1. Customer Value, Satisfaction and Loyalty

2. The New “Managerial Paradigm”

3. Amazon epitomizes the “Customer-Oriented” Model

4. So does Jones Soda…

5. So does Threadless…

6. Value Perceptions Customer-perceived value (CPV) –The difference between the customer’s evaluation of all the benefits and all the costs of an offering

7. Determinants of CPV

8. The Value Proposition The whole cluster of benefits the company promises to deliver less the associated total cost.

9. Loyalty A deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite exposure to situational influences and marketing efforts that have the potential to cause switching behavior.

10. The Customer-Development Process Prospects Suspects Disqualified First-time customers Repeat customers ClientsMembers Partners Ex-customers

11. Attracting and Retaining Customers Retention dynamics/marketing funnel

12. JetBlue has loyal customers

13. Question du Jour Is it better to reward your most or least loyal customers?

14. Customer Satisfaction Total customer satisfaction –A person’s feelings of pleasure or disappointment that result from comparing a product or service’s perceived performance (or outcome) to expectations

15. Customer Satisfaction Two components – Cognitive (thinking, reasoning, logic) – Affective (emotional) Expectancy Confirmations vs. Disconfirmations Articulation Issues – Consumers can almost always articulate the reasons for their dissatisfaction – Sometimes harder for consumers to articulate reasons for their satisfaction – Great movie vs. bad meal example

16. Measuring Satisfaction Periodic Surveys Customer Churn & Returns Mystery Shoppers Social Media / Word of Mouth Social Media / Word of Mouth

17. 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.

18. Quality Conformance quality Performance quality

19. Customer Acquisition & Retention Acquisition of new customers is almost always far more expensive than retaining current customers. Consumers aren’t as brand loyal as they used to be. Small reductions in customer churn can increase profitability significantly. Customer profitability tends to increase over the life of a retained customer.

20. Customer Lifetime Value Customer Lifetime Value (CLV) –The net present value of the stream of future profits expected over the customer’s lifetime purchases

21. CLV Formula – Finite Time Horizon CLV = [GC t * r t ] / (1 + i) t – AC CLV = Customer Lifetime Value GC t = Gross Contribution from customer at time t (revenues – servicing costs) r t = Retention Rate of customer at time t i = interest or “discount rate” AC = Acquisition Cost

22. CLV Formula – Infinite Time Horizon CLV = [GC * r] / [1 + i - r) – AC CLV = Customer Lifetime Value GC = Average Gross Contribution from customer (revenues – servicing costs) r = Average Retention Rate of Customer i = interest or “discount rate” AC = Acquisition Cost

23. Customer Lifetime Value

24. Customer Lifetime Value - Multiples

25. Value Creation Practices Social networking – Welcoming, empathizing, governing Impression management – Evangelizing, justifying Community engagement – Staking, milestoning, badging, documenting Brand use – Grooming, customizing, commoditizing

26. Cultivating Customer Relationships Customer relationship management (CRM) –The process of carefully managing detailed information about individual customers and all customer “touch points” to maximize loyalty

27. Quality/Satisfaction Exercise How do consumers typically define QUALITY for the following products? – Flights – Eating Out – Cars – Smartphones – Medical Services – Artwork – Hotel Stays Develop a brief 5-question survey that measures consumer satisfaction in each of the product categories