising is critical. Don’t make unbelievable claims about performance. Build trust with programs that deliver quality product and then advertise it.

TQM and Pricing Strategy… Lower prices can be delivered with high quality if efforts are properly directed to reduce the cost of quality. Compaq has become leading seller of PCs at lower price by formulating ways to reduce price without lowering quality of components.

Marketing managers have two responsibilities in a quality centered company. First, they must participate in formulating strategies and policies designed to help the company win through total quality excellence. Second, they must deliver marketing quality alongside production quality.