Creating Customer Value And Customer Relationship 362hm
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4. Creating Customer Value and Customer Relationships
Agenda • Defining and delivering customer value, satisfaction, and
loyalty. • Lifetime value of customers • Cultivating strong customer relationships • Attracting and retaining customers • Understanding database marketing
• Creating loyal customers is at the heart of every business. • The only value your company will create is the value that comes from customers – the ones you have now and the ones you will have in the future – Don
Peppers and Martha Rogers
Organizational Charts
Customer Perceived Value Customer perceived value is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.
Determinants of Customer Perceived Value Total customer benefit
Total customer cost
Product benefit
Monetary cost
Services benefit
Time cost
Personal benefit
Energy cost
Image benefit
Psychological cost
Determinants of Customer Perceived Value Image value Personnel value Services value
Total customer value
Product value
Customer delivered value
Monetary cost Time cost Energy cost Psychic cost
Total customer cost
Steps in a Customer Value Analysis • Identify major attributes and benefits that customers value
• Assess the qualitative importance of different attributes and benefits • Assess the company’s and competitor’s performances on the different customer values against rated importance • Examine ratings of specific segments
• Monitor customer values over time
What is Loyalty? Loyalty is 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.
The Value Proposition
The whole cluster of benefits the
company promises to deliver
Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.
Customer Satisfaction • Satisfaction: A person’s feelings of pleasure or disappointment that results from comparing a product’s perceived performance to expectations
Measuring Satisfaction Periodic Surveys
Customer Loss Rate
Mystery Shoppers
Monitor Competitive Performance
Customer Complaints • Tip of the iceberg phenomenon • Given the potential downside of having an unhappy customer, it’s critical that marketers deal with customer complaints properly. • Service recovery strategies
Product Satisfaction and Quality • Satisfaction will also depend on 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.
Maximizing Customer Lifetime Value Customer-Product Profitability Analysis
Measuring Customer Lifetime Value • Annual customer revenue: Rs.500
• Average number of loyal years: 20 • Company profit margin: 10%
• Customer lifetime value: Rs.1000
Customer Relationship Management CRM is the process of carefully managing detailed information about individual customers and all customer touch points to maximize customer loyalty.
Framework for CRM
Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge
Customize for each customer
Building a Relationship with Rural Consumers • Challenges due to lack of technology and resources • Personal relationship between buyer and seller for ages • SBI Tiny initiative was aimed at starting a relationship with an eye on future profits • Aadhaar offers home delivery of agri-inputs to villagers in busy sowing season
CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on highprofit customers
Customer Retention • Acquisition of customers can cost five 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.
The Customer Development Process Suspects
Prospects
Disqualified
First-time customers
Repeat customers
Clients
Partners Ex-customers
Database Key Concepts
• Customer database
• Business database
• Database marketing
• Data warehouse
• Data mining
Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes
Perils of CRM • Implementing CRM before creating a customer strategy • Rolling out CRM before changing the organization to match • Assuming more CRM technology is better
• Stalking, not wooing, customers
Agenda • Defining and delivering customer value, satisfaction, and
loyalty. • Lifetime value of customers • Cultivating strong customer relationships • Attracting and retaining customers • Understanding database marketing
• Creating loyal customers is at the heart of every business. • The only value your company will create is the value that comes from customers – the ones you have now and the ones you will have in the future – Don
Peppers and Martha Rogers
Organizational Charts
Customer Perceived Value Customer perceived value is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.
Determinants of Customer Perceived Value Total customer benefit
Total customer cost
Product benefit
Monetary cost
Services benefit
Time cost
Personal benefit
Energy cost
Image benefit
Psychological cost
Determinants of Customer Perceived Value Image value Personnel value Services value
Total customer value
Product value
Customer delivered value
Monetary cost Time cost Energy cost Psychic cost
Total customer cost
Steps in a Customer Value Analysis • Identify major attributes and benefits that customers value
• Assess the qualitative importance of different attributes and benefits • Assess the company’s and competitor’s performances on the different customer values against rated importance • Examine ratings of specific segments
• Monitor customer values over time
What is Loyalty? Loyalty is 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.
The Value Proposition
The whole cluster of benefits the
company promises to deliver
Copyright © 2009 Dorling Kindersley (India) Pvt. Ltd.
Customer Satisfaction • Satisfaction: A person’s feelings of pleasure or disappointment that results from comparing a product’s perceived performance to expectations
Measuring Satisfaction Periodic Surveys
Customer Loss Rate
Mystery Shoppers
Monitor Competitive Performance
Customer Complaints • Tip of the iceberg phenomenon • Given the potential downside of having an unhappy customer, it’s critical that marketers deal with customer complaints properly. • Service recovery strategies
Product Satisfaction and Quality • Satisfaction will also depend on 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.
Maximizing Customer Lifetime Value Customer-Product Profitability Analysis
Measuring Customer Lifetime Value • Annual customer revenue: Rs.500
• Average number of loyal years: 20 • Company profit margin: 10%
• Customer lifetime value: Rs.1000
Customer Relationship Management CRM is the process of carefully managing detailed information about individual customers and all customer touch points to maximize customer loyalty.
Framework for CRM
Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge
Customize for each customer
Building a Relationship with Rural Consumers • Challenges due to lack of technology and resources • Personal relationship between buyer and seller for ages • SBI Tiny initiative was aimed at starting a relationship with an eye on future profits • Aadhaar offers home delivery of agri-inputs to villagers in busy sowing season
CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on highprofit customers
Customer Retention • Acquisition of customers can cost five 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.
The Customer Development Process Suspects
Prospects
Disqualified
First-time customers
Repeat customers
Clients
Partners Ex-customers
Database Key Concepts
• Customer database
• Business database
• Database marketing
• Data warehouse
• Data mining
Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes
Perils of CRM • Implementing CRM before creating a customer strategy • Rolling out CRM before changing the organization to match • Assuming more CRM technology is better
• Stalking, not wooing, customers
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