CONNECTING

WITH
CUSTOMER
TABLE
TABLE OF
OF CONTENT
CONTENT
CUSTOMER VALUE, SATISFACTION
1 AND LOYALTY

2 LIFETIME VALUE CUSTOMER

ATTRACT AND RETAIN

3 CUSTOMER

4 DATA BASE MARKETING

CUSTOMER VALUE,
SATISFACTION AND
LOYALTY
CUSTOMER VALUE
It is the customer's perception of
the worth of your product or
service.
CUSTOMER
VALUE ANALYSIS

1.Identify the major attributes and benefits that customers

value. Customers are asked what attributes, benefits, and
performance levels they look for in choosing a product and
vendors.

2. Assess the quantitative importance of the different attributes

and benefits. Customers are asked to rate the importance of
different attributes and benefits.
3. Assess the company's and the competitors’ performance on the
different customer values against the rated importance. Customers
describe where they see the company’s and competitors’ performances
on each attribute and benefit.

4. Examine how customers in a specific segment rate a company’s

performance against a specific major competitor on an individual
attribute or benefit basis. If the company's offer exceeds the competitor's
offer on all important attributes and benefits, the company can charge a
higher price or charge the same price and gain more market share.
5.Monitor customer values over time. The
company must periodically redo its studies of
customer values and competitors’ standing as
the economy, technology, and product
features change.
SATISFACTION
In general, satisfaction is a person’s
feelings of pleasure or disappointment that
result from comparing a product or
service's perceived performance (or
outcome) to expectations.
MONITORING SATISFACTION

Many companies are systematically

measuring how well they treat customers,
identifying the factors that shape
satisfaction, in changing operations and
marketing as a result.
Influence of customer satisfaction

Product and Service Quality

Impact of quality
LOYALTY
It has been defined as “a deeply held
commitment to rebuy or re-patronize a
preferred product or service in the future
despite situational influences and marketing
efforts having the potential to cause
switching behavior”.
LIFETIME CUSTOMER
VALUE
Customer lifetime value (CLV) is a
business metric that measures how
much a business can plan to earn
from the average customer over
the course of the relationship
 THE IMPORTANCE OF LIFETIME CUSTOMER VALUE

By understanding the different parts of your CLV, you can

test different strategies to find out what works best with
your customers. Thanks to its simplicity, CLV can be an
important financial metric for small businesses. Thus,
Customer lifetime value represents the total earnings from a
customer over the duration of their relationship with the
business
 CUSTOMER PROFITABILITY
ANALYSIS

A useful type of profitability analysis is shown in Figure 5.3. Each

cell contains a symbol representing the profitability of selling that
product to that customer. Customer profitability analysis (CPA) is
best conducted with the tools of an accounting technique called
activity-based costing (ABC). ABC accounting tries to identify the
real costs associated with serving each the costs of products and
services based on the resources they consume.
 4 Steps to Measure Customer Lifetime
Value

1.Determine Your Average Order Value

2.Calculate the Average Number of

Transactions Per Period

3.Measure Your Customer Retention

 Customer Lifetime Value Formula
CLV = Average Transaction Size x Number of Transactions x Retention Period

FOR EXAMPLE (Coffee shop)

A coffee shop is a perfect starting example for CLV, as it is easy to understand even if
you don’t have an extensive business background. Let’s say a local coffee chain with
three locations has an average sale of $4. The typical customer is a local worker who
visits two times per week, 50 weeks per year, over an average of five years.

CLV = $4 (average sale) x 100 (annual visits) x 5 (years) = $2,000

CUSTOMER PROFITABILITY
ANALYSIS
· A useful type of profitability analysis is shown in Figure
5.3. Each cell contains a symbol representing the
profitability of selling that product to that customer.
Customer profitability analysis (CPA) is best conducted
with the tools of an accounting technique called activity-
based costing (ABC). ABC accounting tries to identify the
real costs associated with serving each customer the
costs of products and services based on the resources
they consume.
 ATTRACTING AND
RETAINING CUSTOMERS
Companies seeking to expand profits and
sales must invest time and resources
searching for new customers. To generate
leads, they advertise in media that will reach
new prospects, send direct mail and e-mails
to possible new prospects, send their
salespeople to participate in trade shows
where they might find new leads, purchase
names from list brokers, and so on.
 REDUCING DEFECTION

It is not enough to attract new customers;

the company must also keep them and
increase their business. Too many
companies suffer from high customer churn
or defection. Adding customers here is like
adding water to a leaking bucket.
 TO REDUCE THE DEFECTION
RATE, THE COMPANY MUST:

Define and measure its retention rate.

Distinguish the causes of customer attrition and identify those

that can be managed better.

Compare the lost customer’s lifetime value to the costs of

reducing the defection rate.
 RETENTION DYNAMICS
The marketing funnel tracks the percentage of the target
market at each stage of the decision process, from
awareness to loyalty. Advancing through each stage is
necessary for a customer to become loyal. Some
marketers even include loyal customers who become
brand advocates or partners in the funnel.
 MANAGING THE
CUSTOMER BASE
Customer profitability analysis and the marketing funnel help
marketers decide how to manage groups of customers that
vary in loyalty, profitability, risk, and other factors. A key
driver of shareholder value is the aggregate value of the
customer base.
 Winning companies improve that value by
excelling at strategies like the following:

Reducing the rate of customer defection.

Increasing the longevity of the customer relationship.

Enhancing the growth potential of each customer through “share of wallet,”

cross-selling, and up-selling.

Making low-profit customers more profitable or terminating them.

Focusing disproportionate effort on high-profit customers.

BUILDING LOYALTY
Companies that want to form strong, tight
connections to customers should heed some
specific considerations One set of
researchers sees retention-building activities
as adding financial benefits, social benefits,
or structural ties.
INTERACT CLOSELY WITH
CUSTOMERS

Connecting customers, clients,

patients, and others directly with
company employees is highly
motivating and informative.
DEVELOP LOYALTY PROGRAMS
FREQUENCY PROGRAMS (FPS)

are designed to reward customers who

buy frequently and in substantial
amounts. They can help build long-term
loyalty with high CLV customers,
creating cross-selling opportunities in
the process.
CREATE INSTITUTIONAL TIES

The company may supply business customers

with special equipment or computer links that
help them manage orders, payroll, and inventory.
Customers are less inclined to switch to another
supplier when it means high capital costs, high
search costs, or the loss of loyal-customer
discounts.
 BRAND COMMUNITIES

A brand community is a specialized

community of consumers and employees
whose identification and activities focus
around the brand.
 WIN-BACKS

Regardless of how hard companies may

try, some customers inevitably become
inactive or drop out. The challenge is to
reactivate them through win-back
strategies.
DATA BASE
MARKETING
Database marketing is a marketing strategy that involves
the collection, analysis, and use of customer data to tailor
marketing efforts and communication to individual
customers or specific customer segments. The primary
goal of database marketing is to build and maintain long-
term, profitable relationships with customers by delivering
highly targeted and personalized marketing messages and
offers.
 Here are some key aspects of database marketing:

Data Collection: Database marketing begins with the collection of

customer data. This data can include demographic information,
purchase history, website behavior, email interactions, and more.
This information is typically stored in a customer relationship
management (CRM) system or a marketing database.

Data Analysis: Once data is collected, it's important to analyze and

segment the customer base. Segmentation involves dividing customers
into groups based on common characteristics or behaviors. This helps in
identifying specific target audiences for marketing campaigns.
Personalization: Database marketing enables marketers to create highly
personalized marketing messages and offers. By understanding individual customer
preferences and behaviors, businesses can send tailored content, product
recommendations, and promotions that are more likely to resonate with each
customer.

Customer Relationship Management (CRM): CRM systems play a crucial role in

database marketing. They help in managing customer interactions, tracking
customer touchpoints, and storing customer data in an organized manner. This
information is then used to enhance customer engagement and retention.

Targeted Campaigns: Database marketing allows businesses to create targeted

marketing campaigns. These campaigns can be delivered through various channels,
including email marketing, direct mail, social media, and online advertising. The goal
is to reach the right customers with the right message at the right time.
Measurement and Analysis: Database marketing campaigns should be
tracked and analyzed to assess their effectiveness. Marketers can measure
key performance indicators (KPIs) such as conversion rates, customer
retention, and return on investment (ROI) to evaluate the success of their
efforts.

Compliance and Privacy: It's crucial for businesses to handle customer data
responsibly and comply with data privacy regulations, such as the General
Data Protection Regulation (GDPR) and the California Consumer Privacy Act
(CCPA). This involves obtaining consent for data collection and ensuring data
security.

Continuous Improvement: Database marketing is an iterative process.

Marketers should continuously collect and update customer data, refine
segmentation strategies, and adjust marketing campaigns based on insights
and feedback.
THANK YOU