ChAptEr 1 | Marketing: Creating Customer Value and Engagement 43

bottles. Mountain Dew fans responded with a flood

of tweets and other social media chatter. “We started
with discreet posts, but it didn’t take long for Dew
Nation to call us out and beg for the rumors to be
true,” says Mountain Dew’s digital brand manager.
“Some of our fans even created collages of all the im-
ages featuring Baja over the last few days to confirm
to other members of Dew Nation that Baja was com-
ing back.” Mountain Dew then created ads on social
media and men’s lifestyle websites incorporating con-
sumers’ tweets. The result: Online chatter about Baja
Blast shot up 170 percent.20
Despite the successes, however, harnessing con-
sumer-generated content can be a time-consuming
and costly process, and companies may find it dif-
ficult to mine even a little gold from all the content
submitted. Moreover, because consumers have so
much control over social media content, inviting
their input can sometimes backfire. For example,
McDonald’s famously launched a Twitter campaign
using the hashtag #McDStories, hoping that it would
inspire heartwarming stories about Happy Meals.
Instead, the effort was hijacked by Twitter users,
who turned the hashtag into a “bashtag” by posting
Consumer-generated marketing: Mountain Dew stirred up user-generated less-than-appetizing messages about their bad expe-
content to create buzz around a limited-time reintroduction of its iconic Baja riences with the fast-food chain. McDonald’s pulled
Blast drink, boosting online chatter by 170 percent.
the campaign within only two hours, but the hashtag
PepsiCo
was still churning weeks, even months later.21
As consumers become more connected and empowered, and as the boom in digital
and social media technologies continues, consumer brand engagement—whether invited
by marketers or not—will be an increasingly important marketing force. Through a pro-
fusion of consumer-generated videos, shared reviews, blogs, mobile apps, and websites,
consumers are playing a growing role in shaping their own and other consumers’ brand
experiences. Engaged consumers are now having a say in everything from product design,
usage, and packaging to brand messaging, pricing, and distribution. Brands must embrace
this new consumer empowerment and master the new digital and social media relation-
ship tools or risk being left behind.

Partner Relationship Management

When it comes to creating customer value and building strong customer relationships,
today’s marketers know that they can’t go it alone. They must work closely with a
variety of marketing partners. In addition to being good at customer relationship manage-
partner relationship management ment, marketers must also be good at partner relationship management—working
Working closely with partners in other closely with others inside and outside the company to jointly engage and bring more
company departments and outside the value to customers.
company to jointly bring greater value to Traditionally, marketers have been charged with understanding customers and rep-
customers. resenting customer needs to different company departments. However, in today’s more
connected world, every functional area in the organization can interact with customers.
The new thinking is that—no matter what your job is in a company—you must understand
marketing and be customer focused. Rather than letting each department go its own way,
firms must link all departments in the cause of creating customer value.
Marketers must also partner with suppliers, channel partners, and others outside the
company. Marketing channels consist of distributors, retailers, and others who connect the
company to its buyers. The supply chain describes a longer channel, stretching from raw
materials to components to final products that are carried to final buyers. Through supply
chain management, companies today are strengthening their connections with partners all
along the supply chain. They know that their fortunes rest on more than just how well they
perform. Success at delivering customer value rests on how well their entire supply chain
performs against competitors’ supply chains.
44 |
pArt 1 Defining Marketing and the Marketing Process

Author Look back at Figure 1.1.

Comment In the first four steps of Capturing Value from Customers
the marketing process, the company The first four steps in the marketing process outlined in Figure 1.1 involve engaging cus-
creates value for target customers and tomers and building customer relationships by creating and delivering superior customer
builds strong relationships with them. value. The final step involves capturing value in return in the form of sales, market share,
If it does that well, it can capture value
and profits. By creating superior customer value, the firm creates satisfied customers who
from customers in return, in the form of
loyal customers who buy and continue stay loyal and buy more. This, in turn, means greater long-run returns for the firm. Here,
to buy the company’s brands. we discuss the outcomes of creating customer value: customer loyalty and retention, share
of market and share of customer, and customer equity.

Creating Customer Loyalty and Retention

Good customer relationship management creates customer satisfaction. In turn, satisfied
customers remain loyal and talk favorably to others about the company and its products.
Studies show big differences in the loyalty between satisfied and dissatisfied customers.
Even slight dissatisfaction can create an enormous drop in loyalty. Thus, the aim of cus-
tomer relationship management is to create not only customer satisfaction but also cus-
tomer delight.
Customer lifetime value Keeping customers loyal makes good economic sense. Loyal customers spend more
The value of the entire stream of and stay around longer. Research also shows that it’s five times cheaper to keep an old
purchases a customer makes over a customer than acquire a new one. Conversely, customer defections can be costly. Losing a
lifetime of patronage. customer means losing more than a single sale. It means losing the entire stream of pur-
chases that the customer would make over a lifetime of patronage. For example, here is a
classic illustration of customer lifetime value:22
Stew Leonard, who operates a highly profitable four-store
supermarket in Connecticut and New York, once said that
he saw $50,000 flying out of his store every time he saw a
sulking customer. Why? Because his average customer spent
about $100 a week, shopped 50 weeks a year, and remained
in the area for about 10 years. If this customer had an un-
happy experience and switched to another supermarket, Stew
Leonard’s lost $50,000 in lifetime revenue. The loss could be
much greater if the disappointed customer shared the bad
experience with other customers and caused them to defect.
To keep customers coming back, Stew Leonard’s has cre-
ated what has been called the “Disneyland of Dairy Stores,”
complete with costumed characters, scheduled entertainment,
a petting zoo, and animatronics throughout the store. From
its humble beginnings as a small dairy store in 1969, Stew
Leonard’s has grown at an amazing pace. It’s built 30 addi-
tions onto the original store, which now serves more than
300,000 customers each week. This legion of loyal shop-
pers is largely a result of the store’s passionate approach to
customer service. “Rule #1: The customer is always right. Rule
Customer lifetime value: to keep customers coming back, Stew #2: If the customer is ever wrong, reread rule #1.”
Leonard’s has created the “Disneyland of dairy stores.” rule #1—the
customer is always right. rule #2—If the customer is ever wrong,
Stew Leonard is not alone in assessing customer lifetime
reread rule #1. value. Lexus, for example, estimates that a single satisfied
Courtesy of Stew Leonard’s and loyal customer is worth more than $600,000 in lifetime
sales, and the estimated lifetime value of a Starbucks cus-
tomer is more than $14,000.23 In fact, a company can lose money on a specific transaction but
still benefit greatly from a long-term relationship. This means that companies must aim high
in building customer relationships. Customer delight creates an emotional relationship with
a brand, not just a rational preference. And that relationship keeps customers coming back.

Growing Share of Customer

Share of customer Beyond simply retaining good customers to capture customer lifetime value, good cus-
The portion of the customer’s purchasing tomer relationship management can help marketers increase their share of customer—
that a company gets in its product the share they get of the customer’s purchasing in their product categories. Thus, banks
categories. want to increase “share of wallet.” Supermarkets and restaurants want to get more “share