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Customer value and Satisfaction

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Customer value and satisfaction: Dr. Gopal Thapa

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Customer value and Satisfaction

  1. 1. Customer Value and Satisfaction Dr. Gopal Thapa Tribhuvan University
  2. 2. Organizational Charts
  3. 3. Customer Perceived Value • Customer perceived value is the difference between the prospective / future customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.
  4. 4. Determinants of Customer Perceived Value Image benefit Psychological cost Personnel benefit Energy cost Services benefit Time cost Product benefit Monetary cost Total customer benefit Total customer cost •TCB is perceived value of economic, functional and psychological benefits customer expect from market offering. •TCC is perceived bundle of costs customers expect to incur in evaluating , obtaining, using given market offering , energy and psychological costs.
  5. 5. Steps in a Customer Value Analysis 1. Identify major attributes and benefits that customers value 2. Assess the qualitative importance of different attributes and benefits 3. Assess the company’s and competitor’s performances on the different customer values against rated importance 4. Examine ratings of specific segments 5. Monitor customer values over time
  6. 6. Value and Satisfaction  Value – relationship between benefit and cost  Satisfaction – Comparison between customer’s expectation and product performance  Expectation = performance (Satisfied Customer)  Expectation > performance (Dissatisfied Customer)  Expectation < Performance (Delighted Customer) 5/11/2020 6Copy right reserved
  7. 7. Monitoring Satisfaction  Many companies are systematically measuring how well they treat customers, identifying the factors shaping satisfaction, and changing operations and marketing as a result.  . , Copy right reserved 7
  8. 8. Monitoring Satisfaction  A highly satisfied customer generally:  stays loyal longer,  buys more talks favourably to others  pays less attention to competing brands  less sensitive to price,  offers product or service ideas to the company,  and costs less to serve than new customers 5/11/2020 Copy right reserved 8
  9. 9. Monitoring Satisfaction  If Customer satisfaction is rated 1-5  1- abandon the product/ even bad mouth  2 to 4 – fairly satisfied / may switch to better offer  5 – repurchase/ word of mouth (highly satisfied) High satisfaction or delight creates an emotional bond with the brand or company, not just a rational preference. 5/11/2020 Copy right reserved 9
  10. 10. Monitoring Satisfaction  Companies use a variety of methods to measure customer satisfaction.  some companies think they’re getting a sense of customer satisfaction by tallying complaints, but studies show that while customers are dissatisfied with their purchases about 25 percent of the time, only about 5 percent complain.  The other 95 percent either feel complaining is not worth the effort or don’t know how or to whom to complain.  They just stop buying. 5/11/2020 Copy right reserved 10
  11. 11. Monitoring Satisfaction  Of the customers who complain, 54 percent to 70 percent will do business with the organization again if their complaint is resolved.  Customers whose complaints are satisfactorily resolved tell an average of five people about the good treatment they received.  The average dissatisfied customer, however, gripes to 11 people. 5/11/2020 Copy right reserved 11
  12. 12. Satisfaction Depends on: Product & Service Quality  Quality is:  Fitness for use  Conformance to requirements  Freedom from variation 5/11/2020 Copy right reserved 12
  13. 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. The seller has delivered quality whenever its product or service meets or exceeds the customers’ expectations. - American Society for Quality 5/11/2020 Copy right reserved 13
  14. 14. Marketing helps to deliver high- quality goods by:  correctly identifying customers’ needs  communicating customer expectations properly to product designers;  making sure that customers’ orders are filled correctly and on time;  checking that customers have received proper instructions, training, and technical assistance for product usage;  staying in touch after the sale to ensure customers are and remain satisfied;  gathering customer ideas for improvements and conveying them to the appropriate departments. 5/11/2020 Copy right reserved 14
  15. 15. Customer Lifetime Value  Customer lifetime value (CLV) describes the net present value of the stream of future profits expected over the customer’s lifetime purchases. 5/11/2020 Copy right reserved 15
  16. 16. Maximizing Customer Lifetime Value Customer Profitability Customer Equity Lifetime Value
  17. 17. Maximizing Customer Lifetime Value  Marketing is the art of attracting and keeping profitable customers  Every company loses money on some of its customers.  The well-known 80–20 rule states that 80 percent or more of the company’s profits come from the top 20 percent of its customers. 5/11/2020 Copy right reserved 17
  18. 18. Maximizing Customer Lifetime Value  The least profitable 10 percent to 20 percent, on the other hand, can actually reduce profits between 50 percent and 200 percent per account, with the middle 60 percent to 70 percent breaking even.  The implication is that a company could improve its profits by “firing” its worst customers. 5/11/2020 Copy right reserved 18
  19. 19. Maximizing Customer Lifetime Value  It’s not always the company’s largest customers who yield the most profit.  The smallest customers pay full price and receive minimal service, but the costs of transacting with them can reduce their profitability.  Midsize customers who receive good service and pay nearly full price are often the most profitable 5/11/2020 Copy right reserved 19
  20. 20. Customer Profitability  A profitable customer is a person, household, or company that over time yields a revenue stream exceeding by an acceptable amount the company’s cost stream for attracting, selling, and serving that customer.  Note the emphasis is on the lifetime stream of revenue and cost, not the profit from a particular transaction.  Marketers can assess customer profitability individually, by market segment, or by channel.  Many companies measure customer satisfaction, but few measure individual customer profitability. 5/11/2020 Copy right reserved 20
  21. 21. Customer Profitability Customers C1 C2 C3 Products P1 + + + Highly profitable product P2 + Profitable product P3 – – Losing product P4 + – Mixed-bag product High-profit customer Mixed-bag customer Losing customer 5/11/2020 Copy right reserved 21
  22. 22. Customer-Product Profitability Analysis What can company do for customer 2 & 3 ? •It can raise the price of less profitable product or eliminate them •It can try to sell customer 2 & 3 its profit making products.
  23. 23. Measuring Customer Lifetime Value  Customer life time value is the present value of the future cash flows attributed to the customer during his/her entire relationship with the company.  The case for maximizing long-term customer profitability is captured in the concept of customer lifetime value 5/11/2020 Copy right reserved 23
  24. 24. Measuring Customer Lifetime Value  Customer lifetime value (CLV) describes the net present value of the stream of future profits expected over the customer’s lifetime purchases.  The company must subtract from its expected revenues the expected costs of attracting, selling, and servicing the account of that customer, applying the appropriate discount rate (say, between 10 percent and 20 percent, depending on cost of capital and risk attitudes).  Lifetime value calculations for a product or service can add up to tens of thousands of dollars or even run to six figures. 5/11/2020 Copy right reserved 24
  25. 25. Cultivating Customer Relationship  Customer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize loyalty.  CRM is important because a major driver of company profitability is the aggregate value of the company’s customer base.  A touch point is any occasion when a customer encounters the brand and product—from actual experience to personal or mass communications to casual observation 5/11/2020 Copy right reserved 25
  26. 26. The Customer Development Process Prospects Suspects Disqualified First-time customers Repeat customers Clients Members Partners Ex-customers
  27. 27. Cultivating Customer Relationship  For a hotel, the touch points include:  reservations,  check-in and checkout,  frequent-stay programs,  room service,  business services,  exercise facilities,  and restaurants. 5/11/2020 Copy right reserved 27
  28. 28. Attracting and Retaining Customers  Companies seeking to expand profits and sales must invest time and resources searching for new customers  To generate leads, they advertise in media that will reach new prospects, send direct mail and e- mails to possible new prospects, send their salespeople to participate in trade shows where they might find new leads, purchase names from list brokers, and so on. 5/11/2020 Copy right reserved 28
  29. 29. Attracting and Retaining Customers  Different acquisition methods yield customers with varying CLVs.  One study showed that customers acquired through the offer of a 35 percent discount had about one-half the long-term value of customers acquired without any discount 5/11/2020 Copy right reserved 29
  30. 30. Attracting and Retaining Customers  It is not enough to attract new customers; the company must also keep them and increase their business.  Too many companies suffer from high customer churn or defection. 5/11/2020 Copy right reserved 30
  31. 31. Attracting and Retaining Customers  To reduce the defection rate, the company must first define and measure its retention rate, distinguish the causes of customer attrition and identify those that can be managed better,  And compare the lost customer’s CLV to the costs of reducing the defection rate.  If the cost to discourage defection is lower than the lost profit, spend the money to try to retain the customer. 5/11/2020 Copy right reserved 31
  32. 32. Marketing Funnel: Steps in Attracting and Retaining Customers 5/11/2020 Copy right reserved 32
  33. 33. Customer Profitability and Marketing Funnel  Customer profitability analysis and the marketing funnel help marketers decide how to manage groups of customers that vary in loyalty, profitability, risk, and other factors.  Winning companies know  how to reduce the rate of customer defection;  increase the longevity of the customer relationship;  enhance the growth of each customer through “share of wallet,” cross- selling, and up-selling;  make low-profit customers more profitable or terminate them;  and treat high-profit customers in a special way. 5/11/2020 Copy right reserved 33
  34. 34. What is Loyalty? Loyalty is a deeply held commitment to re- buy a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.
  35. 35. Building Loyalty  Companies should strive to build loyalty for strong, enduring connections with customers.  One set of researchers sees retention-building activities as adding financial benefits, social benefits, or structural ties. 5/11/2020 Copy right reserved 35
  36. 36. Building Loyalty  Marketing activities that improve loyalty and retention:  Interact closely with customers  Develop loyalty programs  Club membership programs  Create institutional ties  Create value with brand communities 5/11/2020 Copy right reserved 36
  37. 37. Database Key Concepts • Customer database • Database marketing • Mailing list • Business database • Data warehouse • Data mining
  38. 38. Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes
  39. 39. Don’t Build a Database When • The product is a once-in-a-lifetime purchase • Customers do not show loyalty • The unit sale is very small • The cost of gathering information is too high
  40. 40. Win-Backs  Regardless of how hard companies may try, some customers inevitably become inactive or drop out.  The challenge is to reactivate them through win- back strategies.  It’s often easier to reattract ex-customers (because the company knows their names and histories) than to find new ones.  Exit interviews and lost-customer surveys can uncover sources of dissatisfaction and help win back only those with strong profit potential. 5/11/2020 Copy right reserved 40
  41. 41. Any Queries? Thank you 5/11/2020 Copy right reserved 41