1. CUSTOMER VALUE AND SATISFACTION

2. Company’s first task is to –
Create customers and not to create products.
--- Peter F Drucker.

3. --- Peter F Drucker.

4. Customers think before they buy---
----- Which product will give them
more value.
-----They are value maximisers
for less cost.

5. What is Customer Value?
VALUE
Quality Price

6. CUSTOMER VALUE ( CUSTOMER PERCIEVED
VALUE)
 It means the customers’ evaluation of the
difference between all the benefits and all
the costs of the product.

7.  If
Product A costs- Rs. 100 Benefits- 500 units
and
Product B costs- Rs. 150 Benefits- 750 units
The customer’s perceived value is
more in the case of Product B

8. Total Customer Value =
Customer Benefits(Economic+ Functional+psychological)
Minus
Customer Costs (cost of evaluation+cost of obtaining+cost of
using+cost of disposing)

9. Customer Benefits
“It is the bundle of benefits customer expect from a given
product or service”
Total Customer benefits is the summation of:
-Product Value
-Services Value
-Personnel Value
-Image Value

10. Customer Costs
“It is the bundle of costs customers expect to incur in
evaluating, obtaining, and using the product or service”
Total Customer Cost is the summation of:
-Monetary Cost
-Time Cost
-Energy Cost
-Psychic Cost

11. Value Calculus
Perceived product
or service
attributes
Perceived
substitute product
or service
attributes Perceived benefits
Value =
Perceived price
Perceived product
or service price
Perceived
substitute product
or service price

12. Customer Value Results From
Consequence Trade-Offs
Perceived
Benefits
Perceived
Value
Perceived
Money Sacrifices Psychological
Stress
Time
Risk
Mental
Effort

13. Steps in a Customer Value Analysis
•Identify major attributes and benefits that
customers value
•Assess the qualitative importance of
different attributes and benefits
•Assess the company’s and competitor’s
performances on the different customer
values against rated importance
•Examine ratings of specific segments
•Monitor customer values over time

14. The Dimensions of Customer Value
•Conformance to requirements.
•Product selection.
•Price and brand.
•Value-added services.
•Relationships and experiences.

15. Why Superior Customer Value?
Designing and delivering
superior customer value
propels
organizations to market
leadership positions
in highly competitive
global markets

16. The Importance of
Superior Customer Value
Continuous creation of
business experiences to
exceed customer
expectations

17. Companies Practicing CV
Focus on 9 Key Criteria
•Innovation
•Social Responsibility
•Quality Management
•Quality of Products and Services
•Long-term Investment Value
•Financial Soundness
•Effective/Efficient use of Corporate
Resources
•Employees’ Skills/Abilities
•The Constant Creation/Addition of
Value

18. Value-Driven Marketing Strategies Assist in 10 Areas
•Understanding customer choices
•Identifying customer segments
•Increasing their competitive options
•Avoiding price wars
•Improving services quality
•Strengthening communications
•Focusing on what is meaningful to
customers
•Building customer loyalty
•Improving brand success
•Developing strong customer brand
success and relationships

19. Customers Seek…..
•fair prices
•acceptable/good value
•valued business transactions/relationships
•Innovativeness
•image status
•value-added services
•convenience in goods and outlets

20. The Value-Creating Organization
• Organizations (along with individual employees)
should be seen as value-creating entities
• Value-creating organizations solve individual
customer problems
• A strong competitive edge can be gained by
consistently providing superior customer value
• In order to create and deliver superior customer
value organizations must be strong in both purpose
and process.

21. Value Creation Index
Innovation
Quality
Customer Relations
Management Capabilities
Alliances
Technology
Brand Value
Employee Relations
Environmental & Community Issues

22. When customer value?

23. Stage One Stage Two Stage Three Stage Four
Minimum Customer Customer Competitive Focus on
Requirements Focus Attitudes Targeted Markets
Customer
Value
Customer • Meeting critical
Loyalty needs of targeted
Customer customers
Satisfaction • Retaining our
Conformance Quality customers • Outperforming
• Providing what competitors
customers want • Getting them to
• Creating new,
• Delivering what we recommend us
• Responding to unique benefits
promise
customer complaints 21st Century
• Meeting standards
Growth
Company
Source: Adapted from Managing Customer Value by Bradley T. Gale, (New York, The Free Press, 1994)

24. Benefits of Customer Value
•Delighted Customers
•Benchmarking against the
competitors.
•Identifying the right things.
•Teamwork by committed employees.
•Enhanced Market Share
•Gaining Competitive Edge
•Enables Competitive Strategic
planning.

25. SUMMARY
• Creating customer value is the driving force behind
a company’s goals
• Customer access to information about the
availability of products and the status of orders and
deliveries is becoming an essential capability.
• Adding services, relationships, and experiences
differentiates company offerings in the market
• Identifying the appropriate customer value measure
not an easy task.
• Ability to provide sophisticated customer
interactions very different from the ability to
manufacture and distribute products.
• No real customer value without a close relationship
with customers.

26. Customer Equity
The total of all
customer values of
all the customers of a
company is known as
customer equity.

27. Customer Lifetime Value (CLV)
The profit generated
by the customer’s
purchase of an
organization’s
product or service
over the customer’s
lifetime.

28. Customer Lifetime Value (CLV)
The amount by which
revenues from a
given customer over
time will exceed the
company’s cost of
attracting, selling to,
and servicing that
customer.

29. EXAMPLE
Estimated customer Revenue p.a.= Rs. 20 000
Estimated no. of loyal years of the customer= 25
Total estimated revenue from the
customer= Rs.500 000
The profit margin= 20%
The CLV= 5 00 000 X 20%= Rs. 100 000

30. Customer Satisfaction
The match between customer expectations of the
product and the product’s actual performance.

31. Customer Satisfaction
• “It is a person’s feelings of pleasure or
disappointment resulting from comparing a
product’s perceived performance in relation to his or
her expectations”

32. Customers evaluate experiences as:
 Dis-satisfaction -
 Satisfaction 0
 High satisfaction +
Such assessments impact future purchase decisions and ongoing
relationships with organizations

33. Customer Satisfaction
Expectations are Based on Customer’s Past
Buying Experiences, the Opinions of Friends, &
Marketer and Competitor Information and Product Exceeds
Promises. Expectations
Customer is
Highly Satisfied
or
Product Falls Product Matches Delighted!
Short of Expectations
Expectations Customer is
Customer is Satisfied
Dissatisfied

34. Customer Satisfaction
 To maximize satisfaction . . .
 Don’t exaggerate the product / service’s
capabilities in advertising or other
communications
 Dissatisfaction will result
 Don’t set expectations too low
 Market size will be limited

35.  Identifyseveral
Keys to Success stakeholder groups
for your business
 Stakeholders
 How might the
 Processes
needs of these
 Resources
groups conflict with
 Organization each other?

36. Keys to Success
 Stakeholders
 New product
development
 Processes  Customer attraction
 Resources  Better Service
 Organization

37. Keys to Success  Resources include
labor, materials,
 Stakeholders machines, energy,
 Processes and information
 Outsourcing vs.
 Resources
 Organization
ownership: Own
and nurture core
competencies

38. Keys to Success
 Stakeholders  Organization refers to
 Processes the organization’s
policies, structures,
 Resources and corporate culture
 Organization

39. MEASURING CUSTOMER SATISFACTION
 Getting the feedback right
 Drawing the right conclusions on customer loyalty
from feedback (satisfaction does not mean loyalty)
 Building customer satisfaction index.

40. The Effects of Customer dissatisfaction
 Customers stop purchasing from the company
 Company loses the relationship with the customer
 Dissatisfied customers spread it to 9 to 10 some
other customers
 They lose further 9 to 10 customers
 90% of the customers leave without giving the
reasons.

41. Customer Retention
Customer Retention is the activity that a selling
organization undertake in order to reduce
customer defections. Successful customer
retention starts with the first contact an
organisation has with a customer and continues
throughout the entire lifetime of a relationship.

42. WHY CUSTOMER RETENTION IS
IMPORTANT?
Good customer retention is vital to any
organization because a slight reduction (5%) in
the customer defection rate has a
disproportionately positive effect on profitability.
Companies with high retention also grow faster.
However, customers can only be retained if they
are loyal and motivated to resist competition .

43. DETERMINANTS :
There are six determinants of customer
retention:
1. Customer expectations versus the delivered
quality of the product or service
2. Value
3. Product uniqueness and suitability
4. Loyalty mechanisms
5. Ease of purchase
6. Customer service

44. 8Cs of Customer Retention:
1. Communication
2. Convenience
3. Choices
4. Consistency
5. Confidence
6. Care
7. Control
8. Commitment.

45. Customer Retention
 Acquisition of customers can cost 5 times more
than retaining current customers.
 On an 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.

46. Customer Retention
 Reducing customer defection is highly
desirable
 Define and measure retention rate
 Identify causes of leaving
 Estimate profit lost from customer defection
(customer lifetime value)
 Estimate cost to reduce defection; take
appropriate action

47. Customer Retention
 Highly satisfied (delighted) customers produce
benefits:
 They are less price sensitive,
 They remain as customers longer,
 They talk favorably about the company and products to
others.
 Tremendous difference between the loyalty of satisfied
customers and completely satisfied customers.
 Delighted customers have emotional and rational
preferences for products, and this creates high
customer loyalty.
47

48. 20 – 80 – 30 Rule
20 20% of your customers
80 Generate 80% of your profit
3 Half of your profit is lost
serving the bottom 30%
0 of your customer base

49. COMPETITIVE ADVANTAGE
Competitive Advantage
 Anadvantage
over competitors
gained by offering consumers
greater
value than
competitors offer.

50. Definition
Competitive Analysis
 The process of identifying key
competitors; assessing their
objectives, strategies, strengths and
weaknesses, and reaction patterns;
and selecting which competitors to
attack or avoid.

51. Competitive Advantage
A company has a C A when its profitability is
greater than the average profitability of all
companies in the industry
 It has a sustained C A when it is able to
maintain above-average profitability over a
number of years

52. Building Blocks of Competitive
Advantage
 Efficiency-input:output
 Quality-excellence,reliability
 Innovation-product,
process
 Customer responsiveness-customization,
customer response time

53. Steps in Analyzing
Competitors

54. Competitor Analysis
Steps in the  Firms face a wide
Process: range of competition
 Methods of identifying
Identifying competitors:
Competitors  Industry point-of-view
Assessing  Market point-of-view
Competitors
Selecting
Competitors to
Attack or Avoid

55. 230-year-old
Encyclopedia
Britannica
viewed itself as
competing with
other publishers
of printed
encyclopedias.
Big mistake! Its
real competitors
were software
encyclopedias
and the Internet.

56. Competitor Analysis
Steps in the  Determining competitors’
objectives
Process:  Identifying competitors’
strategies
Identifying
Competitors
 Assessing competitors’
strengths and weaknesses
Assessing  Estimating competitors’
Competitors reactions
Selecting
Competitors to
Attack or Avoid

57. Competitor Analysis
Steps in the
Process:
 Strong or weak
Identifying competitors
Competitors  Close or distant
Assessing competitors
Competitors  “Good” or “Bad”
competitors
Selecting
Competitors to
Attack or Avoid

58. Competitive Strategies
 Basic Winning Competitive
Strategies: Porter
 Overall cost leadership
 Lowest production and
distribution costs
 Differentiation
 Creating a highly
differentiated product line
and marketing program
 Focus
 Effort is focused on serving
a few market segments

59. Competitive Strategies
 Basic Competitive Strategies:
 Operational excellence
 Superior value via price and convenience
 Customer intimacy
 Superior value by means of building strong
relationships with buyers and satisfying
needs
 Product leadership
 Superior value via product innovation

60. Competitive Marketing
Strategies
Firms Competing in a Given Target Market Differ in their Objectives and
Resources so May Choose the Following Forms:
60

61. Competitive Marketing
Strategies
Firm With the Largest Market
Firm With the Largest Market Runner-Up Firms that Fight
Runner-Up Firms that Fight
Share
Share to Increase Market Share
to Increase Market Share
Expand the
Expand the Protecting
Protecting Attack the Avoid the
Attack the Avoid the
Total Market
Total Market Market Share
Market Share Market Leader Market Leader
Market Leader Market Leader
Expanding
Expanding Attack Other Acquire Smaller
Attack Other Acquire Smaller
Market Share
Market Share Firms Firms
Firms Firms 61

62. Competitive Marketing
Strategies
Runner-Up Firms that Want
Runner-Up Firms that Want Firms that Serve Small Segments
Firms that Serve Small Segments
to Hold Their Share Without
to Hold Their Share Without Not Pursued by Other Firms
Not Pursued by Other Firms
Rocking the Boat
Rocking the Boat
End-User
End-User Customer-Size
Customer-Size
Specialist
Specialist Specialist
Specialist
Follow
Follow Follow at a
Follow at a
Closely
Closely Distance
Distance
Geographic
Geographic Quality-
Quality- Service
Service
Market
Market Price
Price Specialist
Specialist
Specialist
Specialist Specialist
Specialist 62

63. Competitive Strategy
 Expanding the total
Competitive demand
Positions  Finding new users
 Discovering and promoting
new product uses
Market Leader  Encouraging greater product
usage
Market  Protecting market share
Challenger  Continuous innovation
 Expanding market share
Market  Profitability rises with market
Follower share
Market Nicher

64. Competitive Strategy
Competitive  Option 1: challenge the
market leader
Positions  High-risk but high-gain
 Sustainable competitive
Market Leader advantage over the leader is
key to success
Market
 Option 2: challenge firms
Challenger of the same size, smaller
Market size or challenge regional
Follower or local firms
Market Nicher

65. Competitive Strategy
Competitive  Follow the market
Positions leader
 Focus is on improving
Market Leader profit instead of market
share
Market  Many advantages:
Challenger  Learn from the market
Market leader’s experience
Follower  Copy or improve on the
leader’s offerings
Market Nicher

66. Competitive Strategy
Competitive
 Serving market niches
means targeting
Positions subsegments
 Good strategy for
Market Leader small firms with limited
Market resources
 Offers high margins
Challenger
 Specialization is key
Market  By market, customer,
Follower product, or marketing
mix lines
Market Nicher

67. Balancing Customer and
Competitor Orientations
 Companies can become so competitor
centered, then they
lose their customer focus.
 Types of companies:
 Competitor-centered companies
 Customer-centered companies

68. Balancing Customer and
Competitor Orientations
Customer-Centered
No Yes
No Product Orientation Customer Orientation
Competition
Product Orientation Customer Orientation
-centered
Yes Competitor Orientation Market Orientation
Competitor Orientation Market Orientation

69. Total Quality Marketing
 Japan was the first country to award a national
quality prize, the Deming prize.
 Mid-1980’s, the U.S. established the Malcolm
Baldridge National Quality Award.
 Europe has developed the ISO 9000 which is
an exacting set of quality standards.
 Total quality has become a truly global
concern.

70. Total Quality Marketing
 Quality is the totality of features and
characteristics of a product or service that bear
on its ability to satisfy stated or implied needs.
 Marketers play a major role in helping their
companies define & deliver high quality products
and services to target customers:
 Must correctly identify the customers’ needs and
requirements and communicate this to product
designers,
 Marketing must deliver each marketing activity to high
quality standards.
70

71. Total Quality Marketing
It is different from the production-oriented Total
Quality Management (TQM) concept. Perfect
products do not sell themselves without proper
marketing effort. Unless customers "perceive"
quality, improving the product quality alone is
not enough. Market Perceived Quality is also
important.
71

72. Total Quality Marketing
The term quality means different things to
different people. It has many meanings
depending on whose perspective is used -- the
manufacturer's or the consumer's. For a
manufacturer, quality means the most effective
way of producing a product -- saving time and
money. For a consumer, it means that the
product is "the best value" that money could buy.
72

73. Requirements for TQMk
73

74. Total commitment to quality from top
management.
Customer-orientation of the organization.
Organization wise involvement.
Team effort. Decision making by cross
functional process teams.
74

75. New technology, such as digitalization,
computerization, etc.
Information communication technology
is used for marketing purposes.
Use of improved quality material and
other inputs.
Flexible production process and
methods.
Use of statistical quality control tools
for measurement of quality. 75

76. IMPLEMENTING TOTAL QUALITY
MARKETING:
They must communicate customer expectations correctly to
product designers.
They must make sure that the customers’ orders are filled
correctly and on time.
They must check that customers have received proper
instructions, training, and technical assistance.
They must stay in touch with customers after the sale to
ensure that they are satisfied and remain satisfied.
They are making their specific contributions to total quality
management and customer satisfaction.
76

77. ALL THE BEST
77