Chapter Questions What are customer value, satisfaction and Topic 4 loyalty, and how can companies deliver Creating Customer Value What is the lifetime value of customers? Satisfaction and Loyalty How can companies both attract and retain customers? Traditional Organization Chart Complaint Escalation Pyramid NUMBERS Middle management One in five comp Middle Management le management Front-line people 25% of these c Frontline service Providers CUSTOMERS
1 Creating Customer Value, Satisfaction and Loyalty Topic 4 2 Chapter Questions • What are customer value, satisfaction, and loyalty, and how can companies deliver them? • What is the lifetime value of customers? • How can companies both attract and retain customers? 3 Traditional Organization Chart 44 Complaint Escalation Pyramid Complaint Escalation Pyramid Vice President Middle Management Frontline Service Providers One in two of these still dissatisfied complain 25% of complainants still dissatisfied One in five complain 25% of these customers still dissatisfied 40% Complain 100% of dissatisfied customers 1 Complaint 2 customers dissatisfied at middle management level 10 who complain to middle management 50 customers who remain dissatisfied after frontline effort 200 who complain To frontline 500 who are dissatisfied THE COMPLAINT PROCESS STATED IN PERCETAGES THE PYRAMID DESCRIBED IN NUMBERS
Customer-oriented Organization Chart Customer Perceived Value CUSTOMERS Total Customer Value Front-line people Total Customer Cost Middle managemer The Value Proposition Customer Satisfaction Custome Satisfaction The value proposition is the cluster of benefits the company promises to deliver Total perceived Exqeuallity"o Pe Needs a wants H
5 Customer-oriented Organization Chart 6 Customer Perceived Value Total Customer Value Total Customer Cost PV= 7 The Value Proposition • The value proposition is the cluster of benefits the company promises to deliver Expected Quality Expected Quality •Communication •Sales •Perceptions •Word of mouth •Past experience •Needs & wants •Communication •Sales •Perceptions •Word of mouth •Past experience •Needs & wants Customer Satisfaction Perceived quality of Competitors Perception Perception Result: What Result: What Process: How Process: How Customer Satisfaction Customer Satisfaction Total perceived Quality Experienced Quality Experienced Quality
The Customer Satisfaction-Loyalty Dissatisfied Customers'Repurchase Intentions under Various Conditions Relationship How Many of Your Unhappy Customers Will Buy Zone of Affection NoncoaplainantsF gs 口 Major Complaints 口 Minor Complaint Zone of indifference Complaints No Zone of Defection Complaints 64 Terrorist nor dissaia Satisfied VerA Percent of customers who will buy from you again The satisfaction Mirror CS and Employee satisfaction Customer Employee CRM ERM Customer Satisfaction. Employee Satisfaction Stronger Rab Customer Retention Employee Retention Customer Lifetime Employee Lifetime Key Customers Key Employees Treat customers like employees and employees like customers
9 The Customer Satisfaction-Loyalty Relationship 0 20 40 60 80 100 1 2 34 5 Loyalty (Retention) Very dissatisfied Dissatisfied Neither satisfied nor dissatisfied Satisfied Very Satisfied Satisfaction Near Apostle Zone of Defection Zone of Indifference Zone of Affection Terrorist Apostle Dissatisfied Customers’ Repurchase Intentions under Various Conditions Dissatisfied Customers’ Repurchase Intentions under Various Conditions How Many of Your Unhappy Customers Will Buy from You Again? 70% 46% 37% 82% 54% 19% 9% 95% Complaints Resolved Quickly Complaints Resolved Complaints Not Resolved Noncomplainants Percent of customers who will buy from you again Major Complaints Minor Complaints The Satisfaction “Mirror” The Satisfaction “Mirror” More Familiarity with Customer Needs and Ways of Meeting Them Greater Opportunity for Recovery from Errors Higher Employee Satisfaction Higher Productivity Improved Quality of Service More Repeat Purchases Stronger Tendency to Complain about Service Errors Higher Customer Satisfaction Lower Costs Better Results Customer Customer Employee 12 CS and Employee Satisfaction CRM • Customer Satisfaction • Customer Retention • Customer Lifetime Value • Key Customers ERM • Employee Satisfaction • Employee Retention • Employee Lifetime Value • Key Employees Treat customers like employees and employees like customers
Total Customer Satisfaction(TCS) Total Customer Expectation CS TCS Analyzing Exceed customer Survey firm's offe Solution expectation for the ke analysis Gap Model Measuring Satisfaction Periodic Surveys Service Customer Loss Rate COMPANY Service Delivery mmunications Customer-Driven o Customers Mystery Shoppers Service designs and Monitor competitive Company Perceptions Consumer Expectations Source: Valarie 4. Zeithaml& Mary Jo Bitmer (2005)
13 TCS TCS Max. customer delivered value Max. customer delivered value CS Survey CS Survey Solution for the key problems Solution for the key problems Improve the degree of CS Improve the degree of CS Total Customer Satisfaction (TCS) 14 Exceed customer expectation Exceed customer expectation Customer expectation analysis Customer expectation analysis Analyzing firm’s offer Analyzing firm’s offer Gap analysis Gap analysis Solution Solution Total Customer Expectation 15 Gap Model External Communications to Customers Service Delivery CUSTOMER COMPANY Expected Service Customer-Driven Service Designs and Standards Perceived Service Company Perceptions of Consumer Expectations Source: Valarie A. Zeithaml & Mary Jo Bitner (2005) 16 Measuring Satisfaction Periodic Surveys Periodic Surveys Customer Loss Rate Customer Loss Rate Mystery Shoppers Mystery Shoppers Monitor competitive performance Monitor competitive performance
Loyalty Four Stages of Brand Loyalty in Consumer Cognitive loyalty ception from brand attribute information that one brand is preferable to its alternatives A commitment to re-buy Affective loyalt developing a liking for the brand based on cumulatively satisfying usage occasions or re-patronize a product or service in the future commitment to repurchase the same brand Action loyalty Customer Loyalty Drives Profitability Customer Retention and growth Acquisition of customers can cost 5 times more 100% than retaining current customers The average company loses 10%of its customers each year A 5% reduction to the customer defection rate 三40% 40%35% can increase profits by 25% to 85% The customer profit rate increases over the life of a retained customer
17 Loyalty A commitment to re-buy or re-patronize a product or service in the future. 18 Four Stages of Brand Loyalty in a Consumer • Cognitive loyalty – perception from brand attribute information that one brand is preferable to its alternatives • Affective loyalty – developing a liking for the brand based on cumulatively satisfying usage occasions • Conative loyalty – commitment to repurchase the same brand • Action loyalty – consistent repurchase behavior 19 Customer Loyalty Drives Profitability and Growth A 5% increase in customer loyalty can produce profit increases from 25% to 85%. 25% 85% 75% 25% 50% 45% 45% 40% 35% 0% 20% 40% 60% 80% 100% Auto service chain Branch bank deposits Credit card Credit insurance Insurance brokege Industrial distribution Industrial laundry Office bldg. Management Percent Increase in Customer Value Software 20 Customer Retention • Acquisition of customers can cost 5 times more than retaining current customers. • The average company loses 10% of its customers each year. • A 5% reduction to the customer defection rate can increase profits by 25% to 85%. • The customer profit rate increases over the life of a retained customer