Kotler05_media.ppt 2997KB Aug 31 2008 10:31:14 PM

MARKETING MANAGEMENT
12th 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?
• How can companies both attract and retain
customers?
• How can companies deliver total quality?

• What is database marketing?
5-2

Washington Mutual differentiates
with human contact

5-3

Figure 5.1 Organizational Charts

5-4

eBay epitomizes the
Customer-Oriented Model

5-5

Figure 5.2 Determinants of
Customer-Delivered Value


Customerdelivered
value

Total
customer
value

Product
value

Total
customer
cost

Monetary
cost

Personal
value


Energy
cost

5-6

Caterpillar Offers Value

5-7

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.

5-8

The Value Proposition


The whole cluster of benefits the
company promises to deliver
5-9

Raising Customer Expectations

5-10

Saturn Advantages

5-11

Measuring Satisfaction
Periodic
Periodic Surveys
Surveys
Customer
Customer Loss
Loss Rate

Rate

Mystery
Mystery Shoppers
Shoppers
Monitor
Monitor competitive
competitive
performance
performance
5-12

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

5-13

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.

5-14

Quality

Conformance
quality

Performance
quality


5-15

Total Quality Management

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

5-16

Maximizing Customer Lifetime Value

Customer
Profitability

Customer
Equity


Lifetime
Value

5-17

Figure 5.3 Customer-Product
Profitability Analysis

5-18

Estimating Lifetime Value





Annual customer revenue: $500
Average number of loyal years: 20
Company profit margin: 10
Customer lifetime value: $1000


5-19

Drivers of Customer Equity

Value
Equity
Brand
Equity

Relationship
Equity

5-20

Customer Relationship Management

5-21

Framework for CRM

Identify prospects and customers
Differentiate customers by needs
and value to company
Interact to improve knowledge
Customize for each customer
5-22

Harrah’s
targets
hundreds of
segments

5-23

CRM Strategies
Reduce
Reduce the
the rate
rate of
of defection

defection
Increase
Increase longevity
longevity
Enhance
Enhance “share
“share of
of wallet”
wallet”
Terminate
Terminate low-profit
low-profit
customers
customers
Focus
Focus more
more effort
effort on
on
high-profit
high-profit customers
customers
5-24

Table 5.1
Mass vs. One-to-One Marketing
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
5-25

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.
5-26

Describing Market Dynamics

Permanent
Capture
Markets

Simple
Retention
Markets

Customer
Migration
Markets

5-27

Figure 5.4 The CustomerDevelopment Process
Suspects

Prospects
First-time
customers

Disqualified
Repeat
customers

Ex-customers

Clients

Members

Partners
5-28

Building Loyalty

Partnership
Proactive
Accountable
Reactive
Basic
5-29

Ameritrade Builds Loyalty

5-30

Figure 5.5
Levels of Relationship Marketing

5-31

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.

5-32

Forming Strong Customer Bonds
Add financial
benefits
Add social
benefits

Add structural
ties

5-33

Financial Benefits

5-34

Social Benefits

5-35

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

5-36

Figure 5.6 Increasing Customer
Share Requirements

5-37

Using the Database
To
To identify
identify prospects
prospects
To
To target
target offers
offers
To
To deepen
deepen loyalty
loyalty
To
To reactivate
reactivate customers
customers
To
To avoid
avoid mistakes
mistakes
5-38

Focus
on
CRM

5-39

Marketing Debate
 Online Versus Offline Privacy?
Take a position:
1. 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.
5-40

Marketing Debate

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

5-41