Session 4 - Mabd Value

8/3/2019 Session 4 - Mabd Value

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Marketing Management

Creating Customer Value,Satisfaction, and Loyalty


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Marketing Management


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Customer Perceived Value

Customer Perceived Value may be defined asthe difference between prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives.

Total Customer Value is the perceived monetaryvalue of the bundle of economic, functional andpsychological benefits that a customer expects.Total Customer Cost on the other hand is the

bundle of costs customers expect to incur inevaluating, obtaining, using and disposing off the given market offering including monetary,time, energy and psychic costs.


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Customer ValueValue of a product within the context of marketing means the relationship betweenthe consumer's expectations of product quality to the actual amount paid for it. It isoften expressed as the equation :

Value = Benefits / PriceThere are parallels between cultural expectations and consumer expectations.Thus pizza in Japan might be topped with tuna rather than pepperoni, as pizzamight be in the US; the value in the marketplace varies from place to place as wellas from market to market.For a firm to deliver value to its customers, they must consider what is known asthe "total market offering." This includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared tocompetitors' market offerings and prices. Value can thus be defined as therelationship of a firm's market offerings to those of its competitors.Value in marketing can be defined by both qualitative and quantitative measures.On the qualitative side, value is the perceived gain composed of individual'semotional, mental and physical condition plus various social, economic, culturaland environmental factors. On the quantitative side, value is the actual gain

measured in terms of financial numbers, percentages, and dollars.

For an organization to deliver value, it has to improve its value : cost ratio. Whenan organization delivers high value at high price, the perceived value may be low.When it delivers high value at low price, the perceived value may be high. The keyto deliver high perceived value is attaching value to each of the individuals or organizationsmaking them believe that what you are offering is beyondexpectationhelping them to solve a problem, offering a solution, giving results,and making them happy.


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Customer Value


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Image benefit Psychological cost

Personal benefit Energy cost

Services benefit Time cost

Product benefit Monetary cost

Total customer value Total customer cost


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Customer Satisfaction

Customer Satisfaction is a persons feeling of pleasure or disappointment resulting from

comparing a products perceived performance inrelation to his or her expectations. If the performancefalls short of expectations, the customer isdissatisfied. If the performance matches theexpectations, the customer is satisfied. If theperformance exceeds expectations, the customer is

highly satisfied or delighted.


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M easuring Customer Satisfaction

It is becoming increasingly important for companies to measure customer satisfactionlevels for the following reasons.

To retain customers, because it takes longer and is costlier to acquire new customers thanto retain existing customers.

To increase business in the form of

repurchasing by satisfied customers. To enjoy the benefits of Viral Marketing.

Delighted customers will do word of mouthpublicity for the company and create newbuyers.


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Measuring Customer Satisfaction

A number of methods are employed tomeasure customer satisfaction. The keymethods being:

Periodic SurveysCustomer Loss RateMystery ShoppersInternet Feedback Sites


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Customer SatisfactionP eriodic Surveys

Periodic Surveys can track customer satisfaction levelsdirectly. Respondents can be asked directly about their intentions to repurchase and the likely hood or willingness to recommend the company and brand toothers.These surveys can be conducted by using any of thefollowing tools:

Internet Surveys

Market Research (Questionnaires)Questionnaires included in the product packingFeedback questionnaires at hotels and airlines


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Customer Loss Rate

Companies can monitor the customer loss rate and contact customers whohave stopped buying or have switchedto other suppliers to learn why thishappened.


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M ystery Shoppers

Companies can hire mystery shoppers to pose

as potential buyers and report on strong andweak points experienced in buying thecompany s and competitors products. Managersthemselves can enter company and competitor'ssales situations where they are unknown andexperience firsthand the treatment they receive,or phone their own company with questions andcomplaints to see how calls are handled.


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Internet Feedback Sites

There are many internet feedback sites thatpublish consumers responses towards variouscommodities that they may have an experiencewith.Keeping abreast of few prominent communitysites may give an unadulterated view of thecustomers about a particular brand.


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Maximizing Customer Lifetime Value

Customer Profitability

Customer Equity

LifetimeValue


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Customer Profitability


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Customer Lifetime Value


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E stimating LifetimeValue

Annual customer revenue: $500

Average number of loyal years: 20Company profit margin: .10Customer lifetime value: $1000


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Customer Relationship Management

CR M is the process of carefullymanaging detailed informationabout individual customers and allcustomer touch points to maximizecustomer loyalty.


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F ramework for CRM

Identify prospects and customers

Differentiate customers by needsand value to company

Interact to improve knowledge

Customize for each customer


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CRM Strategies

Reduce the rate of defection

Increase longevity

Enhance share of wallet

Terminate low-profitcustomers

Focus more effort onhigh-profit customers


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Customer Retention

Customer retention is important for the successof any business for the following reasons:

Acquiring new customers can cost five timesmore than it takes to satisfy and retain currentcustomers.On an average any company looses 10 per of its customers every year. It becomes like aleaking bucket.

Large number of loyal customers createcustomer equity for an organization.


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Customer Retention

In the light of the fact that it is becoming more andmore important by the day to retain customers,lets look at the ways how customers can beretained.

H igh Switching Barriers: Customers are lessinclined to switch to another supplier when thiswould involve high capital costs, high searchcosts or the loss of loyal customer discounts.

Deliver H igh Customer Satisfaction: By increasingthe customer perceived value, it becomes harder for the competitors to offer lower prices or inducements to switch.


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Customer Retention

Complaint Avenues: It is also possible to maintainsatisfaction levels by making it easier for thecustomers to complain. This makes them feel morecomfortable it is in the best interest of the businessesthat the customers vent out their feelings within the

company rather than in the marketplace. Suggestionforms, toll free numbers, websites, email addressesmake it easier for the customers to reach out andcomplain.

Prompt Action: Merely making it easy to complain or conducting satisfaction level fact finding is not enough.The companies must be quick to respond to takecorrective action against specific or genericcomplaints.


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Documents

Session 4 - Mabd Value