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CUSTOMER VALUE, SATISFACTION, AND LOYALTY 5 C H A P T E R LEARNING OBJECTIVES After reading this chapter, students should: Know what are customer value, satisfaction, and loyalty, and how can companies deliver them Know what is the lifetime value of customers and how marketers can maximize it. Know how companies can cultivate strong customer relationships Know how companies can both attract and retain customers Know what is database marketing CHAPTER SUMMARY Customers are value-maximizers. They form an expectation of value and act on it. Buyers will buy from the firm that they perceive to offer the highest customer-delivered value, defined as the difference between total customer benefits and total customer cost. A buyer’s satisfaction is a function of the product’s perceived performance and the buyer’s expectations. Recognizing that high satisfaction leads to high customer loyalty, many companies today are aiming for TCS—total customer satisfaction. For such companies, customer satisfaction is both a goal and a marketing tool. Losing profitable customers can dramatically affect a firm’s profits. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy. The key to retaining customers is relationship 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 key role in achieving high levels of total quality so that firms remain solvent and profitable. Marketing managers must calculate customer lifetime values of their customer base to understand their profit implications. They must also determine ways to increase the value of the customer base. Companies are also becoming skilled in Customer Relationship Management (CRM), which focuses on developing programs to attract and retain the right customers and meeting the individual needs of those valued customers. Customer relationship 185
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Chapter-by-Chapter Instructional Material management often requires building a customer database and doing datamining to detect trends, segments, and individual needs. DETAILED CHAPTER OUTLINE 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. 1. BUILDING CUSTOMER VALUE, SATISFACTION, AND LOYALTY Managers who believe the customer is the company’s only true “profit center” consider the traditional organizational chart obsolete. Successful marketing companies invert the chart.
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