Building Customer Satisfaction, Value,

and Retention Customer perceived value (CPV):

difference between the prospective customer’s evaluation of all the ________ and all the _____ of an offering and the perceived alternatives

Customer Satisfaction

Satisfaction: a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived ___________ (or outcome) in relation to his/her __________.

Delivering Customer Value and Satisfaction

Value chain: tool for identifying ways to ______ more customer value.

Examine costs and performance in each value-creating activity and look for ways to improve

Attracting and Retaining Customers

Value of a highly satisfied customer:

loyal, purchases more, talks favorably about company, pays less attention to competitors, less price-sensitive, costs less to serve than new customers because transactions are routine

Attracting and Retaining Customers

Implications:

• acquiring new customers can cost five times more than the cost of satisfying and retaining current customers

• need to deliver high customer satisfaction

Customer Relationship Building

• Most companies practice only _____ __________ when their markets contain many customers and their unit profit margins are small.

• In markets with few customers and high profit margins, most sellers move to ___________ _________ .

Forming Strong Customer Bonds

• Frequency programs: reward customers who buy frequently and/or in substantial amounts

• Adding social benefits: personalize customer relationships

• Adding structural ties: increase consumer’s proclivity to repurchase company’s brand

The Profitable Customer

20-80-30 rule:

the top 20 percent of customers generate 80 percent of the company’s profits, half of which is lost serving the bottom 30 percent of unprofitable customers.

Therefore, company can improve profits by “firing” its worst customers.

The Profitable Customer

Profitable Customer:

Person, household, or company that over time yields a revenue stream that _______ by an acceptable amount the company’s ____ of attracting, selling, and servicing that customer

Application

Traditional Retail Marketing

Loyal Customers: 20 percent of all customers; 80 percent of profits.

Secondary: 30 percent of all customers; 15 percent of profits.

Deal Seekers: 50 percent of all customers; 5 percent of all profits.

Application

Traditional Retail Marketing

For Thanksgiving, sell turkeys below cost to attract “deal seekers.”

Profits are disappointing

Application

Customer Focused Marketing

Offer free turkey for those that spend 500.00 or more the previous two months before Thanksgiving

Result: Number of customers spending 500.00 or more increases by 25 percent

Build customer loyalty