Creating Customer Value and Customer Relationships

Chapter 4

Traditional Organization VS Modern Customer Oriented Company Organization

What is Loyalty ?A deeply held commitment to rebuy or re-

patronize a preferred product or service in the future despite situational influence and marketing effort having the potential to cause switching behavior.

Value Proposition The value proposition consists of the whole

cluster of benefits the company promise do delivery; it is more than the core positioning of the offering. Example: Volvo’s core positioning has been “safety”, but the buyer is promised more than just a safe car; other benefits includes good performance, design and safety for the environment.

The value SystemThe deliver system includes all the

experience the customer will have on the way to obtaining and using the offering.

Value Proposition

Customer Satisfaction

Satisfaction is persons feeling of pleasure or disappointment that result from comparing a

products perceived performance s to expectations.

Measuring Customer Satisfaction

Periodic Surveys

Customer Loss Rate

Mystery Shoppers

Monitor Competitors Performanc

e

What is 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.

Customer Profitability

A Profitable customer is a person, household or company that over time yields a revenue steam

exceeding by an acceptable amount the company’s cost stream for attracting, selling and serving that

customer.

Customer Profitability Analysis

Customer 1 is very profitable; he buys two profit making products (P1 and P2). Customer 2 yields mixed profitability; he buys one profitable product (P1) and one unprofitable product (P3). Customer 3 is losing customer because he buys one profitable product (P1) and two unprofitable product (P3 and P4).

What can the company do about customer 2 and 3?

(1) It can raise the price of its less profitable products or eliminate them, or

(2) If can try to sell customers 2 and 3 its profit making products.

Measuring Customer Lifetime Value

Customer Lifetime Value (CLV) described the net present value of the stream of future profits

expected over the customer lifetime purchase.

What is Customer Relationship Management?

CRM is the process of carefully managing detailed information about individual customers and all customer

touch points to maximize customer loyalty.

A customer touch point is any occasion on which a customer encounters the brand and products – from actual experience to personal or mass communication to causal

observation.

Personalizing Marketing: Personalizing marketing is about making sure the brand and its marketing

are as relevant as possible to as many customers as possible – a challenge, given that no two customers

are identical.

Permission Marketing : the practice of of marketing to customer only after gaining their expressed permission, is based on the premise that marketers can no longer use “interruption marketing” via mass media campaigns.

Participatory Marketing : May be more appropriate concept than permission marketing because marketers and consumers need to work together to find out how the firm can best satisfy customers.

Customer Empowerment :

Often seen as the flag bearer for marketing best practice, P&G’s former chairman, A.G. Lafley. “The power is consumer”

Customer Review and Recommendation :

The strongest influence on consumers choice remain “recommendation by relative/friends”, Example: Blogger who products or service have become important because they may have thousand of followers.

Attracting and Retaining Customers

Reducing Defection: 1) Define and measure its defection rate2) Distinguish the causes of customer attrition3) Compare the lost customers lifetime value to the costs of reducing the defection rate.

Marketing Funnel : It identifies the percentage of potential target market and at each stage before becoming loyal customer.

Managing Customer Base

Reducing the rate of customer defection

Increasing the longevity of the customer relationship

Enhancing the growth of each customers through “share of wallet”, cross-selling and up-selling

Making low profit customers more profitable or terminating them

Focusing disproportionate effort on high profit customers

Building Loyalty

Interacting with Customers: Listening to customers is crucial. It is also important to be a advocate and, as much as possible, take the customers side and understand their point of view.

Developing Loyalty Program: Frequency Program (FP) are designed to reward the customers who buy frequently and substantial amounts. Example: airlines, hotels and credit cards.Club Membership Program can be open to anyone who purchases a product or service, or limited to an affinity group or those willing to play a small fee. Example: Dhaka Club membership, Golf club membership

Creating Institutional TiesThe company may supple customers wit special equipment or computer links that help them manage orders, payroll and inventory.

Customer Databases and Database Marketing

Customer Database: A customer database is an organized collection of comprehensive information about individual customers or prospects that current, accessible and actionable for lead generation, lead qualification, sale of a product or service, or maintain of customer relationship.

Database Marketing:Database marketing a process of building, maintaining and using database and other databases (products, suppliers, resellers) to contact, transact and build customer relationship.

Customer Database

Customer Mailing list: A customer mailing list is simply a set of names, addresses and telephone

numbers. A customer database contains much more information, accumulate through customer

transaction, registration information, telephone queries, cookies and every customer contact.

Customer Mailing Database

Customer Database (cont.)

Business Database: A business database contains business customers’ past purchase; past volumes, prices and profits; buyers team members names (and ages, birthdays, hobbies, and favorite foods); statues of current contracts; an estimate of supplies share of the customers business; competitive supplies; assessment of competitive strengths and weakness in selling and servicing the account; and relevant customer buying practices, patterns and policies.

Business Database

Data Warehouse and Data Mining

Data WarehouseData are collected by the company’s contact center and

organized in a data warehouse where marketers can capture, query and analyze them to draw interference about an individual customers needs and responses.

Data MiningMarketing statistician can extract from he mass of data

useful information about individual, trends and segments.

Usage of Database

To identify prospects

To decide which customers should receive a particular offer

To deepen customers loyalty

To reactive customers purchases

To avoid serious customer mistakes

Downside of Database Marketing and CRM

Some situations are just not conductive to database management

Building and maintaining a customer database requires a large, well-placed investment in computer hardware, database software, analytical programs, communication links and skilled staff

It may be difficult to get everyone in the company to be customer oriented an use the available information

Not all customer want a relationship with the company

The assumption behind CRM may not always hold true