Transcript Kotler_ch04

A FRAMEWORK for
MARKETING MANAGEMENT
Chapter 4
Creating
Customer Value,
Satisfaction,
and Loyalty
Kotler
Keller
Cunningham
Chapter Questions
• How can companies deliver customer
value, satisfaction, and loyalty?
• What is the lifetime value of a customer?
• How can companies cultivate strong
customer relationships?
• What is database marketing, and why is it
important?
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Profile: Canadian Marketing Excellence
CANADIAN TIRE
• In 1922, Canadian Tire started out as a
single garage
• Faces extensive competition from Wal-Mart
and Home Depot
• It has, however, been able to stand firm,
remaining the leader in the housewares
and hardware categories
• Unique product mix: automotive,
housewares, sports and leisure
• Canadian Tire money – loyalty program
• 75% of stores are less than 10 years old
• Employee e-learning program to improve
customer service
• Offers value to customers
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Determining Customer
Value and Satisfaction
Customer perceived value (CPV)
is the difference between the
prospective customer’s evaluation
of all the benefits and costs
of an offering and the perceived
alternatives
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Figure 4.1 Determinants of
Customer-Delivered Value
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Loyalty
Loyalty is 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 behaviour
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Satisfaction
Satisfaction is a person’s
feelings of pleasure or disappointment
resulting from comparing
a product’s perceived performance
in relation to his or her expectations
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Raising Customer Expectations
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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
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Forms of Quality
Conformance
quality
Performance
quality
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Total Quality Management
TQM is an organization-wide
approach to continuously
improving the quality of
all the organization’s processes,
products, and services
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Maximizing Customer Lifetime Value
Customer
profitability
Customer
equity
Lifetime
value
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Figure 4.2 Customer-Product
Profitability Analysis
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Estimating Lifetime Value
•
•
•
•
Annual customer revenue: $500
Average number of loyal years: 20
Company profit margin: 10%
Customer lifetime value: $1,000
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Customer Equity
“The ongoing process of identifying and
creating new value with individual
customers and then sharing the benefits
from this over a lifetime association.”
Ian Gordon
(Canadian Marketing Consultant)
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Drivers of Customer Equity
Value
equity
Brand
equity
Relationship
equity
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Framework for CRM
Identify prospects and customers
Differentiate customers by needs
and value to company
Interact to improve knowledge
Customize for each customer
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Improving the Value of
Company’s Customer Base
Reduce the rate of defection
Increase longevity
Enhance customer growth potential
Terminate low-profit customers
Focus more effort on high-profit
customers
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Figure 4.3 The Customer-Development Process
Suspects
Prospects
First-time
customers
Disqualified
Repeat
customers
Clients
Members
Partners
Ex-customers
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Building Loyalty
Partnership
Proactive
Accountable
Reactive
Basic
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Figure 4.4 Levels of Relationship Marketing
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Reducing Customer Defection
• Define and measure retention rate
• Distinguish causes of customer attrition
• Estimate profit loss associated with loss of
customers
• Assess cost to reduce defection rate
• Gather customer feedback
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Forming Strong Customer Bonds
Add financial
benefits
Add social
benefits
Add structural
ties
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Database Key Concepts
• Customer
database
• Database
marketing
• Mailing list
• Business
database
• Data warehouse
• Data mining
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Data Warehousing:
SHOPPERS DRUG MART
• Shoppers Drug Mart
• Its competitive advantage
Corporation is one of
is “HealthWatch”, a
Canada’s largest retailers
database that maintains
of health care products/
patients’ medical profiles
services
and generates alerts for
possible allergies or drug
• Over 974 stores
interactions when a
• Makes extensive use of
prescription is filled
data warehousing
• The company generated
software
sales exceeding
• Analysis of customer and
$7 billion (2005)
market trends to support
its loyalty program - the
“Optimum” card
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Figure 4.5 Increasing Customer
Share Requirements
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For Discussion
How does the concept of customer
lifetime value differ for different types
of businesses?
• Real estate agents
• Grocery stores
• Hotels
• Furniture
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