Transcript kotler03exs-Building Customer Satisfaction, Value, and Retention

Chapter 3
Building Customer
Satisfaction, Value,
and Retention
PowerPoint by Karen E. James
Louisiana State University - Shreveport
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 0 of 18
Objectives
 Understand how companies
deliver customer value and
satisfaction.
 Identify the factors that make a
high performance business.
 Understand how companies
attract and retain customers.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 1 of 18
Objectives
 Realize how companies can
improve both customer and
company profitability.
 Understand how companies can
deliver total quality.
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 2 of 18
Customer Value
 Customers seek to maximize value by
– estimating which offer (product/firm)
delivers the most value (CPV)
– forming an expectation of value and acting
upon it (purchase)
– evaluating their usage experience against
the expectations
 Satisfaction results when expectations
are equaled or surpassed
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 3 of 18
Customer Perceived Value
 Perception of delivered value is a
function of:
– Total customer costs
– Total customer value
 Firms at a disadvantage must:
– Reduce perceptions of costs or
enhance perceptions of value
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 4 of 18
Customer Satisfaction
 Satisfaction is defined as . . .
“a person’s feelings of pleasure or
disappointment resulting from
comparing a product’s perceived
performance (or outcome) in
relation to his or her expectations.”
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 5 of 18
Customer Satisfaction
 To maximize satisfaction . . .
– Don’t exaggerate the product /
service’s capabilities in advertising
or other communications
 Dissatisfaction
will result
 FTC may become involved
– Don’t set expectations too low
 Market
©2003 Prentice Hall, Inc.
size will be limited
To accompany A Framework for Marketing Management, 2nd Edition
Slide 6 of 18
High Performance Businesses
Keys to Success
 Stakeholders
 Processes
 Resources
 Organization
©2003 Prentice Hall, Inc.
 Identify several
stakeholder
groups for your
University
 How might the
needs of these
groups conflict
with each other?
To accompany A Framework for Marketing Management, 2nd Edition
Slide 7 of 18
High Performance Businesses
Keys to Success
 New product
development
 Stakeholders
 Customer attraction
and retention
 Processes
 Order fulfillment
 Resources
 Reengineering work
flows
 Organization
 Building cross
functional teams
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 8 of 18
High Performance Businesses
Keys to Success
 Stakeholders
 Processes
 Resources
 Organization
©2003 Prentice Hall, Inc.
 Resources include
labor, materials,
machines, energy,
and information
 Outsourcing vs.
ownership: Own
and nurture core
competencies
To accompany A Framework for Marketing Management, 2nd Edition
Slide 9 of 18
High Performance Businesses
Keys to Success
 Stakeholders
 Processes
 Resources
 Organization
©2003 Prentice Hall, Inc.
 Organization refers
to the organization’s
policies, structures,
and corporate culture
 Corporate culture:
shared experiences,
stories, beliefs, and
norms within an
organization
To accompany A Framework for Marketing Management, 2nd Edition
Slide 10 of 18
Core Business Practices
 Market Sensing
 Customer Acquisition
 Customer Relationship
Management
 Fulfillment Management
 New Offering Realization
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 11 of 18
Customer Retention
 Reducing customer churn (defection)
is highly desirable
– Define and measure retention rate
– Identify causes of attrition
– Estimate profit lost from customer
defection (customer lifetime value)
– Estimate cost to reduce defection; take
appropriate action
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 12 of 18
Drivers of Customer Equity
 Brand Equity
 Relationship Equity
 Value Equity
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 13 of 18
Strong Customer Bonds
Keys to Success
 Adding Financial
Benefits
 Frequency
programs
 Club
memberships
 Adding Social
Benefits
 Adding Structural
Ties
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 14 of 18
Strong Customer Bonds
Keys to Success
 Adding Financial
Benefits
 Personalize
customer
relationships
 Adding Social
Benefits
 Adding Structural
Ties
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 15 of 18
Strong Customer Bonds
Keys to Success
 Adding Financial
Benefits
 Adding Social
Benefits
 Adding Structural
Tie
©2003 Prentice Hall, Inc.
 Create long-term
contracts
 Charge less for
ongoing
purchases
 Link product to
long-term service
To accompany A Framework for Marketing Management, 2nd Edition
Slide 16 of 18
20 – 80 – 30 Rule
20 20% of your customers
80 Generate 80% of your profit
30 Half of your profit is lost
serving the bottom 30%
of your customer base
©2003 Prentice Hall, Inc.
To accompany A Framework for Marketing Management, 2nd Edition
Slide 17 of 18