BUILDING
“Generating a sale is not the ultimate goal of the
marketing process. It is the beginning of building
and managing customer relationships for the
purpose of creating a loyal customer base”
“Customer loyalty is the result of a company’s
efforts to consistently deliver a positive product,
service, and brand experience”
MANAGING
CUSTOMER ACQUISITION
&
RETENTION
THE CUSTOMER ACQUISITION FUNNEL
Awareness Appeal Ask Act Advocate
BALANCING CUSTOMER ACQUISITION & RETENTION
• Conversion rate
• Importance of customer retention
• Spinners – Unmet needs, poor product/service quality, high
complexity, billing errors.
• Retention rate – subscription renewal rate
• Cost of reducing the defection rate v/s Customer lifetime value
CRITICAL FACTORS RESPONSIBLE FOR
CUSTOMER SWITCHING
• Pricing issues (high price, price increases, unfair pricing, deceptive pricing)
• Convenience issues (location/hours, wait time for appointment and service)
• Core service failure (service mistakes, billing errors, service catastrophes)
• Service encounter failures (uncaring, impolite, unresponsive, unknowledgeable)
• Response to service failure (negative response, no response, reluctant response)
• Competition (found better service)
• Ethical problems (cheat, hard sell, unsafe)
• Involuntary switching (customer moved, provider closed)
MANAGING
CUSTOMER SATISFACTION
&
LOYALTY
CUSTOMER LOYALTY
Satisfaction Advocacy Evangelism
Loyalty is “a deeply held commitment to rebuy or
repatronize a preferred product or service in the
future despite situational influences and
marketing efforts having the potential to cause
switching behavior.”
UNDERSTANDING CUSTOMER SATISFACTION
• Satisfaction is a person’s feelings of pleasure or disappointment
that result from comparing the perceived performance (or
outcome) of a product or service with expectations.
Performance Expectation
UNDERSTANDING CUSTOMER SATISFACTION
• Customer Satisfaction v/s Profit
• Balance between Customer Satisfaction & Stakeholder Satisfaction
• How do customers form expectations:
- Past buying experiences
- Advice of friends & associates
- Public information & discourse
- Information & promises from marketers & competitors
• High & Low expectation
UNDERSTANDING CUSTOMER SATISFACTION
GOAL
TOOL
PRODUCT & SERVICE QUALITY CUSTOMER SATISFACTION
ES S
Totality of features and characteristics of a product or service that
I TN E
bear on its ability to satisfy stated or implied needs
S
F U R O M
OR O M
F
N A N CE
F PERFORMANCE
F R E E D
A R I AT I O
N FO
M
CONSISTENCY
R
O TS
V O T
CReflects theEM E N
Reflects the overall I R
degree to whichUa company’s
functionality of a company’s
E Q
products and services R remains at the
performance
same level over time
PRODUCT & SERVICE QUALITY CUSTOMER SATISFACTION
PRODUCT CUSTOMER PROFITABILITY
& SATISFACTION
SERVICE QUALITY
ROLE OF A MARKETER – PRODUCT & SERVICE QUALITY
Communicate customer
expectations
Identify customer needs
Customer orders Instruction, Training, Stay in Touch
Technical Assistance
Gather customer ideas for
improvements
MEASURING CUSTOMER SATISFACTION
•BENEFITS
WAYS OF Adefinition
Customer’s SATISFIEDofCUSTOMER
TO MEASURE “Good Performance”
• Stays longer
Periodic
Highly andfor
satisfied
Surveys buys more reasons
different
• Positive Word-of-Mouth
• Pays lessShoppers
Customers’
Mystery attention to competitor’s
interaction brand
with competitors
• Less sensitive to price
• Offers product/service
Higher
Managersranking
themselves ideas to higher
corresponds the company
spending
• Costs less to serve than new customers
• Monitor the competition too
BUILDING CUSTOMER LOYALTY
INTERACT
CLOSELY WITH
CUSTOMERS
DEVELOP
LOYALTY
PROGRAMS
BUILDING
BRAND
COMMUNITY
MANAGING
CUSTOMER RELATIONSHIPS
Customer relationship management (CRM) is the process of carefully
managing detailed information about individual customers and all
customer touch points to maximize loyalty
CRM enables companies to provide excellent real-time customer
service through the effective use of individual account information.
Popular Strategies for enhancing CRM:
• Customization
• Customer Empowerment
• Managing Customer Word-of-Mouth
• Dealing with Customer Complaints
MANAGING
CUSTOMER LIFETIME VALUE
Customer lifetime value (CLV) reflects the monetary equivalent of the
value that customers will create for the company during their tenure
with the company.
• Customer lifetime value is affected by the revenue and the costs of
customer acquisition, retention, and cross-selling
• Customer profitability analysis is often conducted with the tools of an
accounting technique called activity-based costing
• The key to effectively employing activity-based costing is to define and
judge “activities” properly
CUSTOMER LIFETIME VALUE & BRAND EQUITY
• The customer lifetime value (customer equity) perspective and the
brand equity perspective certainly share many common themes
• In practice, however, the two perspectives emphasize different things
• The customer equity perspective focuses on bottom-line financial
value
• The brand equity perspective, on the other hand, tends to emphasize
strategic issues in managing brands and creating and leveraging brand
awareness and image with customers
• Both types of equity matter
BUILDING CUSTOMER LIFETIME VALUE
• Improving customer service
• Engaging customers
• Enhancing the growth potential of each customer
• Managing unprofitable customers
• Rewarding the most profitable customers
• Customer touch-point
“Any occasion when a customer encounters the brand and product”
CREATING CUSTOMER LOYALTY BY BUILDING TRUST
-What does it mean to trust a company or a brand?
• Competence trust
• Honesty trust
• Benevolence trust
-Competence is more strongly affected by positive information than by
negative information
-In contrast, both honesty and benevolence are more strongly affected
by negative information
CALCULATING CUSTOMER LIFETIME VALUE
• Customer lifetime value is typically calculated as the net present
value of the stream of future profits expected over the customer’s
lifetime purchases.
• CLV = Expected Revenues - Expected costs (attracting, selling, and
servicing the account of that customer), applying the appropriate
discount rate
CALCULATING CUSTOMER LIFETIME VALUE
CALCULATING CUSTOMER LIFETIME VALUE
