Creating Long-term

Loyalty Relationships

Andi Riskyah R A 155020307121014

Indriati Pratiwi 155020307121019

Nabilah Qatrunnada Anuwar 155020307121025

 Building Customer Value,
Satisfaction and Loyalty

“Creating loyal customers is at the

heart of every business”
Traditional Organization versus
Modern Customer-Oriented
Company Organization
Traditional Organization chart
Modern Customer-Oriented
Organization Chart
 Customer Perceived Value
How then do customers ultimately make choices?

• They tend to be value maximizers, within the

bounds of search costs and limited knowledge,
mobility, and income.

• Customers estimate which offer they believe—

for whatever reason—will deliver the most
perceived value and act on it
Customer
Perceived Value
(CPV) is the
difference between
the prospective
customer's evaluation
of all benefits and all
the cost of an offering
and the perceived
alternatives.
APPLYING VALUE CONCEPTS
Customer
Profit Price
Value

$6,000 $20,000 -0-

5,000 19,000 $1,000

4,000 18,000 2,000

3,000 17,000 3,000

2,000 16,000 4,000

Caterpillar
1,000 15,000 5,000

-0- 14,000 6,000

 APPLYING VALUE CONCEPTS
by using this concept, it can improve in three ways
• First, it can increase total customer benefit by improving
economic, functional, and psychological benefits of its
product, services, people, and/or image.
• Second, it can reduce the buyer’s nonmonetary costs by
reducing the time, energy, and psychological investment.
• Third, it can reduce its product’s monetary cost to the
buyer.

to win the sale, the firm must offer more customer

perceived value than the other firm does.
 DELIVERING HIGH CUSTOMER
VALUE
consumer have varying degrees of loyalty to
specific brands, stores and companies
• The value proposition consists of the whole
cluster of benefits the company promises to
deliver; it is more than the core positioning of the
offering.
• The value delivery system includes all the
experiences the customer will have on the way
to obtaining and using the offering.
 The Value Proposition

Core positioning:
• Safety Volvo

Other benefits:
• Good performance
• Design
• Environmentally
friendly
 Total Customer Satisfaction
“Satisfaction is a
person’s feelings of
pleasure or
disappointment that
result from comparing a
product’s perceived
performance (or
outcome) to
expectations.”
 Customer Expectations

Previous purchases
Friends advice
Marketers’ / competitors
Expectations
 Monitoring Satisfaction
• Level one: abandon the company and
even bad-mouth it.
• Level two to level four: satisfied but still
find it easy to switch when a better offer
comes along.
• Level five: repurchase and even spread
good word of mouth about the company.
 Monitoring Satisfaction

Measurement
Techniques

Influence of
Customer
Satisfaction

Customer
Complaint
s
 MEASUREMENT TECHNIQUES
Periodic surveys can track customer
satisfaction directly and ask additional
questions to measure repurchase intention
and the respondent’s likelihood or willingness
to recommend the company and brand to
others.
 INFLUENCE OF CUSTOMER
SATISFACTION
 For customer-centered companies,
customer satisfaction is both a goal and a
marketing tool.

 Companies need to be especially

concerned with their customer
satisfaction level today because the
Internet provides a tool for consumers to
quickly spread both good and bad word of
mouth to the rest of the world.

 The University of Michigan’s Claes

Fornell has developed the American
Customer Satisfaction Index (ACSI) to
measure consumers’ perceived
satisfaction with different firms, industries,
economic sectors, and national
economies
 Customer Complaints
54% - 70%
5% Buy again if
resolved
Tell 5
Complain people
95%
If resolved quickly
25%
Dissatisfi
ed 95% Tell 11
Stop buying people
 Product and Service Quality
Satisfaction

Performance
Quality
Conformance

Profitability
Maximizing Customer Lifetime Value

Customer Probability
‘’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. ‘’
 Customer-Product Profitability Analysis
Customers

Products

Customer Lifetime Value

Cultivating Customer Relationship

Customer Empowerment
Give customer more power to choose product
Both company and customer use
information of each other
Customer Relationship Management
(CRM)
“Managing information of individual customer
and all customer “touch points ” to maximize
loyalty”

Personalizing Marketing
Making sure brand & its marketing are
relevant to customers
“No two customers are identical.”
Best relationship marketing = right technology
Personalization is more than just creating
customized information
Employees increase bonds by individualizing
and personalizing relationships

Customer vs Clients
Nameless Named
Part of mass Individual
Served by anyone Served by professionals
Adapt to customer’ increase of desire for
personalization
Permission Marketing (PM)
Marketing after gaining their expressed permission
Based on Marketers can’t use “interruption marketing”
Seth Codin
Presume consumers know what they want
Participation Marketing (RM)
More appropriate than PM
One-to-one marketing
 Customer Empowerment
Advertisement & making customer help in
customizing products
“Customer in charge.”
Connect to brands
How much customer want to get involved in your company

Customer Reviews and Recommendations

Effects of Positive Reviews:
Invite more consumers to become customers
Refer to a similar product will increase sales
Effects of Negatives Reviews:
Amazon.com
People can compare advantages vs disadvantages
Attracting and Retaining Customers

Searching for new customers by:

Discounts
Sales
Campaigns
Etc.

Reducing Defection
Keep customers and increase business
Many companies suffer from high customer churn or defection
“It’s like adding water to a leaking bucket.”
E.g.: Cellular carriers and tv cable suffer from spinners
 Reducing Defection continous...
 Dissatisfaction in defection
• Unmet needs and
expectations
• Poor product/service quality
• High complexity
• Billing errors
Reducing Defection continous...
Reduce defection rate:
1. Define and measure retention rate
 Magazine – renewal rate
 CollE.g.e – class graduation rate
2. Know the causes of customer attrition/reduction
and focus on certain customers
 Focus on increasing customer satisfaction by decreasing:
• Poor service
• Shoddy products
• High prices
Reducing Defection continous...
3. Compare the customer’s lifetime value to
the costs of reducing the defection rate
Defection rate cost:
• Campaign
• Service
• Sales
Lost profit
• Profit if company try to discourage defection
o Increase in customers as they are more loyal
• Dis-defection cost < lost profit
o retain customer OR continue dis-defection
 Retention Dynamics
 Marketing funnel
Shows how to attract and retain customers:
 Identify percentage of potential targets
 Identify percentage of potential targets
“Must move through each target to be very loyal”
 Stages can be extended
E.g.: to group brand advocates and partners with the firm
 Identify bottleneck stage/barrier that separate from
building a loyal customer franchise
 If recent users > triers
“something wrong”
 Customer retention
 Acquiring can cost 5 times bigger satisfying and
retaining customers
 Average company lose 10% of its customers
 Decrease 5% customer defection = increase profits
by 25 to 85%
 Increase life of retained customer = increase profit
rate
 Managing The Customer Base
 Reducing rate of customer defection
 E.g.: Increase employee skills
 Increase longevity of the customer relationship
Customer stick around
 E.g.: more engaged

 “Share of wallet”, cross-selling and up-selling

 E.g.: Harley Davidson: motorbikes, gloves, jackets, and shot
glass
 Make low profit customers to profitable or terminate
them
 Give special treatment on high-profit customer
 Building Loyalty
• Interacting with Customers
 Understanding the customers
 E.g.: customer feedback
• Developing Loyalty Programs
 Frequency Programs (FP)
 Reward customer when they did a certain number of visits
 Club Membership Programs
• Creating Institutional Ties
 Supply customer with equipment to help them manage order
 Databases & Database Marketing
Customer databases
•Name, address, telephone
#
•Purchase history
• Data Warehouse
•Demographics capture, query and analyze
•Psychographics
•Mediagraphics
• Data Mining
• to identify prospects
• To decide which customer should
receive a particular offer
• To deepen customer loyalty
• To reactive customer loyalty 35
The Downside of Database Marketing and
CRM

Some situations are just not conductive

Building and maintaining a customer database requires a
large
Difficult to get everyone in the company to be customer
oriented
Not all customers want a relationship with the company

The assumptions behind CRM may not always hold true