Customer Focus and Managing Customer

Loyalty

Chapter OneChapter One

MMarket-Basedarket-Based Management, 4Management, 4thth editionedition

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Customer Focus and Customer Focus and Managing Customer LoyaltyManaging Customer Loyalty

Chapter One

• Market orientation and customer focus

• The importance of customer satisfaction, retention, and loyalty

• Building a measure of customer loyalty

• Customer relationship management

• Marketing knowledge

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Weak Customer FocusWeak Customer Focus

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Strong Customer FocusStrong Customer Focus

Insert figure 1.2 here

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Customer SatisfactionCustomer Satisfaction

• Measuring Customer Satisfaction– Customer Satisfaction

Index (CSI)

• Why is it important?– Directly correlated to

profits– Leading indicator of

operating performance

• Impact of Dissatisfied Customers

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• Why is customer retention important?– Cost of

replacing/maintaining customers

– Lifetime value of a customer

• How does a firm retain customers?– Encouraging complaints

Customer Satisfaction and Customer Satisfaction and RetentionRetention

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Measuring Customer RetentionMeasuring Customer Retention

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Customer LoyaltyCustomer Loyalty

• Why is it important?– Customer

Recommendations

• Measuring Customer Loyalty – Customer Loyalty

Index (CLI)

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Customer Relationship Customer Relationship ManagementManagement

• Why is CRM important?– Not all customers are

desirable

• Goal of CRM– Build Customer Loyalty

• Classification of Customers– High Potentials– Top Performers– Non Profits– Underachievers

• New Customer vs. Win-Back Customer

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Customer Relationship Customer Relationship ManagementManagement

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Marketing OrientationMarketing Orientation

Three Pillars of Marketing Orientation:

• Customer Focus

• Competitor Orientation

• Team Approach

Three Drivers of Marketing Orientation:

• Marketing Knowledge

• Marketing Leadership

• Employee Satisfaction

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Marketing Orientation and Marketing Orientation and Marketing KnowledgeMarketing Knowledge

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Marketing Excellence SurveyMarketing Excellence Survey

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TakeawaysTakeaways//ReviewReview

• Customer Focus • Market Orientation • Customer Satisfaction • Customer Retention• Customer Loyalty• Key Performance

Metrics– Profit impacts of

retention, exit, and satisfaction

• Customer Relationship Management (CRM)

• Marketing Knowledge• Exercises

– Marketing Performance Tools

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Marketing Performance ToolsMarketing Performance Tools

Customer Satisfaction and Customer Profitability

Customer CSI Annual Percent Gross Retention Customer

Customer Satisfaction Percent Score Sales Margin Profit Cost Profit

Very Satisfied 25% 100 $1,500 60% $900 $100 $800

Satisfied 36% 80 $500 50% $250 $100 $150

Somew hat Satisfied 22% 60 $250 50% $125 $100 $25

Somew hat Dissatisf ied 10% 40 $150 40% $60 $100 ($40)

Dissatisfied 5% 20 $75 40% $30 $100 ($70)

Very Dissatisfied 2% 0 $50 40% $20 $100 ($80)

100% 72 $630 $350 $250

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Marketing Performance ToolsMarketing Performance Tools

Customer Retention and Customer Loyalty

Customer CSI Pecent % Who Would Customer

Customer Satisfaction Percent Score Repurchase Recommend Loyalty

Very Satisfied 25% 100 0.95 0.90 86

Satisfied 36% 80 0.80 0.75 48

Somew hat Satisfied 22% 60 0.50 0.50 15

Somew hat Dissatisf ied 10% 40 0.10 0.00 0

Dissatisfied 5% 20 0.10 0.00 0

Very Dissatisfied 2% 0 0.00 0.00 0

100% 7200% 0.65 42

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Marketing Performance ToolsMarketing Performance Tools

Lifetime Value of a Customer

Customer Retention 67%

Customer Life 3.0

Year 0 1 2 3 4 5 6 7 8 9 10

Customer Margin $250 $250 $250

Acqusition Cost ($350)

Retention Cost ($70) ($70) ($70)

Net Profit ($350) $180 $180 $180 $0 $0 $0 $0 $0 $0 $0

Discount Rate 20%

Present Value Multiplier 1.000 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162

Net Present Value ($350) $150 $125 $104 $0 $0 $0 $0 $0 $0 $0

Life Time Value of Customer $29.17