MARKETING MANAGEMENT

MBA 1ST Sem.

Module V: :Long Term Loyalty Management

Dr. Sanjana Samaddar (Mondal)
Associate Professor- Marketing
CMS Business School
JAIN University

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Session 14-15 content

Module -5: Long Term Loyalty Management 4 Hours

Building customer value, satisfaction and loyalty, Kano’s model of customer delight,
Concept of Customer Lifetime Value, Customer Management - Acquisition, Retention, and
developing value, Measuring CRM Success – Net Promoter Score, Customer Satisfaction
Score, Customer Effort Score, Share of Wallet

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 Contents
What is to Building customer value, satisfaction and loyalty, Kano’s
model of customer delight, Concept of Customer Lifetime
be covered Value,
Customer Management - Acquisition, Retention, and
developing value
Measuring CRM Success – Net Promoter Score, Customer
Satisfaction Score, Customer Effort Score, Share of Wallet

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 Session Plan for Module V
Date Day Time Lesson Slide
No
14th Monday and 8:40-10:40 Building customer value, satisfaction
September Wednesday and loyalty, Kano’s model of customer
delight, Concept of Customer Lifetime
Value, Customer Management -
Acquisition, Retention, and developing
value,
15th Wednesday 11:10-1:10 Measuring CRM Success – Net
September Promoter Score, Customer Satisfaction
Score, Customer Effort Score, Share of
Wallet

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 Building customer value,
satisfaction and loyalty- CRM

Customer relationship management (CRM) is an approach to manage a

company's interaction with current and potential customers. It uses data analysis
about customers' history with a company to improve business relationships with
customers, specifically focusing on customer retention and ultimately driving
sales growth.

One important aspect of the CRM approach is the systems of CRM that compile
data from a range of different communication channels, including a company's
website, telephone, email, live chat, marketing materials and more recently, social
media. Through the CRM approach and the systems used to facilitate it,
businesses learn more about their target audiences and how to best cater to their
needs so as to build superior customer value to gain satisfaction and loyalty.

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 Need For CRM

Need and Importance for Customer Relationship Management

 Customer Relationship Management leads to satisfied customers and eventually

higher business every time.
 Customer Relationship Management goes a long way in retaining existing
customers.
 Customer relationship management ensures customers return back home with a
smile.
 Customer relationship management improves the relationship between the
organization and customers. Such activities strengthen the bond between the sales
representatives and customers.

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 Advantages of CRM

• Facilitates discovery of new customers

• Helps the sales team in closing deals faster
• Enhances effective cross and up selling of products
• Simplifies the sales and marketing processes
• Enhances customer loyalty
• Builds up on effective internal communication
• Facilitates optimized marketing

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 Building Customer Value

Customer value is best defined as how much a product or service is worth to a customer.

Today’s consumers don’t care only about price or quality. They also want the product or
service they buy to solve a problem or need. With tons of shopping options at their
fingertips, buyers are looking for companies that consistently deliver value.

Customers see value in a company that makes their lives easier and improves their
overall sense of well-being. In their minds, the benefits of their purchase are worth the
cost, and they’ll continue to reward the company with their business.

Customer value refers to the worth of a product or service in the eyes of your customers.
In other words, it is the satisfaction a customer experiences with your product in relation
to its price. When you offer high customer value, customers are bound to choose your
brand over other competitors present in the market.

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 Building customer value
Customers are constantly comparing products based on the value they offer
them.

For example, while one customer might find great functional value in a
smartwatch, others might perceive more psychological value in an antique watch
that was owned by a special someone.

Imagine you run a cake shop at a street corner. You bake pineapple pies and
price them at Rs. 50/piece. Customers visit your shop, try the pastry but hardly
repurchase it. What can be the reason? Customers did not get the actual value
that they had perceived before buying the pie.

After witnessing this, you price the same pastries at Rs. 35/piece. Now, you see
more and more customers repeatedly buying the pie as they feel it is an excellent
buy at that price.

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 Building customer value

How to Decide Where You Can Add Customer Values?

• What values does your business already provide?

• What values do customers expect from brands in your industry?
• What values are offered by your close competitors?

How to Create Value for Customers That Lasts?

• Revisit Your Brand’s Value Proposition

• Reward Customers With a Loyalty Program
• Engage Your Audience With Relevant Content
• Segment Your Customers Into Meaningful Groups
• Go Beyond Just a Competitive Price
▪ Keep an Eye on Emerging Customer Value Trends

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 Customer value
Calculation
Money is an important factor in buying anything, However, there are different
parameters which can be used by a seller to define the customer value. A customer
value can be in any form such as in respect of their product or services, such as
quality, time, service, marketing, social influence, experience with the product.

For Example, the cost price of the perfumes is very low, but they are advertised by the
celebrities to create a perception of luxury in our mind and its perceived value can be
far greater. It provides us a psychological as well as an image benefit.
The entire idea of a customer value means that, the customer should feel the worth of
their money spent and satisfied by the product or services that they receive.

Customer Perceived Value(CPV)= Total Perceived Benefits – Total Perceived

Cost
OR
Customer value(CV)= Total Benefits- Total Costs

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 CRM Value Chain Model

CRM Is a tool to manage customer relationships with the help of people, information
technology, customer’s data, company’s process and customers themselves.

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 CRM Value Chain Model

The CRM value chain is an established model which businesses can easily follow when they developing
and implementing their CRM strategies.

It has been five years in development and has been piloted in a number of business-to-business and
business-to-consumer settings, with both large companies and SMEs: IT, software, telecoms, financial
services, retail, media, manufacturing, and construction.

The model is based on strong theoretical principles and the practical requirements of business.

The ultimate purpose of the CRM value chain process is to ensure that the company builds long-term
mutually-valued relationships with its strategically significant customers.

Not all customers are strategically significant. Indeed some customers are simply too expensive to acquire
and service.

They buy little and infrequently; they pay late or default; they make extraordinary demands on customer
service and sales resources; they demand expensive, short-run, customized output; and then they defect to
competitors.

These are called strategically-insignificant customers.

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Customer Satisfaction and Customer Loyalty

Customer Satisfaction can be termed as the measurement tool used to check how
successful is a business in providing quality product or services to their customers to
overcome their expectations.
If the performance of the product/services falls short of expectations the customer is
dissatisfied. It is important to provide complete customer satisfaction as it not only
maintains an existing customer, but also helps in bringing in new number of customers into
the business. It always falls cheaper to maintain the relations with an existing customer,
than spending out a huge amount of finance in marketing to attract new customers. If a
customer remains satisfied with the product and services they not only remain loyal to the
company, but they also bring up the goodwill of the company by their word of mouth, which
in return attracts new customers into the business.

Customer Loyalty is defined by the entire process in which a customer provides repeat
business to an organization by returning frequently. It is when a customer chooses to buy
the products or services of the same business repeatedly rather than opting for similar
products by the other competitors. Customer loyalty is important in maintaining the
foundation of a business. When a customer remains loyal to a business they serve as
medium in increasing the business by their word of mouth. When a customer remains loyal
they serve as a important medium in attracting new customer and hence saves a large
amount of finance expenditures for marketing.
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 Customer Loyalty

Customer loyalty is a measure of a customer’s likeliness to do repeat business with a company or

brand. It is the result of customer satisfaction, positive customer experiences, and the overall
value of the goods or services a customer receives from a business.

It describes an ongoing emotional relationship between the company and it’s customer,
manifesting itself by how willing a customer is to engage with and repeatedly purchase from a
company versus their competitors. Loyalty is the byproduct of a customer’s positive experience
with the company and works to create trust.

Loyal customers

• Purchase repeatedly
• Use what they purchase
• Interact with the company through a variety of different channels
• Are company’s biggest proponents, sending others to the company and providing proactive
(and reactive) positive feedback to the company.

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 Customer Loyalty
People are loyal for various reasons, but it’s relatively easy to group them into six distinct
loyalty categories.

1 Happy Customer
These customers like your products or services, have never complained, and probably
have purchased from you numerous times. But your competitors can easily steal them: all
it takes is a better deal, a discount, or the formation of a new relationship.

2 Price-loyal
These customers are with you only because of low prices. If they can save money
elsewhere, they’ll leave. If you offer the best price again, they’ll return. It’s pretty easy to
keep this type of customer, but at a tremendous cost.

3 Loyalty program-loyal
These customers are not loyal to your company or what you sell. They are loyal only to
your loyalty program, and in many cases, only because your loyalty reward offers the best
deal.

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 Customer Loyalty

4 Convenience-loyal
This person is loyal only because your brand is easy to communicate with, easy to find,
and easy to purchase from. A convenience-loyal customer isn’t swayed by price:
Convenience is what keeps them with you.

5 Loyal to freebies
These customers are not drawn to your brand because of what you sell but because of
other things you offer. Free Wi-Fi or infant changing tables or free inspections are some
examples. Customers who are loyal to your freebies may buy from you only
sporadically and don’t contribute heavily to your revenue stream.

6 Truly loyal
These are your customer advocates. They repeatedly purchase from you, talk about
their great experiences with your company, and send their friends and family to you.

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Defining customer loyalty

▪ Loyalty is EMOTION ! It is not a rating

▪ Satisfaction is a rating ! It is not an emotion

▪ Usually resulting from series of

positive experiences that have
occurred over period of time
Defining customer loyalty

Loyalty occurs when an individual has a interest in maintaining a close relationship, usually
resulting from series of positive experiences that have occurred over period of time

Tangible Intangible
experiences experiences

Product quality, Brand Image

Ease of use, Reliability, Effective Respectful communication
service Self Expressive and Emotional
benefits

Product Brand
The relationship between customer satisfaction and Loyalty (Tepeci, 1999)

Loyalty

Highly Somewhat Natural Somewhat Highly

dissatisfied dissatisfied satisfied satisfied

Satisfaction
Relationship between
Satisfaction
Loyalty
and
Business performance
Satisfaction, Loyalty and Business performance

Customer Customer satisfaction is the customer’s fulfillment response to a

Satisfaction customer experience, or some part thereof.

Satisfaction is a ‘pleasurable’ response Vs Dissatisfaction is ‘unpleasurable’ response

Satisfaction / Dissatisfaction evaluation can be directed at any or all elements of customer experience
- Product
- Service
- Process
- any other components of customer experience

Expectations-Disconfirmation Model :
- Positive confirmation when expectations are met … Happy
- Negative disconfirmation when expectations are underperformed…Unhappy
Satisfaction, Loyalty and Business performance

Customer Loyalty Two approaches in defining and measuring loyalty.

Behavioral Loyalty Attitudinal Loyalty

Measured by customer purchasing Measured by reference to attitudes

behavior - beliefs, feelings and purchasing
- Patronage in buying intention
- Repeat buying

RFM measure of behavioral loyalty

R = time elapsed since last buying

F = number of purchases in a given time period
M = monetary value of purchases
 Kano’s model of customer delight

The Kano Analysis model (pronounced “Kah-no”), also known as the

“Customer Delight vs. Implementation Investment” approach, is an analysis
tool that enables you to understand how customer emotional responses to
products or features can be measured and explored

Dr. Noriaki Kano, a professor of quality

management at the Tokyo University of Science,
created the Kano Model in 1984. Dr. Noriaki
developed this framework while researching the
factors that contributed to customer satisfaction and
loyalty.
The model identifies five categories of potential
customer reactions to a new feature, ranging from
dissatisfaction to indifference, all the way up to
what many call customer delight or excitement
features.
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''Noriaki KANO, Nobuhiko SERAKU, Fumio TAKAHASHI, and Shin-ichi TSUJI Attractive Quality and
Must-Be Quality, Journal of the Japanese Society for Quality Control, Vol. 14, No. 2, pp. 147-156,
1984." www.bschool.cms.ac.in
The model assigns three types of attribute (or property) to
products and services:

1. Threshold Attributes (Basics). These are the basic features

that customers expect a product or service to have.
For example, when you book into a hotel, you'd expect hot
water and a bed with clean linen as an absolute minimum.

2. Performance Attributes (Satisfiers). These elements are

not absolutely necessary, but they increase a customer's
enjoyment of the product or service.

Returning to our example, you'd be pleased to discover that

your hotel room had free superfast broadband and an HD TV,
when you'd normally expect to find paid-for wi-fi and a
standard TV.

3. Excitement Attributes (Delighters). These are the surprise

elements that can really boost your product's competitive edge
They are the features that customers don't even know they
want, but are delighted with when they find them.

In your hotel room, that might be finding the complimentary

Belgian chocolates that the evening turn-down service has left
on the bed.
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Dr. kano believed that customer loyalty depended on emotional response
levels to features. He hypothesised that there were five emotional
response types to features, and conducted a study with 900 participants
to explore his theory. With his results, he created the kano reaction graph
(below ), which visualises the five emotional responses as curves.

With this reaction graph, he was able to prove that customer satisfaction
depends on how sophisticated an available function is, which in turn causes
a more emotional response.
Kano’s Five Emotional Response Types

Must-be (or must have) features

Performance features
Attractive features
Indifferent features
Reverse features

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 Kano analysis

Kano analysis uses a standardised questionnaire to help customers

feedback about their responses to features. It offers a way to measure
opinions in a quantifiable way.

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In the questionnaire, list each feature separately. You can even aid
understanding of that feature by providing context or a demonstration of the
feature.

For each feature, two sets of questions are asked:

•How do you feel if you have this feature?
•How would you feel if there was more of…?
(requesting a response based on a positive, or functional, situation)
•How do you feel if you do not have this feature?
•How would you feel if there was less of…?
(requesting a response based on a negative, or dysfunctional, situation)
The answers are chosen from this range of responses:
•I like it
•I expect it
•I am neutral
•I can tolerate it
•I dislike it

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 Evaluating the responses from the kano model
questionnaire
Based on the responses, you can figure out which of the five Kano
feature categories closely aligns with each feature investigated. You do
this by looking at the combination of answers to see how they score
against this marking table:

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 Examples of threshold attributes:
•Automatic channel scan (tuning) on a Examples of excitement attributes:
TV, •Special features
•Choosing from a selection of •Stylish design
•Guarantee or after-sales services
ringtones on a telephone,
•Financing models
•MP3 Player on your smartphone, •Receiving a bottle of bubbly of a bunch of flowers when you
•Anti-rust coating on a car, buy a car
•Interior light in a fridge, •Contactless payment by mobile phone
•Free parking with residents‘ permit
•A breakfast buffet consisting mainly of regional, organic
Examples of performance products
attributes:
•Screen resolution for a PC monitor
•Battery time for a mobile phone
•How big the boot is in a car
•Acceleration speed for a motorbike
•How light a racing bike is
•Energy efficiency of a washing
machine
•How much storage space there is in
a fridge

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 When would you use Kano analysis?

•When there is a limited time

When product teams are working to tight deadlines, the kano model is a great tool to
speed up decision-making.

•When there are limited resources

The simple method for carrying out Kano analysis uses an email questionnaire, meaning
that you don’t need expert resources to do the research.

•When you want to see what would impress your customers

When you’re looking to ‘think outside of the box or ‘think big, you can use kano analysis
to see what features customers would like and find useful.

•When you want to enhance a current product

When it’s time to refresh the product or keep it competitive against your market
competition, using Kano analysis will assess all your feature options and give you clear
choices to pick.

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 Lifetime Customer Value

Customer lifetime value (CLV) is one of the key stats to track as part of
a customer experience program. CLV is a measurement of how valuable
a customer is to your company, not just on a purchase-by-purchase basis
but across the whole relationship.

CLV is a great metric to use when you have a multi-year

relationship with a customer – say for a paid TV subscription or
mobile phone contract. And it’s good for spotting the early signs of
attrition – say, for example, you see spend dropping off after the
first year as they use the subscription less and less.

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 Lifetime Customer Value

How much are your customers costing you?

CLV goes hand in hand with another important metric – CAC (customer acquisition cost). That’s
the money you invest in attracting a new customer, including advertising, marketing, special
offers, and so on. Customer lifetime value only really makes sense if you also take the CAC into
account.

For example, if the CLV of an average coffee shop customer is Rs 70,000 and it costs more than
Rs. 100,000 to acquire them (via advertising, marketing, offers, etc.) the coffee chain could be
losing money unless it pares back its acquisition costs. Another thing to keep a close eye on is the
cost of that customer to your business.

Another factor in the equation is Cost to Serve. This is part of the cost of doing business, and it
involves everything you do to get the product or service into the customer’s hands and doing what
they need it to do. For example, logistics, overheads in your physical location, contact centre costs,
and so on.

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 How do you measure customer lifetime
value?
Some companies don’t attempt to measure CLV, citing the challenges of segregated teams, inadequate
systems, and untargeted marketing.
When data from all areas of an organisation is integrated, however, it becomes easier to calculate CLV.

CLV can be measured in the following way:

1.Identify the touchpoints where the customer creates the value

2.Integrate records to create the customer journey
3.Measure revenue at each touchpoint
4.Add together over the lifetime of that customer

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 What you’ll need to calculate customer lifetime
value
CLV can be calculated at a company level (i.e. the average CLV across all your customers), a customer segment level
(the CLV of distinct groups within your customer base) or an individual level (the CLV of each individual customer you
deal with).

To start off simply, let’s begin with a company-wide CLV. But before get into the formula for CLV, you’ll need a few
pieces of data to hand.

• A. Average purchase value — the value of all customer purchases over a

particular timeframe (a year is usually easiest), divided by the number of purchases
in that period.
•B. Average purchase frequency — divide the number of purchases in that same
time period by the number of individual customers who made a transaction over the
same period.
• A*B=C Customer value — the average purchase frequency multiplied by the
average purchase value.
• D. Average customer lifespan — the average length of time a customer
continues buying from you
•CLV= C*D
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 Calculating CLV: The Magic Formula

CLV = customer value X average customer lifespan

The resulting CLV is a monetary value (depending on the currency you work in)
and shows how much you can reasonably expect the average customer to
spend with you over their lifetime.

It’s a great frame of reference for everything from the investments you make into
improving the customer experience (i.e. will the investment deliver ROI by
generating more revenue over a customer’s lifetime); to optimising your
customer acquisition strategy (i.e. comparing the amount you invest to ‘win’ a
customer vs the amount you can expect them to spend with you).

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 Customer Management - Acquisition,
Retention, and developing value

Customer acquisition is the process of attracting and converting new customers to

your business, whereas customer retention is the process of keeping existing
customers engaged, satisfied, and loyal to your brand.

Metrics
Customer acquisition: Key metrics include cost of customer acquisition (CAC),
conversion rate, customer lifetime value (CLV), and ROI of marketing campaigns.

Customer retention: The essential metrics are churn rate, repeat purchase rate,
customer loyalty indices (like Net Promoter Score), average revenue per user
(ARPU), and CLV.

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 Customer Management - Acquisition

What is customer acquisition?

Customer acquisition refers to the process of bringing in new customers or clients for
your business. This is typically achieved when a customer purchases your product for
the first time, or subscribes to your service, and it is, in many ways, the central goal of a
company.

The customer acquisition funnel

The customer acquisition funnel represents the journey of a potential customer, from
first learning about your company to making the decision to become a customer (and
returning customer).
Awareness
Interest
Consideration
Intent
Purchase

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 Customer Management - Acquisition

How to calculate customer acquisition cost

The basic formula for calculating CAC is dividing the
total amount spent on acquisition efforts by the
number of new customers you have acquired. This will
tell you how much it costs your business to bring in
each new customer.

For example, if you spend RS20,000 on advertising

and acquire 100 new customers, your CAC is 20,000
divided by 100, resulting in a CAC of Rs.200.

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 Customer Retention

Customer retention is a metric that measures customer loyalty, or the ability for an
organization to keep its customers over time. In addition to identifying the number of loyal
customers, customer retention can reflect or predict customer satisfaction, repurchase
behavior, customer engagement and emotional ties to a brand.

While customer relationships typically begin with an initial interaction, customer retention
metrics are related to the first purchase made by a customer and include all subsequent
interactions. Once customer retention is measured, organizations can use this feedback to
perform data analysis on components of customer experience and customer success. For
example, if a drop in customer retention is reported, an organization can use this to help
identify the root cause and adjust its product offerings.

Customer retention is critical because the cost of acquiring new customers is much higher
than retaining existing customers. Retained customers are also more likely to engage in
word-of-mouth marketing or become brand ambassadors.

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What is Customer Lifecycle?

= Customer lifecycle (CLC) = the customer lifecycle describes the various stages a consumer goes through
before, during and after they complete a transaction
 How to measure customer retention and key
metrics
Customer retention is typically measured in terms of retention rate and should be monitored continuously. The first
step to determining this rate is to identify the period of time an organization wants to record. This can range from a
month to a fiscal year or beyond. Other factors used to determine the retention rate include the following:

the number of customers in the customer base at the start of the period (S);
the number of customers at the end (E); and
the number of new customers acquired over time (N).
These metrics should be recorded. Once retrieved, the formula is applied as follows:

E-N/S x 100 = retention rate

For example, if an organization starts with 750 customers and ends with 950, but acquires 625 over the period of
time, the customer retention rate would be 43.3%.

*According to the Annexcloud.com blog post titled "21 Surprising Customer Retention Statistics For 2021,"
almost 65% of a company's business comes from repeat customers, while focusing on increasing customer
retention by 5% can increase profits by 25% to 95%. The more loyal an individual becomes to a business, the
more likely they will try new products or bring in new customers.

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 Customer retention strategies

Some best practices and strategies to follow when considering customer retention strategies
include the following:

• Offer personalized service. Personalizing services to the customer can improve a

customer's experience and lead them to become repeat customers. Use data to provide
personalized support interactions. Data gathered about customers can help aid
organizations in knowing their preferences, enabling them to build more personalized
services.

• Build trust. Building relationships with customers will help increase brand loyalty and
trust.

• Use social media. Social media sites such as Twitter, LinkedIn and Facebook can help an
organization reach out to its customers, build relationships and trust, and even respond to
customer support queries.

• Incentivize loyalty. This can be done through customer loyalty programs or by offering
discounts or credit.
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 Customer retention strategies

Some best practices and strategies to follow when considering customer retention strategies
include the following:
• Gather customer feedback. Gathering feedback from customers enables an organization to
further personalize experiences.

• Improve customer support services. Implementing a live chat or help desk tool, putting an
emphasis on responding to customer support queries quickly and encouraging customers to
create accounts can all help increase customer retention.

All these customer retention strategies together can help build more trust between an
organization and a customer, which can help increase the chances of current customers
becoming repeat customers.

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 Determinants of customer retention

Delivered quality of products and services versus customer expectation: The worthiness of a particular
product or service does not depend on its own merits. It is only worth and useful if it meets all customers’
expectation.
If the customer expectation is very high and the provided product or service does not meet his expectation
then the customer will obviously not purchase that particular product again. Hence one of the key facets in
determining retention is the deference between the quality of the product or service provided and the
customer’s expectation. The organization must always try to optimize the balance between quality of product
and expectation from customers.

Value: Value here could be defined as the getting a quality product at optimal cost. Possibilities are there that
the organization could provide excellent quality product with matching price or similar quality products at
comparatively lower price. Some times the organizations justify a lower quality product to be of good quality
product and argue to get greater price. After the customer identifies that real value of the product is not worth
its quality it may lead to customer detection.

Uniqueness and suitability of products: Most customers prefer unique and different product. Identical
products normally decrease the probability of selling. Uniqueness in products often increases the demand of
that particular product in the global market. More importantly, the unique products should also be suitable so
that it meets the differential expectations of range of customers. Hence uniqueness and suitability of products
helps in retaining customers to a higher extent.

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 Determinants of customer retention

Loyalty: It is necessarily required for an organization to interact and communicate with customers on a
regular basis to increase customer loyalty. In these interactions and communications it is required to
learn and determine all individual customer needs and respond accordingly. Even if the products are
identical in competing markets, loyalty provides high retention rates.

Easy availability: Some of the products in market are not easily available. This may be because of poor
marketing strategy or less retail stores. This could have an adverse effect on retention rates. For
example, a customer is not able to buy a special brand of perfume if it not widely available in market or
if the direct supplier or retail stores are not reachable to the customer, even if the product is of high
demand. Hence, easily available products could be enhances its selling power and hence customer
retention.

Customer service: Customer service could be considered as the most important aspect of customer
retention. In some cases, customer service determines if or not a customer defects from organization.
Customer service is the reaction by the organization to the queries and activities of the customer.
Dealing with these queries intelligently is very important as small misunderstandings could convey
unalike perceptions.

Exit barrier: Organizations which are successful in creating an exit barrier can obviously retain
customers. For example, by providing rewards and concessions to continuously buying customers or by
designing and customizing the products according to customer needs could create a barrier against the
customer to switch to other options.
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 Customer Management - Developing
Value

Creating value for customers means providing useful products and

services that customers consider worthy of their time, energy and
money. For customers to find value in a product or service, its
perceived benefits need to outweigh its cost. Creating value means
maximizing benefits within an acceptable price point.

Improve the buying process

Focus on brand perception
Get customer feedback
Make a unique product
Provide a positive experience
Prioritize quality over price
Identify your strengths
Adjust your marketing strategy
Educate customers
Run enticing campaigns
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Satisfaction, Loyalty and Business performance

Satisfaction-Profit Chain

Customer Business
Customer Loyalty
Satisfaction Performance

• Understand • Behavioral Loyalty • Revenue growth

Customer • Attitudinal Loyalty • Share of customer
Requirements • Customer Tenure
• Meet customer
expectations
• Deliver Customer
Value

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 How to Measure CRM
Success
What CRM metrics should we track to measure CRM Success?

•Close rate
•Upsell rate
•Net-new revenue
•Length of each sales pipeline stage
•Length of sales cycle
•Customer lifetime value (CLV)
•Customer acquisition cost (CAC)
•Revenue generated by campaign
•Email list growth rate
•Net promoter score (NPS)
•Churn rate
•Average time to resolution

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1. Close rate: close rate is the number of deals closed compared to the number
of leads in the pipeline. If you have 100 leads in your pipeline and only 10
close, your close rate is 10%.
2. Upsell rate : Upselling is essentially convincing the customer to spend more
than they originally planned. Your upsell rate is how many customers buy things
they weren’t originally planning to buy.

Let’s say you run sales for a home cleaning company. Upselling might involve
selling customers:
•A year’s worth of monthly cleaning, instead of purchasing month-by-month
•Deep cleaning services instead of the basic option
If you convince 1 out of every 5 customers to upgrade their purchase, your
upsell rate is 20%.
3. Net-new revenue : New revenue means spending from new customers.
How long a customer stays “new” depends on your business model.
•If you sell yearly subscriptions, new revenue is the revenue generated by
customers within their first year.
•If you sell one-time products, new revenue is the revenue generated by
customers’ first purchases.

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4. Length of each sales pipeline stage : How long does the average lead
stay in each stage of your pipeline?
Stages are the steps in your pipeline (or sales process). Tracking stages helps
you find bottlenecks in your sales process (like if deals tend to get stuck in a
specific pipeline stage).
5. Length of sales cycle: Lead velocity measures how long the average deal
takes to close. This is also sometimes called lead velocity.

6. Customer lifetime value (CLTV)

7. Customer acquisition cost (CAC)

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 8. Revenue generated by campaign
Breaking down how much you make from each campaign can help identify what
resonates with your customers. This lets you test and improve:
•Email length
•Calls to action
•Subject lines
•Images
•“From” field
•Number of emails in the campaign
9. Email list growth rate
This metric measures how much your email list grows over a specific period.
To calculate email growth rate:
1.Subtract the number of unsubscribes from the number of new subscribers
2.Divide by the total number of contacts on your list
3.Multiply by 100
Say you have 500 new subscribers and 50 unsubscribes. Your list has 5,000 contacts
total. Here’s the math:
1.500 new subscribers – 50 unsubscribes = 450
2.450 / 5,000 = 0.09
3.0.09 x 100 = 9% email list growth rate
Your CRM helps your marketing team increase this metric
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 •Net promoter score
(NPS)
How likely are your customers to recommend your business to someone else?
NPS answers that question on a scale from 1 to 10.

To measure NPS, you need to send customers a survey with some variation of
these questions:

1.On a scale of 1 to 10, how likely are you to recommend our company to a friend
or colleague?
2.What made you choose that score?
Respondents are broken into 3 categories:
1.Promoters (9–10): People who are really pumped about what your business has
done for them (and want to shout it from the rooftops!)
2.Passives (7–8): People who get what they want from your business but aren’t
particularly excited about it
3.Detractors (0–6): People who had a less-than-great experience and are likely to
switch to a competitor
.

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What does NPS have to do with CRM?

•CRM helps personalize the customer experience, which

makes people happier (and more likely to give you a higher
score!)
•CRM keeps all customer information in one place, letting you
see a customer’s NPS and how it changes over time at a
glance
•CRM lets you automate sending out NPS surveys and
reporting on the findings.
You can automate sending out NPS surveys through Active
Campaign. In this automation, NPS surveys are sent only to
customers that have been active for longer than 6 months.
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 Customer Satisfaction Score

Customer Satisfaction Score (CSAT)

measures customer satisfaction with a
business, purchase, or interaction. It’s
one of the most straightforward ways to
measure customer satisfaction, and it's
obtained by asking a simple question,
such as 'How satisfied were you with your
experience?' To answer, there's a
corresponding survey scale, which can be
1 – 3, 1 – 5, or 1 – 10.
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 Customer Satisfaction Score
Calculation
A CSAT score is the sum of all positive
responses, divided by the total
responses collected, then multiplied by
100. The outcome leaves you with the
overall percentage of satisfied
customers at your business.
For example, if you received 25 total
responses and 15 of them were positive
— your CSAT score would be 60% (15
positive responses / 25 total responses =
.60 x 100 = 60%).
This indicates that most people are
satisfied with your offering, but also
highlights that there’s much more room www.bschool.cms.ac.in
 What is Customer Effort Score
(CES)?
Customer Effort Score (CES) is a metric derived from a
customer satisfaction survey that measures a product or
service’s ease of use to customers. A Customer Effort Score
reflects the amount of effort a customer had to exert to use
a product or service, find the information they needed, or get
an issue resolved.

Regardless, as a general principle: the higher the CES, the

better. A high CES score means that your company provides
an effortless experience for customers, while a low CES
means that people find your processes arduous or your
customer support ineffective—and you need to make
improvements or risk losing customers and sustaining a
high churn rate.

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 How to measure CES

CES data is collected by surveying customers in real-time after a single action

(e.g., customer completes a purchase) or interaction (e.g., customer receives help
from the support team) with a business. The survey can appear directly on a
website page, or be emailed as soon as the action is completed.

Customers are typically asked to rate the ease of their experience through a
numerical 1-5 or 1-7 scale, but more creative and visual solutions can include an
emoticon anger-to-happiness scale.
The collected answers are then averaged to give an idea of how much effort a
certain process requires of customers.

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 Share of Wallet

Share of wallet is the amount an existing consumer regularly

spends on a specific brand as opposed to its competitors. If a
customer has allocated a portion of their budget to spend on a
specific kind of product or service, share of wallet is the
percentage of money that goes to that brand instead of its
competitors.

For example, imagine a consumer allocates Rs.150 per month to

spend on laundry detergent and they need a new bottle of
detergent every two weeks. There are two competing brands
vying for that consumer's business and both companies charge
Rs. 75 for a bottle of detergent.
If the consumer buys one brand at the beginning of the month
and the other two weeks later, both brands have 50% share of
wallet for that month.
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End of Module V

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THANK YOU

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