May 2, 2019

Creating Customer Value, Satisfaction and Loyalty - Summary of Kotler and Keller's Chapter

2 Minute Summary of the Chapter - Important Points - Slide  Show - Video



Building Customer Value, Satisfaction and Loyalty

Creating loyal customers is at the heart of every successful business.

Managers who believe the customer is the company's only true profit center consider the person serving the customer as the most important person in the organization. The rest of only support staff to him. Some companies have been founded with the customer-on-top business world, and customer advocacy has been their strategy-and competitive advantage.

Why does a user become a loyal customer?  Why does he make the first buy from a company? Customers tend to be value maximizers or perceived value maximizers, within the bounds of search costs and limited knowledge, mobility and income. Customers evaluate various offers available to satisfy a need and estimate the perceived value of each offer. Customer-perceived value (CPV) is the difference between the prospective customer's evaluation of all the benefits and all the costs of an offering.  Total customer benefit is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering because of the products, accompanying services 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 offering, including monetary, time, energy, and psychological costs.

If customers are perceived value maximizers, firms also have to try to increase that value. The marketers can try to increase the benefit bundle but improving the product, accompanying services and improving the image related feature of the product and their organization. They can also try to reduce the cost incurred by the customers by reducing the price (by emphasizing rational cost reduction of products and services), improving their marketing communication so that customer spend less on search and evaluation and improving their sales process so that customer spend less on purchase activity.

Companies often conduct value analysis to compare their products with competitor's products to identify areas that can be taken up for improvement.

Maximizing Customer Life Time Value

The amount of goods a customer is likely to buy from the company and thereby contribute to its profits can be estimated from the past buying behavior and anticipated trends. This gives an estimate of customer life time value.Customer acquisition cost has to be less than it and also if a customer leaves the company it is a value loss and this can be also be calculated. These calculations give the idea that company have to take actions to retain customers. Relationship marketing emerged from this finding. Companies have to take actions to retain customers.

Cultivating Customer Relationships

Customer relationship management emerged as an important marketing area once relationship marketing concept was created. One aspect of CRM is maintenance and use of detailed information about individual customers and their touch points with the company.

Customer Databases and Database Marketing

A customer database is an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for marketing purposes - lead generation, lead qualification, sale of a product or service, or maintenance of customer relationships. Database marketing is the process of building, maintaining, and using customer databases and other databases to contact, transact, and build customer relationships.

Benefits of Database Marketing

1. Prospects can be identified.
2. Decisions regarding which customers should receive a particular offer can be taken.
3. Customer loyalty can be increased by sending information of particular interest to a customer.
4. Customer purchases can be reactivated by sending a timely reminder.
5. Properly maintained and used database will help in preventing some marketing mistakes or errors.

Problems in Using Databases

1. There is a significant cost involved in developing and maintaining a database.
2. Employees have to trained in using databases and taking marketing decisions.
3. Some customers may not like the database marketing initiatives.
4. The assumptions behind CRM may not always hold true.


Kotler and Keller, Marketing Management, 13 Edition

Planned Revision schedule for marketing chapters is in February and March

Updated 2018 - 27 January
  22 Feb 2015, 31 Jan 2015

1 comment:

  1. Thanks for a quick review. I will definitely not spend time evaluating their opensource product.

    Loyalty Marketing Solutions