3 - customer segmentation
DESCRIPTION
Marketing Management PPTTRANSCRIPT
Creating Customer Value, Satisfaction, and Loyalty
CUSTOMER VALUE
• Customer Value : Difference between what a customer gets from a product, and what he or she has to give in order to get it.
• Customer delivered value : Difference between total customer value and total customer cost
• Total Customer Value : Bundle of benefits customers expect from a given product or service
• Total customer cost : Bundle of costs customers expect to incur in evaluating, obtaining and using the product and service
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Figure 5.1 Organizational Charts
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What is Customer Perceived Value?
Customer perceived value is the difference between the prospective customer’s
evaluation of all the benefits and all the costs of an offering and the perceived alternatives.
Important factors Applying Value ConceptsChoices and ImplicationsDelivering High Customer Value
DETERMINANTS OF CUSTOMER DELIVERED VALUE
PRODUCT VALUE
SERVICES VALUE
PERSONNEL VALUE
IMAGE VALUE
TOTAL CUST. VALUE
TOTAL CUST. COST
MONETARY COST
TIME COST
ENERGY COST
PSYCHIC COST
CUSTOMER DELIVERED VALUE
CUSTOMER SATISFACTION
• Customer Satisfaction : Person’s feeling of pleasure or disappointment resulting from comparing a product’s perceived performance (outcome) in relation to his or her expectation
• Satisfaction is a function of perceived performance and expectation
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Steps in a Customer Value Analysis
• Identify major attributes and benefits that customers value
• Assess the qualitative importance of different attributes and benefits
• Assess the company’s and competitor’s performances on the different customer values against rated importance
• Examine ratings of specific segments• Monitor customer values over time
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What is Loyalty?
Loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or service
in the future despite situational influences and marketing efforts having the potential to
cause switching behavior.
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The Value Proposition
The whole cluster of benefits the
company promises to deliver
VALUE CHAIN
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
INBOUND OPERATIONS OUTBOUND MARKETING SERVICE LOGISTICS LOGISTICS AND SALES
MARGIN
PRIMARY ACTIVITIES
SECO
NDA
RY
ACTI
VITI
VITI
ES
Monitoring Satisfaction
• Measurement Techniques• Influence of Customer satisfaction• Customer complaints
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Measuring Satisfaction
Periodic Surveys
Customer Loss Rate
Mystery Shoppers
Monitor Competitive Performance
ATTRACTING AND RETAINING CUSTOMERS
• Customer defection rate : rate at which they loose customers• Steps to increase customer retention :1. Define and measure retention rate2. Distinguish the causes of customer attrition and identify
those which can be managed better3. Estimate profit it loses when it loses customers4. Find out methods to reduce defection rateCustomer Lifetime Value : Present value of profit stream that
the company would have realised on a customer if customer would not have defected ( CLV)
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Maximizing Customer Lifetime Value ( CLV)
Customer Profitability
Customer Equity
LifetimeValue
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Figure 5.4 Customer-Product Profitability Analysis
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Estimating Lifetime Value
• Annual customer revenue: $500• Average number of loyal years: 20• Company profit margin: 10• Customer lifetime value: $1000
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What is Customer Relationship Management?
CRM is the process of carefully managing detailed information about individual customers and all customer touch points to maximize customer loyalty.
ONE TO ONE MARKETING
• Identify your prospects and customers• Differentiate your customers in terms of needs
and their value to your company• Interact with individual customers to improve
your knowledge about their individual needs and to build stronger relationships
• Customise products, services, and messages to each customer
INCREASING VALUE OF CUSTOMER BASE
• Reducing the rate of customer defection• Increasing the longevity of customer relationships• Enhancing the growth potential of each customer
through “share of wallet”, cross selling and up selling
• Make low profit customers more profitable or terminate them
• Focusing disproportionate effort on high value customers
NEED FOR CUSTOMER RETENTION
• Cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy
• Two ways for customer retention :1. Strengthen customer retention – erect high
switching barriers2. Deliver high customer satisfaction
KEY TO RELATIONSHIP MARKETING
• Adding Financial Benefit : Frequency marketing programs ( FMPs) and club marketing programs
• Adding Social Benefits : Increase social bonds by individualising and personalising their customer relationship
• Adding structural ties : Supply customers with tools and linkages to help manage customer better
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Framework for CRM
Identify prospects and customers
Differentiate customers by needs and 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-profit customers
Focus more effort on high-profit customers
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Database Key Concepts
• Customer database• Database marketing• Mailing list
• Business database• Data warehouse• Data mining
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Using the Database
To identify prospects
To target offers
To deepen loyalty
To reactivate customers
To avoid mistakes
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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
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Perils of CRM
• Implementing CRM before creating a customer strategy
• Rolling out CRM before changing the organization to match
• Assuming more CRM technology is better• Stalking, not wooing, customers
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Marketing Debate Online vs. Offline Privacy?
Take a position:1. Privacy is a bigger issue in the online world than in the offline world.
or
2. Consumers receive more benefit than risk from marketers knowing their personal information.
CUSTOMER DEVELOPMENT PROCESS
SUSPECTS
PROSPECT
DISQUALIFIED PROSPECTS
FIRST TIME CUST.
REPEAT CUST. CLIENT ADVOCATE
PART
NER
S
INACTIVE OR EX-CUSTOMER
FIVE LEVELS OF COMPANY INVESTMENT IN CUSTOMER-RELATIONSHIP BUIDING
• Basic Marketing : Simple selling• Reactive Marketing : Sell and encourage questions on
products• Accountable Marketing : After sales, check to see whether
product meets customer’s expectations – improvements• Proactive marketing – Contacts customers from time to
time with suggestions for improved products uses or new products
• Partnership Marketing : Company works continuously with customers for better performance and savings
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Steps for Creating Customer Evangelists
• Customer plus-delta• Napsterize your knowledge• Build the buzz• Create community• Make bite-size chunks• Create a cause