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Creating customer Value, Satisfaction and Loyalty Chapter: 5 Customer Perceived Value “ It is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives” Total customer value is the perceived monetary value of the bundle of economic, functional and psychological benefits customer expect from a market offering ( product value+service value+personnel value+image value) Total customer cost : Monetary cost+Time cost+Energy cost+Psychic cost Total Customer Satisfaction Satisfaction is a feeling of pleasure that results from comparing product’s perceived performance with one’s expectations Actual < Expected = Dissatisfaction Actual > Expected = Delight Actual = Expected = Satisfaction Maximising customer Value • The 80 : 20 principle • The concept of profitable customer – whose revenue stream exceeds cost of servicing him • Customer profitability analysis : different tiers • Customer life time value: net present value of stream of future profits expected over the customer’s lifetime purchases Cultivating Customer Relationships • Mass customisation – ability of firm to meet requirements of each and every customer • CRM: process of managing detailed information about customers and managing “customer touch point” to ensure customer loyalty Attracting, Retaining and Growing Customers Suspects(Potentials) Prospects First time customers Repeat customers Clients Members Advocates Partners At any point customers – from first timers to partners can become inactive or excustomers Building Loyalty 1. 2. 3. 4. 5. Basic marketing: Sales men simply sells product Reactive marketing: Sales men sells product and encourages customer to call up in case of any queries Accountable marketing: Sales men rings up the customer asking for problems, suggestions and improvements Proactive marketing: Salesmen contacts customer from time to time with suggestions about improved product used or new products Partnership marketing: Company works continuously with customers to help improve their performance Forming strong customer bonds 1. Adding financial benefits – e.g. Frequent flier program 2. Adding social benefits – e.g. TTL’s customer loyalty program 3. Adding structural ties – e.g. Magazine’s subscription Customer database and Database marketing Customer database is an organised collection of comprehensive information about individual customer or prospects that is accessible and actionable for marketing purpose Database marketing is the process of building, maintaining and using customer databases and other databases for the purpose of contracting, transacting and building customer relationships Analysing Consumer Markets Chapter: 6 Cultural factors Consumer behavior is influenced by culture, subculture and social class Culture is values, rituals, beliefs that are passed from generation to generation Subculture is alternate culture that moves parallel to culture in the same or opposite direction Social stratification : SEC in India – Socioeconomic classification – on the basis of education and occupation of the chief wage earner – A1, A2,B1,B2, C,D,E1,E2 In rural areas SEC is based on occupation of the chief wage earner and the type of house – R1 to R4 Social factors Reference groups - groups with which person has direct or indirect contact which affects his behaviour Memberships groups – groups having direct influence Primary groups - continuous and informal interaction Secondary groups – Less continuous and formal interaction Aspiration group – hope to join Dissociative groups – whose values person rejects Family : blood or legal linkage Family of orientation : Parents and siblings Family of Procreation: One’s spouse and kids Personal factors • Age and stage in the life cycle • Occupation and economic circumstance • Personality and self concept - personality is set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli • Lifestyle and values Key psychological processes Motivation: • Sigmund Freud’s theory :”Psychological forces shaping people’s behaviour are largely unconscious” • Maslow’s theory: “Human needs are arranged in an hierarchy” • Herzeberg’s theory: “Dissatisfiers and Satisfiers” Perception • • • • Selective Attention Selective distortion Selective retention Subliminal perception Learning • Permanent change in individual’s behaviour that rises from experience • It is an interplay of drives, stimuli, cues, responses and reinforcement Memory • Short term – temporary repository of information • Long term memory – permanent repository of information Associative network memory model • Long term memory has a set of nodes an links • Nodes are stored information connected by links that vary in strength • Nodes becomes activated when external information is encoded or internal information is retrieved from long term memory The buying decision process : Five stage model 1. Problems Recognition – triggered by internal or external stimuli 2. Information search – sources of information personal,commercial,public,experimental 3. Evaluation of alternatives – purchase intention – affected by attitude of others and unanticipated situational factors 4. Purchase decisions 5. Post purchase behaviour – post purchase satisfaction and post purchase dissonance Purchase decisions Noncompensatory models of consumer choice – the negative aspects of a product are not off set by its positive aspects as in compensatory models Types of choice heuristics: 1. Conjunctive : consumer sets minimum acceptable cutoff for each attribute and choose the first option that meets the minimum requirements 2. Lexicographic : consumer chooses the best brand on the basis of its perceived most important attribute 3. Elimination by aspect: consumer compares brands on attribute selected probabilistically – based on attribute's importance Level of Consumer Involvement 1. Elaboration Likelihood model : Central route and peripheral route to persuasion 2. Variety seeking buying behaviour Analysing Business Markets Chapter : 7 Business market v/s Consumer market • • • • • • • • • Few and larger buyers Close supplier –customer relationships Professional purchasing Several buying influences Multiple sale calls Derived demand Fluctuating demand Geographically concentrated buyers Direct purchasing Buying situations • Straight rebuy • Modified rebuy • New task Participants in business buying process • • • • • • • Initiators Users Influencers Deciders Approvers Buyers Gatekeepers Stages of buying process 1. Problem recognition 2. General need recognition and product specification 3. Supplier search 4. E-procurement 5. Proposal solicitation 6. Supplier selection 7. Order routine specification 8. Performance review Identifying Market Segments and Targets Chapter 8 Levels of Market Segmentation • • • • Segment Marketing Niche Marketing Local Marketing Customerisation Segmenting consumer markets • • • • Geographic Segmentation Demographic Segmentation Psychographic segmentation Behavioural segmentation : Occasions, Benefits, User status,Usage rate, Buyer readiness stage, Loyalty status, Attitude Segmenting Business markets • Demographic : Industry, company size, Location • Operating variables: Technology, User or nonuser status, customer capabilities • Purchasing approaches: purchasing function, power structure, nature of existing relationships, purchase polices, purchasing criteria • Situational factors: urgency, specific application, size of order • Personal characteristics: buyer seller similarity, attitudes towards risk, loyalty Favorable market segments • • • • • Measurable Substantial Accessible Differentiable Actionable Evaluating and Selecting Market Segments • • • • • Single segment concentration Selective specialisation Product Specialisation Market Specialisation Full Market coverage