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MARKETING MANAGEMENT

MARKETING MANAGEMENT. 5 Creating Customer Value, Satisfaction, and Loyalty. 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?.

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MARKETING MANAGEMENT

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  1. MARKETING MANAGEMENT 5 Creating Customer Value, Satisfaction, and Loyalty

  2. 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?

  3. A Customer-Oriented Model?

  4. The Value Proposition The cluster of benefits the company promises to deliver

  5. Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor competitive performance

  6. Loyalty A commitment to re-buy or re-patronize a product or service in the future.

  7. Building Loyalty Partnership Proactive Accountable Reactive Basic

  8. Maximizing Customer Lifetime Value Customer Profitability Customer Equity Lifetime Value

  9. Customer-Product Profitability Analysis

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

  11. Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer

  12. CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on high-profit customers

  13. 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.

  14. Customer-Development Process Suspects Prospects Disqualified First-time customers Repeat customers Clients Members Partners Ex-customers

  15. 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.

  16. Forming Strong Customer Bonds Add financial benefits Add social benefits Add structural ties

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

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