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MARKETING MANAGEMENT 12 th edition

MARKETING MANAGEMENT 12 th edition. 5 Creating Customer Value, Satisfaction, and Loyalty. Kotler Keller. Chapter Questions. What are customer value, satisfaction, and loyalty, and how can companies deliver them? What is the lifetime value of customers?

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MARKETING MANAGEMENT 12 th edition

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  1. MARKETING MANAGEMENT12th edition 5 Creating Customer Value, Satisfaction, and Loyalty Kotler Keller

  2. Chapter Questions • What are customer value, satisfaction, and loyalty, and how can companies deliver them? • What is the lifetime value of customers? • How can companies both attract and retain customers? • How can companies deliver total quality? • What is database marketing?

  3. Washington Mutual differentiates with human contact

  4. Figure 5.1 Organizational Charts

  5. eBay epitomizes the Customer-Oriented Model

  6. Figure 5.2 Determinants of Customer-Delivered Value Total customer value Product value Personal value Customer- delivered value Total customer cost Monetary cost Energy cost

  7. Caterpillar Offers Value

  8. 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.

  9. The Value Proposition The whole cluster of benefits the company promises to deliver

  10. Raising Customer Expectations

  11. Saturn Advantages

  12. Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor competitive performance

  13. Countrywide received the #1 customer satisfaction rating from J.D. Power and Associates

  14. 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.

  15. Quality Conformance quality Performance quality

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

  17. Maximizing Customer Lifetime Value Customer Profitability Customer Equity Lifetime Value

  18. Figure 5.3 Customer-Product Profitability Analysis

  19. Estimating Lifetime Value • Annual customer revenue: $500 • Average number of loyal years: 20 • Company profit margin: 10 • Customer lifetime value: $1000

  20. Drivers of Customer Equity Value Equity Brand Equity Relationship Equity

  21. Customer Relationship Management

  22. Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer

  23. Harrah’s targets hundreds of segments

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

  25. 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 Table 5.1 Mass vs. One-to-One Marketing

  26. Customer Retention • Acquisition of customers can cost 5 times more than retaining current customers. • The average customer 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.

  27. Describing Market Dynamics Permanent Capture Markets Simple Retention Markets Customer Migration Markets

  28. Figure 5.4 The Customer-Development Process Suspects Prospects Disqualified First-time customers Repeat customers Clients Members Partners Ex-customers

  29. Building Loyalty Partnership Proactive Accountable Reactive Basic

  30. Ameritrade Builds Loyalty

  31. Figure 5.5 Levels of Relationship Marketing

  32. 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.

  33. Forming Strong Customer Bonds Add financial benefits Add social benefits Add structural ties

  34. Financial Benefits

  35. Social Benefits

  36. Customer database Database marketing Mailing list Business database Data warehouse Data mining Database Key Concepts

  37. Figure 5.6 Increasing Customer Share Requirements

  38. Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes

  39. Focus on CRM

  40. Marketing Debate • Online Versus Offline Privacy? Take a position: • Privacy is a bigger issue in the online world than in the offline world. 2. Consumers receive more benefit than risk from marketers knowing their personal information.

  41. Marketing Debate Choose a business and show how you would go about developing a quantitative formulation that captures the concept of customer lifetime value.

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