MARK 4500 Chapter Notes - Chapter 12: Customer Relationship Management, Net Present Value, Switching Barriers
10 Jun 2018
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CHAPTER 12 – Managing Customer Relationships and Building Loyalty
Customer Loyalty
− 3 components:
1. High Satisfaction
2. High Likelihood to Repurchase
3. High Likelihood to Recommend (word of mouth)
− Customer asset management: management of customer base/loyalty
− Zero defections: keep every customer that can be profitably served
− Repeated purchase does not necessarily = loyalty
Customer Profitability Increases with Time
− Increased purchases and/or account balances (purchase in greater quantities as families grow)
− Reduced operating costs (viewer mistakes as customers become experienced)
− Referrals to other customers
− Price premiums (customers willing to pay regular or higher prices)
Customer Lifetime Value (CLV)
− Acquisition revenues less costs
o Revenues = application fee + initial purchase
o Costs = marketing + credit check + account set up
− Projected annual revenues and costs
o Revenues = annual fees + sales + service fees + value of referrals
o Costs = account management + cost of sales + write-offs
− Value of referrals
o Percentage of customers influenced by other customers
o Other arketig actiities that dre the fir to a idiidual’s attetio
− Net Present Value
o Sum anticipated annual values (future profits)
o Suitably discounted each year into the future
Customer-Firm Relationship
− Transactional – Ar’s legth
− Relationship Marketing: database marketing (information exchange), interaction marketing (add
people and social processes), network marketing (B2B)
− Creating membership relationships
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Document Summary
Chapter 12 managing customer relationships and building loyalty. 3 components: high satisfaction, high likelihood to repurchase, high likelihood to recommend (word of mouth) Customer asset management: management of customer base/loyalty. Zero defections: keep every customer that can be profitably served. Repeated purchase does not necessarily = loyalty. Increased purchases and/or account balances (purchase in greater quantities as families grow) Reduced operating costs (viewer mistakes as customers become experienced) Price premiums (customers willing to pay regular or higher prices) Acquisition revenues less costs: revenues = application fee + initial purchase, costs = marketing + credit check + account set up. Projected annual revenues and costs: revenues = annual fees + sales + service fees + value of referrals, costs = account management + cost of sales + write-offs. Value of referrals: percentage of customers influenced by other customers, other (cid:373)arketi(cid:374)g acti(cid:448)ities that dre(cid:449) the fir(cid:373) to a(cid:374) i(cid:374)di(cid:448)idual"s atte(cid:374)tio(cid:374)
