Sultan Ahmed 1 Topic 04

Sultan Ahmed 2 You would be able to answer the followings after reading the chapter: 1.Definitions: perceived value, satisfaction, loyalty, value proposition, quality, TQM, customer retention. 2.What are the determinants of customer perceived value? 3.How do company measures customer satisfactions? Explain. 4.Explain the framework of CRM. 5.Explain various strategies of CRM. 6.What are the differences between one-to-one and mass marketing? 7.Draw the customer development process. 8.Explain various ways of building customer loyalty. 9.How do a firm strengthen customer bonding?

Sultan Ahmed 3 Value and Satisfaction Perceived Value –The customer’s evaluation of the difference between benefits and costs. –Customers often do not judge values and costs accurately or objectively. Customer Satisfaction –Product’s perceived performance relative to customer’s expectations.

Sultan Ahmed 4 Determinants of Customer Perceived Value Image benefitPsychological cost Personal benefitEnergy cost Services benefitTime cost Product benefitMonetary cost Total customer benefitTotal customer cost

Sultan Ahmed 5 Determinants of Customer-Delivered Value Customer- delivered value Total customer value Total customer cost Product value Monetary cost Personal value Energy cost

Sultan Ahmed 6 Loyalty A deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.

Sultan Ahmed 7 The Value Proposition The whole cluster of benefits the company promises to deliver

Sultan Ahmed 8 Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor competitive performance

Sultan Ahmed 9 Product and Service Quality Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Sultan Ahmed 10 Total Quality Management TQM is an organization-wide approach to continuously improving the quality of all the organization’s processes, products, and services.

Sultan Ahmed 11 Customer-Product Profitability Analysis

Sultan Ahmed 12 Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer

Sultan Ahmed 13 CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on high-profit customers

Sultan Ahmed 14 Mass vs. One-to-One Marketing Mass Average customer Customer anonymity Standard product Mass production Mass distribution Mass advertising One-way message Economies of scale One-to-One Individual customer Customer profile Customized market offering Customized production Economies of scope Share of customer

Sultan Ahmed 15 Customer Retention Acquisition of customers can cost 5 times more than retaining current customers. The average company 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.

Sultan Ahmed 16 The Customer-Development Process Prospects Suspects Disqualified First-time customers Repeat customers ClientsMembers Partners Ex-customers

Sultan Ahmed 17 Building Loyalty Partnership Proactive Accountable Reactive Basic

Sultan Ahmed 18 Forming Strong Customer Bonds Add financial benefits Add social benefits Add structural ties