Marketing Management 12e, Kotler and Kellner
Summary: Chapter 5 (pages 139 - 171)
Building Customer Value, Satisfaction and Loyalty
Successful marketing companies invert the chart and see customers at the top and managers at every level must be personally involved in knowing, meeting and serving customers.
Customer Perceived Value
Customers are more educated and informed than ever and they have the tools to verify companies’ claims and seek out superior alternatives. They estimate which offer 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 the benefits and all the costs ...view middle of the document...
The key to generating high customer loyalty is to deliver high customer value.
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.
Total Customer Satisfaction
Satisfaction = a person’s feelings of pleasure of disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.
Customer expectations = many successful companies are raising expectations and delivering performances to match.
It is wise to measure customer satisfaction regularly because one key to customer retention is customer satisfaction. The link between customer satisfaction and customer loyalty are not proportional. Numerous methods exist to measure satisfaction:
▪ Periodic surveys
▪ Monitor the customer loss rate and find out why
▪ Mystery shoppers
It is important to ask the right questions and it is also important to monitor the customer satisfaction of competitors.
Product and Service Quality
Satisfaction also depends on product and service quality.
Quality = the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.
A company that satisfies most of its customers’ needs most of the time is called a quality company.
Conformance quality = all the units deliver their respective promised quality
Total quality is the key to value creation and customer satisfaction.
Total Quality Management
Is an organisation-wide approach to continuously improving the quality of all the organisations’ processes, products and services. Studies have shown a high correlation between relative product quality and company profitability. New terminology emerging = return on quality (ROQ) which advocates improving quality only on those dimensions that produce tangible customer benefits, lower cost or increased sales.
Maximising Customer Lifetime Value
Ultimately marketing is the art of attracting and keeping profitable customers. Companies could improve their profits by “firing” their worst customers. It is not necessarily the company’s largest customers who yield the most profit.
A profitable customer is one that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling and servicing that customer. There are only 2 solutions to handling unprofitable customers: raise fees or reduce service support.
Customer profitability analysis - unprofitable customers who defect should not concern the company.
Customer profitability analysis (CPA) is best conducted with the tools of an accounting technique called activity based costing.
Competitive advantage = a company’s ability to perform in one or more ways...