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Chapter 5 Creating Long-term Loyalty Relationships.docx

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Department
Marketing
Course
MKT 702
Professor
Rob Wilson
Semester
Fall

Description
MKT702 Marketing Management CHAPTER 5 Creating Long-term Loyalty Relationships BUILDING CUSTOMER VALUE, SATISFACTION, AND LOYALTY Customer-Perceived Value  Customer-perceived value (CPV): difference between prospective customer’s evaluation of all benefits and al costs of an offering and the perceived alternatives o Can increase value of customer offering by raising economic, functional, or emotional benefits and/or reducing one or more costs  Total customer benefit: perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering because of product, service, people, and image  Total customer cost: perceived bundle of costs customers expect to incur in evaluating, obtaining, using, an disposing given market offering, including monetary, time, energy, and psychological costs  Customer value analysis: reveals company’s strengths and weaknesses relative to those of various competitors 1. Identify major attributes and benefits customers value 2. Assess quantitative importance of different attributes and benefits 3. Assess company’s and competitors’ performance on the different customer values against their rated importance 4. Examine how customers in specific segment rate the company’s performance against a specific major competitor on an individual attribute or benefit basis 5. Monitor customer values over time  Buyers operate under various constraints and occasionally make choices that give more weight to their personal benefits than company’s benefit  Loyalty: deeply head commitment to re-buy or re-patronize preferred product or service in the future despite situational influences and marketing efforts having potential to cause switching behaviour  Value proposition: consists of whole cluster of benefits the company promises to deliver; it is more than the core positioning of the offering  Value-delivery system: all experiences customer will have on the way to obtaining and using offering Total Customer Satisfaction  Satisfaction: person’s feelings of pleasure or disappointment that result from comparing product’s perceived performance (or outcome) with his or her expectations o Customer assessment of product performance depends on many factors, especially type of loyalty relationship customer has with the brand  Company must try to deliver high level of customer satisfaction subject to also delivering acceptable levels to other stakeholders, given total resources Monitoring Satisfaction  Periodic surveys can track customer satisfaction directly and ask additional questions to measure repurchase intention and respondent’s likelihood or willingness to recommend company and brand to others  Customer loss rate are customers who have stopped buying or have switched to another supplier to find out why  Mystery shoppers pose as potential buyers and report on strong and weak points experienced in buying company’s and competitors’ products Product and Service Quality  Quality: totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs; conformance quality and performance quality (or grade) o Quality is the key to value creation and customer satisfaction  Total quality: organization-wide approach to continuously improving quality of all organization’s processes, products, and services MAXIMIZING CUSTOMER LIFETIME VALUE Customer Profitability  Profitable customer: person, household, or company that overtime yields a revenue stream exceeding by an acceptable amount the company’s cost stream for attracting, selling and serving that customer o Emphasizes lifetime stream of revenue and cost MKT702 Marketing Management  Customer profitability analysis (CPA): means of assessing and ranking customer profitability through accounting techniques such as activity-based costing (ABC)  Activity-based costing (ABC): accounting procedure that quantify true profitability of different activities by identifying their actual costs o Costs should account for all company resources that go into serving that customer, direct and indirect Measuring Customer Lifetime Value  Customer lifetime value (CLV): net present value of stream of future profits expected over the customer’s lifetime purchases o Subtract expected revenues and expected costs of attracting, selling, and servicing account of that customer, applying appropriate discount rate  CLV provides formal quantitative framework for planning customer investment and help marketers adopt a long-term perspective CULTIVATING CUSTOMER RELATIONSHIPS Customer Relationship Management  Customer relationship management (CRM): process of carefully managing detailed information about individual customers and all customer “touch points” to maximize loyalty o Customer touch point is any occasion on which customer encounters brand and product – from actual experience to personal or massive communications to causal observation  Personalized marketing is about making sure the brand and its marketing are relevant as possible to as many customers as possible o Employees can create strong bonds with customers by individualizing and personalizing relationships  Permission marketing is based on the premise that marketers can no longer use “interruption marketing” via mass media campaigns
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