Customer Complaints by YOx1v9

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									   CHAPTER 5
Creating Customer Value,
      Satisfaction,
       and Loyalty
             PREPARED BY: Arceo, Mary Joyce M.
                            Javier, Alyssa Mae L.
                      Obligacion, Maria Teresa Z.
BY THE END OF THIS CHAPTER,
WE HOPE TO:
 Define the customer value, satisfaction, and loyalty, and
  how can companies deliver them.

 Define the lifetime value of customers and how can
  marketers maximize it.

 Know how can companies cultivate strong relationships.

 Be able to define the database marketing.
INTRODUCTION
    Today, companies face their toughest competition
ever. Moving from a product-and-sales philosophy to a
holistic marketing philosophy, however gives them a
better chance of outperforming competition. And the
cornerstone of a well-conceived marketing orientation is
strong customer relationships. Marketers must connect
with customers-informing, engaging, and maybe even
energizing them in the process.

    Successful marketers are the ones that fully satisfy
their customers profitably. In this chapter, we spell out in
detail the ways companies can go about winning
customers and beating competitors.
Building Customer Value, Satisfaction, and Loyalty
                                                               (b) Modern Customer-oriented
                                                                     Organization Chart
                                (a) Traditional Organization
                                            Chart

                                                                      CUSTOMERS
  Managers who believe
     the customer is the                   Top
    company’s only true                   mana-                          Frontline
  “profit center” consider               gement                           people

the traditional organization           Middle
                                                                       Middle
    chart in Figure 5.1- a            Manageme
                                                                      Manageme
 pyramid with the president                nt
                                         Frontline                         nt
                                          people                        Top
  at the top management
                                                                       manage
in the middle, and frontline
                                                                        ment
     people and customers
                at                     CUSTOMERS

   the bottom- obsolete.
                               FIG.5.1 Traditional Organization versus Modern
                                   Customer-Oriented Company Organization
Successful marketing companies invert the chart in Figure
5.1b.

    At the top are the customers; next in importance are
frontline people who meet, serve, and satisfy customers;
under them are the middle managers, whose job is to
support the frontline people so they can serve customers
well; and at the base is top management, whose job is to
hire and support good middle managers. We have added
customers along the sides of Figure 5.1 (b) to indicate
that managers at every level must be personally involved
in knowing, meeting and serving customers.
CUSTOMER-PERCEIVED VALUE (CPV)
- is the difference between the prospective customer’s
  evaluation of all benefits and all costs of an offering and
  perceived alternatives.

TOTAL CUSTOMER BENEFIT
- is the perceived monetary value of the bundle of
  economic, functional, and psychological benefits
  customer expect from a given market offering because
  of the products, services, personnel, and image
  involved.

TOTAL CUSTOMER COST
- is the perceived bundle of costs customers expect to
  incur in evaluating, obtaining, using, and disposing of
  the given market offeringm including monetary, time,
  energy, and psychological costs.
     Very often, managers conduct a CUSTOMER
  VALUE ANALYSIS to reveal the company’s strengths
  and weaknesses relative to those of various
  competitors. The steps in this analysis are:

1. IDENTIFY THE MAJOR ATTRIBUTES AND BENEFITS
   THAT CUSTOMERS VALUE
   - Customers are asked what attributes, benefits, and
   performance levels they look for in choosing a product
   and vendors.

2. ASSESS THE QUANTITATIVE IMPORTANCE OF THE
   DIFFERENT ATTRIBUTES AND BENEFITS
   - Customers are asked to rate the importance of the
   different attributes and benefits. If their ratings diverge
   too much, the marketer should cluster them into different
   segments.
3. ASSESS THE COMPANY’S AND COMPETITOR’S
  PERFORMANCES ON THE DIFFERENT CUSTOMER
  VALUES AGAINST THEIR RATED IMPORTANCE
  - Customers describe where they see the company’s
  and competitor’s performances on each attribute and
  benefit.

4. EXAMINE HOW CUSTOMERS IN A SPECIFIC
   SEGMENT RATE THE COMPANY’S PERFORMANCE
   AGAINST A SPECIFIC MAJOR COMPETITOR ON AN
   INDIVIDUAL ATTRIBUTE OR BENEFIT BASIS
   - If the company’s offer exceeds the competitor’s offer
   on all important attributes and benefits, the company
   can charge a higher price (thereby earning higher
   profits), or it can charge the same price and gain more
   market share.
5. MONITOR CUSTOMER VALUES OVER TIME
   - The company must periodically redo its studies of
   customer values and competitors’ standings as the
   economy, technology, and features change.



DELIVERING HIGH CUSTOMER VALUE
  - Consumers have varying degrees of loyalty to specific
  brands, stores, and companies.
TOTAL CUSTOMER SATISFACTION
Whether the buyer is satisfied after purchase depends
on the offer’s performance in relationship to the buyer’s
expectations, and whether the buyer interprets any
deviations between the two.

SATISFACTION
- is a person’s feelings of pleasure or disappointed that
result from comparing a product’s perceived
performance (or outcome) to their expectations. If the
performance falls short of expectations, the customer is
DISSATISFIED. If the performance matches the
expectations, the customer is SATISFIED. If the
performance exceeds expectations, the customer is
HIGHLY SATISFIED OR DELIGHTED.
TOTAL CUSTOMER SATISFACTION

HOW DO BUYERS FORM THEIR EXPECTATIONS

- Expectations result from buying experience; friends’
and associates’ advise; and marketer’s and competitors’
information and promises. If marketers raise
expectations too high, the buyer is likely to be
disappointed.
MONITORING SATISFACTION
Many companies are systematically measuring how well
they treat their customers, identifying the factors
shaping satisfaction, and making changes in their
operations and marketing as a result.

MEASUREMENT TECHNIQUES

1. PERIODIC SURVEYS
   - can track customer satisfaction directly and also ask
additional questions to measure repurchase intention
and the respondent’s likelihood or willingness to
recommend the company and brand to others.
MONITORING SATISFACTION
2. Companies can monitor their CUSTOMER LOSS
RATE and contact customers who have stopped buying
or who have switched to another supplier to find out
why.

3. Companies can hire MYSTERY SHOPPERS to pose
as potential buyers and report on strong and weak
points experienced in buying the company’s and
competitors’ products.

4. In addition to tracking customer value expectations
and satisfaction for their own firms, companies need to
monitor their competitor’s performance in these areas.
MONITORING SATISFACTION

INFLUENCE OF CUSTOMER SATISFACTION

For      customer-centered     companies,    customer
satisfaction is both a goal and a marketing tool.
Companies need to especially concerned today with
their customer satisfaction level because the internet
provides a tool for consumers to quickly spread bad
word of mouth – as well as good word of mouth – to the
rest of the world.
o Studies of customer dissatisfaction show that customers
are dissatisfied with their purchases about 25% of the time
but that only about 5% complain. The other 95% either feel
complaining is not worth the effort, or they do not know
how or to whom to complain, and they jus t stop buying.



*The fact is no matter how perfectly designed and implemented a
marketing program is, mistakes will happen.
The following procedures can help to recover
customer goodwill;

1. Set-up a 7-day, 24 hour toll-free “hotline” (y
   phone, fax or e-mail) to receive and act on
   customer complaints.
2. Contact the complaining customer as quickly as
   possible.
3. Accept responsibility for the customer’s
   disappointment; don’t blame the customer.
4. Use customer-service people who are empathic.
5. Resolve the complaints swiftly and to the
   customer’s dissatisfaction.
         Product and Service Quality

What exactly is quality?
             •Fitness for use
             • Conformance to requirements
             • Freedom from variation


   American Society for Quality Control’s definition:
           “Quality is the totality of features and
   characteristics of a product or service that
   bear on its ability to satisfy stated or implied
   needs”. (this is clearly a customer-centered
   definition)
Quality company          –a company hat satisfies
        most of its customers' needs most of the
time.


   “Performance Quality”

   “Conformance Quality”
         Impact of Quality

 Higher levels of quality result in
higher     levels  of     customer
satisfaction.

 Quality is clearly the key to
value creation and customer
satisfaction.
                   Total Quality
To deliver high- quality goods and services to target customers,
marketers should;
 bear the major responsibility for correctly identifying the
customers’ needs and requirements
 must communicate customer expectations properly to
product designers
 must make sure that customers’ orders are filled correctly
and on time
 must check that customers have received proper
instructions, training, and technical assistance in the use of the
product
 must stay in touch with customers after the sale to ensure
that they are satisfied and remain satisfied
 must     gather customer ideas for product and service
improvements and convey them to the appropriate
departments.
Maximizing Customer Lifetime Value

The well-known 20-80 rule says that; the top
20% of the customers often generates 80% or
more of the company’s profits.


The implication is that a company could improve
its profitability by “firing” its worst customers.
        Customer Profitability

 What makes a
customer profitable?

   Profitable customer - a person, household, or
   company that over time yields a revenue stream
   that exceeds by n acceptable amount the
   company’s cost stream for attracting, selling, and
   servicing that customer.
               Customer Profitability Analysis
                                  Customers
                            C1             C2       C3

                 P1         +              +         +       High profitable
                                                                product
                 P2         +                                  Profitable
    Products




                                                                product
                 P3                        -         -        Unprofitable
                                                                product
                 P4                                  -           High
                                                              unprofitable
                                                                product
                        High-profit   Mixed-bag    Losing
                         customer     customer    customer



*Customer-Product Profitability Analysis
 What can the company                do     about
customers 2 and 3?

    • Raise the price of its less profitable
    products or eliminate them

    • Try to sell the customer 2 and 3 its profit-
    making products
Customer Profitability Analysis (CPA)                 - is
best conducted with the tools of an accounting technique
called activity-based costing (ABC).


Different profit-tiers customers:

     Platinum customers – most profitable
      Gold customers – profitable
      Iron customers – low profitability but
     desirable for volume
      Lead customers – unprofitable and
     undesirable
              Customer Portfolios
 One perspective is that a firm’s portfolio consist of a
combination of acquaintances, friends, and partners that are
constantly changing. The 3 types of customers will differ in
their product needs, their buying, selling, and servicing
activities, and their acquisition costs and competitive
advantages.

 Another perspective compares the individuals who make
up the firm’s portfolio to the stocks that make up an
investment portfolio. From this perspective, firms should
assemble portfolios of negatively correlated individuals so
that the financial contributions of one offset the deficits of
another to maximize the portfolios risk-adjusted lifetime value.
Measuring Customer Lifetime Value

   Customer lifetime value (CLV) – describes the
   net present value of the stream of the future
   profits expected over the customer’s lifetime
   purchases.


   CLV calculations provide a formal quantitative
   framework for planning customer investment and
   help marketers adopt a long-term perspective.
Cultivating Customer Relationships
 Maximizing customer value means cultivating long-
 term customer relationships.

  Information has the advantages of being easy to
  differentiate, customize, personalize, and dispatch over
  networks t incredible speed.

  Customer empowerment has become a way of life for
  many companies that have o adjust to a shift in the
  power with their customer relationships.
 Customer Relationship Management
              (CRM)
    -- is the process of carefully managing detailed
    information about individual customers and all customer
    “touch points” to maximize customer loyalty.


        Customer touch point - is any occasion on which the
        customer encounters the brand and product– from
        actual  experience     to    personal   or    mass
        communications to casual observation.

CRM enables companies to provide excellent real-time
customer service through the effective use of individual
account information.
          One-to-One Marketing
Don Peppers and Martha Rogers outline a four-step
framework for one-to-one marketing that can be adapted
to CRM marketing as follows:

 Identify your prospects and customers.
 Differentiate customers in terms of their needs and their
value to your company.
 Interact with individual customers to improve your
knowledge about their individual needs to build stronger
relationships.
Customize products, services and messages to each
customer.
Increasing Value of the Customer Base
Winning companies improve the value of their customer base by
excelling at strategies such as the following:


    Reducing the rate of customer defection.
    Increasing the longetivity of the customer
   relationship.
   Enhancing the growth potential of each customer
   through “share-of-wallet,” across selling and up-
   selling.
    Making low-profit customers more profitable or
   terminating them.
    Focusing disproportionate effort on high-value
   customers.
  Attracting and Retaining Customers


       To generate leads, company develop ads and
place them in media that will reach new prospects;
Send direct mail and make phone calls to possible
new prospects;
Purchases names from list brokers.
         Reducing Defection
To reduce the defection rate, the company must:

1. Define and measure its retention rate.
2. Distinguish the causes of customer attrition
   and identify those that can be managed better.
3. Compare the lost profit equal to the
   customer’s lifetime value from a lost customer
   to the costs to reduce the defection rate.
                 Building Loyalty
 Creating a strong tight connection is the dream of
  many marketer and often the key to long term
  marketing success.

Interacting with customers
 Listening to customers is crucial to customer relationship
  management.
 It is also important also important to be advocate and as much as
  possible take the customers side on issues understanding their
  point of view
Developing Loyalty Programs
 Two customers loyalty programs that companies can offer are
  frequency programs and club marketing programs.

FREQUENCY PROGRAMS (FP’s)
 Are design to provide rewards to customers who buy frequently
  and in substantial amounts.

CLUB MEMBERSHIP PROGRAMS
 It is open to everyone who purchase a product or service or it
  can be limited to an affinity group or to those willing to pay a
  small fee.
 Fee’s and membership conditions prevent those only a fleeting
  interest in a company’s products from joining.
Examples of Highly successful clubs include the following:
 Apple Inc.                       - Harley Davidson
Personalizing Market
   Company personnel can create strong bonds with customers by
    individualizing and personalizing relationships.
   TECHNOLOGY is an essential ingredient for the best relationship
    marketing today.

  Distinction between customer and clients:

         Customers                                Clients

• may be nameless to the institute   • cannot be nameless to the
• served as part of the mass or as   institute
part of the larger segments          • served on an individual basis
• served by anyone who happens       • served by the professional
to be available                      assigned to them.
Creating Institutional Ties



   The company may supply customers with special
   equipment or computer links that help customers
   manage orders, payroll, and inventory.

   Customers are less inclined to switch to another
   supplier when this would involve high capital costs,
   high research cost, or loss of loyal-customer
   discounts.
A good examples is;
McKesson Corporation




                       Milliken & Company
WIN-Backs
     Regardless of the nature of the category how hard
 companies may try some customer s inevitably become
 inactive or drop out.


     The challenge is to reactive dissatisfied customers
 through win-back strategies.


    It is often easier to reattract ex-customers than to find
 new one’s.


     The key is to analyze the causes of customer detection
 through exit interviews and lost customer surveys and win
 back only those who have strong profit potential.
             Customer Database and Database
                       Marketing
       Customer Database
      Is an organized collection of comprehensive information about
        individual customers or prospects that is current, accesible and
        actionable for such marketing puposes as lead generation, lead
        qualification, sale of a product or services or maintenance of
        customer relationship.

    Database Marketing
       • is the process of building and maintaining and using customer
       databases and other databases (products, suppliers and
       resellers) to contract , transact, and build customer relationships.
           Customer Databases


A customer mailing list is simply a set of names
  addresses and telephone numbers.

A customer databases contains much more
 information, accumulated through customer
 transaction information, telephone queries,
 cookies, and every customer contract.
Customer database            Business database
•   Consumer past purchase   •   Business costumers past
•   Demographics                 purchase
•   psychographics           •   Past volumes
•   Media graphics           •   Prices
•   Others…                  •   Profits
                             •   Buyer team member names
                             •   Status of current contract
                             •   Estimate of the supplier share of
                                 the customers business
                             •   Competitive supplier
                             •   Assessment of competitive
                                 strengths and weaknesses in
                                 selling and servicing account
                             •   Relevant buying practices and
                                 patterns and policies.
      Data warehouses and Data mining
In Data Warehouse marketers can capture, query and
    analyze it to draw inferences about an individual
    customers needs and responses.

Telemarketers can respond to customers inquiries based on
    a total picture of the customer relationship.

Through DataMining, marketing statisticians can extract
    useful information about individuals, trends and
    segments from the mass of data.

Datamining uses sophisticated statistical and mathematical
    techniques such as cluster analysis, automatic
    interaction detection, predictive modeling, and neural
    networking.
In general, companies can use their database in 5 ways:


1.   To identify Prospects
    Many companies generate sales leads by advertising their product or
     services.

2.   To decide which customers should receive a particular offer
    Companies are intersted in selling, up-selling and cross selling their
     products and services.

3.   To deepen customer loyalty
    Companies can build interest and enthusiasm by remembering
     customer preferences and by sending appropriate gifts, discount
     coupons, and interesting reading materials.

4.   To reactive customer purchases
    Companies can install automatic mailing programs that send out
     birthday or anniversary cards, Christmas shopping reminders or off
     season promotions.

5.   To avoid customers mistakes
    A major bank confessed to a number of mistakes it had made by not
     using its customers database well.
 Downside of Database Marketing and
               CRM
 There are four problems that can prevent a firm from effectively
   using CRM as follows:

1. Building and maintaining a customer database requires a large
    investment in computer hardware, database soft ware,
    analytical programs, communication links and skilled personnel.
    Building a customer database would not be wothwhile in the
    following cases:
(a). When the product is a once-in-a-lifetime purchase
(b). When customers show loyalty to a brand
(c). When the unit sale is very small
(d). When the cost of gathering information is too high.
2.   Difficulty of getting everyone in the company to be customer
     oriented and to use the available information.
                Effective database marketing requires managing and
     training employees as well as dealers and suppliers


3.   Not all customers want a relationship with the company, and they
     may resent knowing that the company has collected that much
     personal information about them.
       Marketers must be concerned about attitudes about privacy
     and security.


4.   The assumption behind CRM may not always hold true.
        High-volume costumers often know their value to a company
     and can leverage it to extract premium service and/or price
     discounts.
eBay Inc.
 Database Marketing is most frequently used by
  business marketers and service providers that
  normally and easily collect a lot of customer data.

Four main perils of CRM
 Implementing CRM before creating a customer
  strategy
 Rolling out CRM before changing the organization to
  match
 Assuming more CRM technology is better
 Stalking, not wooing ,customers
Companies that uses Database
Marketing .

								
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