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Assignment: Marketing Management
Assignment on: Creating Customer Value and customer Relationships
Submitted to: Ma’am Maria Kanwal
Names Roll no.
Umar Farooq 1504
Hammad Ahmad 1626
Muhammad Amir 1558
University of Education Lahore,
Chapter 4Chapter 4
Creating Customer Value and Customer
Building Customer Value and Satisfaction
Customer perceived value (CPV)—the
difference between the prospective
customer’s evaluation of all the benefits and
all the costs of an offering and the perceived
The Marketer can increase the value of the
customer offering by raising economical,
functional or emotional benefits or reducing
one or more costs.
Figure 5.2 Determinants of Customer Perceived
Image benefit Psychological cost
Personal benefit Energy cost
Services benefit Time cost
Product benefit Monetary cost
Total customer benefit Total customer cost
Steps in a Customer Value Analysis
Identify major attributes and benefits that
Assess the qualitative importance of
different attributes and benefits
Assess the company’s and competitor’s
performances on the different customer
values against rated importance
Examine ratings of specific segments
Monitor customer values over time
Delivering High Customer Value
Loyalty- A deeply held commitment to re-
buy or re-patronize a preferred product or
service in the future despite situational
influences and marketing efforts having the
potential to cause switching behavior.
Value Delivery System- The set of core
business processes that help deliver
distinctive consumer value.
The Value Proposition
The whole cluster of
Total Customer Satisfaction
A person’s feelings of pleasure or
disappointment that result from comparing a
product’s perceived performance (or
outcome) to expectations.
If the performance falls short of expectation,
the customer is dissatisfied. If it matches,
the customer is satisfied and if it exceeds,
the customer is delighted.
Product and Service Quality
Quality (or grade) is the totality of features
and characteristics of a product or service
that bear on its ability to satisfy stated or
Maximizing Customer Lifetime Value
A profitable customer is one that over time
yields a revenue stream that exceeds by an
acceptable amount the company’s cost
stream for attracting, selling, and servicing
Marketers can assess customer profitability
individually by marketing segment or by
Customer Profitability Analysis (CPA)
Best conducted with an accounting technique
called Activity-Based Costing (ABC).
Estimate all revenue coming from the
customer, less all costs that go into serving
Companies that fail to measure their cost
correctly, are also not measuring their profit
correctly and are likely to misallocate their
Measuring Customer Lifetime Value
Describes the net present value of the stream
of future profits expected over the customer’s
The company must subtract from its expected
revenues the expected cost of attracting,
selling and servicing the account of that
customer and applying the appropriate
discount rate (say, between 10-20 percent).
Cultivating Customer Relationships
Customer relationship management
(CRM) is the process of carefully managing
detailed information about individual
customers and all customer “touch points” to
maximize customer loyalty.
Touch point—any occasion on which a customer
encounters the brand and product.
1. Identify your prospects and customers.
2. Differentiate customers in terms of their
needs and their value to your company.
3. Interact with individual customers.
4. Customize products, services, and
messages to each customer.
Reduce the rate of defectionReduce the rate of defection
Increase longevityIncrease longevity
Enhance “share of wallet”Enhance “share of wallet”
Focus more effort on
Focus more effort on
Acquisition of customers can cost five times
more than retaining current customers.
The average customer loses 10% of its
customers each year.
A 5% reduction to the customer defection rate
can increase profits by 25% to 85%.
The customer profit rate increases over the life
of a retained customer.
Interact with customers
Develop loyalty programs
Club membership programs
Create institutional ties
Customer Database and Database
Customer database—an organized
collection of comprehensive information
about individual customers or prospects that
is current, accessible, and actionable for
Database marketing—the process of
building, maintaining, and using customer
databases and other databases to make
contact, facilitate transactions, and build
Data Warehouse and Datamining
Data warehouse—organized data where
marketers can capture, query, and analyze it
to draw inferences about an individual
customer’s needs and responses.
Data mining—statisticians extract useful
information about individuals, trends, and
segments from the mass of data.
Using the Database
To identify prospectsTo identify prospects
To target offersTo target offers
To deepen loyaltyTo deepen loyalty
To reactivate customersTo reactivate customers
To avoid mistakesTo avoid mistakes
Downside of Database Marketing and
Difficulty in getting everyone to be customer
Not all customers want an ongoing
Assumptions behind CRM may not always