In-SIDE group

Presented by :

Lee Soon Yau GM04241

Lee Yoke Chin GM04240
M.Dzul Azzwan GM04174
Marzieh Khodavandloo GM04103
Meor Shahiful Annuar B. Mior GM04116
Chapter 5
Creating Customer Value, Satisfaction,
and Loyalty

Marketing Management 13th edition

by Philip Kotler & Kevin Lane Keller
Learning Objectives
After studying this chapter, you should able to:
1.Define the customer value, satisfaction, and loyalty,
and explain how can companies deliver them
2.Define the lifetime value of customers
3.Explain how can companies cultivate strong
customer relationships
4.Explain how can companies both attract and retain
customers
5.Define the database marketing
Traditional Versus Modern Customer
Oriented Company Organization
Building Customer Value, Satisfaction, and
Loyalty
Customer perceived value
• difference between total customer benefit and
total customer cost
Building Customer Value, Satisfaction, and
Loyalty (Cont’d)
Customer perceived value
• is the difference between the prospective
customer’s evaluation of all the benefits and all
the costs of an offering and the perceived
alternatives.
Building Customer Value, Satisfaction, and
Loyalty (Cont’d)
Total customer benefit
• is the perceived monetary value of the bundle of
economic, functional, and psychological
benefits.
Total customer cost
• is the perceived bundle of costs customers in
evaluating, obtaining, using, and disposing of the
given market offering.
Determinants of
Customer Perceived Value

Total customer benefit Total customer cost

Product benefit Monetary cost

Services benefit Time cost

Personal benefit Energy cost

Image benefit Psychological cost

Customer Value Analysis Process
① Identify major attributes and benefits that
customers value
② Assess the qualitative importance of different
attributes and benefits
③ Assess the company’s and competitor’s
performances on the different customer values
against rated importance
④ Examine ratings of specific segments
⑤ Monitor customer values over time
Total Customer Satisfaction
Satisfaction
• person’s feeling of pleasure or disappointment that
result from comparing a product’s perceived
performance to their expectation.
 Total Customer Satisfaction (cont’d)
Expectation
• past buying experience, friends, and associates' and
marketers, competitors’ information and promises.
• Customer Satisfied :
Performance = Expectation
• Customer Dissatisfied :
Expectation > Performance
Measuring Satisfaction
• Customer retention is customer satisfaction.

• Numerous methods exist to measure satisfaction:

1.Periodic surveys
2.Monitor the customer loss rate and find out why
3.Mystery shoppers
4.It is important to ask the right questions and it is
also important to monitor the customer
satisfaction of competitors.
Choices and implications
• The buyer may be under orders to buy at the
lowest price
• The buyer will retire before the company realises
that the product is more expensive to run
• The buyer enjoys a long-term friendship with
one of the sales people
Product and Service Quality
•  Satisfaction also depends on
1.product
2.service quality

• Quality = the totality of features and

characteristics of a product or service that bear
on its ability to satisfy stated or implied needs.
Product and Service Quality(Cont’d)
• A company that satisfies most of its customers’
needs most of the time is called a quality
company.
• Conformance quality = all the units deliver their
respective promised quality
• Total quality is the key to value creation and
customer satisfaction.
Delivering High Customer Value
Loyalty
• deeply held commitment to re-buy or re-
patronize a preferred product or service in the
future
Value proposition
• the benefits that company promise to deliver.
Customer Profitability
Profitable customer
• person, household, or company
that over time yields a revenue
stream exceeds cost stream for
attracting, selling, and servicing
that customer.
• maximizing long term customer
profitability
Customer profitability analysis
• is best conducted with the tools of an accounting
technique called activity based costing.
• There are only 2 solutions to handling
unprofitable customers:
1.raise fees or
2.reduce service support.
• unprofitable customers who defect should not
concern the company.
Competitive advantage
• a company’s ability to perform in one or more
ways that competitors cannot or will not match.
• Few competitive advantages are sustainable.
• A leverage able advantage is one that a company
can use as a springboard to new advantages.
• Any competitive advantage must be seen by
customers as a customer advantage.
Maximizing Customer Lifetime Value
Customer lifetime value (CLV)
• net present value of the stream of future profits
expected over the customer’s lifetime purchases
• Emphasis on customer service and long-term
customer satisfaction rather than on maximizing
short-term sales
Customer Equity
• Is the total of the discounted lifetime values of
all the firm’s customers. Clearly the more loyal
the customers, the higher the customer equity.
3 drivers support customer equity
Value equity
• the customer’s objective assessment of the utility of
an offering based on perceptions of its benefits
relative to its costs.
Brand equity
• the customer’s subjective and intangible assessment
of the brand, above and beyond its objectively
perceived value. The sub-drivers of brand equity
are:
3 drivers support customer equity (Cont’d)
• Relationship equity
• the customer’s tendency to stick with the brand,
above and beyond objective and subjective
assessments of its worth.
Cultivating Customer Relationships
Customer Relationship
Management (CRM)
• managing customer detailed
information to maximize customer
loyalty.

Customer touch point

• everytime your customer come into
contact with, or touch your brand
and anything and everything
associated with it.
One-to-One Marketing
• customer relationship management strategy
emphasizing personalized interactions with
customers
• Try to make a unique product offering for each
customer
• Eg: Customer detail form
Eg: Customer detail form
Steps of One-to-One Marketing
① Identify prospects and customers
② Differentiate customers by needs and value to
company
③ Interact to improve knowledge
④ Customize for each customer
1.Identify prospects and customers
• Build, maintain, and mine a rich customer
database with information derived from all the
channel and customer touch points
2.Differentiate customers by needs and
value to company
• Apply activity-based costing and calculate
customer lifetime value
• Estimate net present all the future profits
coming from purchase, margin levels, and
referrals, less customer specific servicing costs.
3.Interact to improve knowledge
• Interact with customer
• Improve knowledge about customer latest
information
• Formulate customized offerings that you can
communicate in a personalized way.
4.Customize for each customer
• Customize products, services, and message to
each customer.
• Facilitate customer-company interaction
through the company contact center and website
CRM Strategies
• Reduce the rate of customer defection
• Increase relationship with customer
• Enhance the growth potential of customer
• Making low profit customer more profitable
• Focus more effort on high-profit customers
Reduce the rate of customer defection
• Selecting and training employees to be
knowledgeable and friendly increases the
likelihood that the inevitable shopping questions
from customers.
Increase relationship with customer
• Treat customers as partners
• Soliciting their help in the design of new
products or improving customer services
Enhance the growth potential of
customer
• Increasing sales from existing customers with
new offerings and opportunity
Making low profit customer more
profitable
• Encourage unprofitable customer buy more or in
large quantity, forgo certain features or services,
or pay higher amounts or fees
Focus more effort on high-profit
customers
• The most valuable customer can be treated in
special way
• Send a strong positive signal to your customers
• Thoughtful gesture : birthday greeting, small
gift, invitation for special sports and so on
Process of Attracting and Retaining
Customers
Potentials
Suspects

Disqualified
Prospects
Prospects

First-time Repeat
customers customers Clients Members

Advocates
Ex-customers
Partners
Process of Attracting and Retaining
Customers (Cont’d)
• Potentials = people who might have an interest
in buying the company’s product or service but
may not have real intention to do so.
• Prospects = people with the motivation, ability
and opportunity to make a purchase
• First time customer = customer first-time buy
company’s products and services
Process of Attracting and Retaining
Customers (Cont’d)
• Repeat customer = customer come back with the
products and services again
• Clients = customers want special treatment and
knowledge from products and services
• Members = customers become member for
particular company
Process of Attracting and Retaining
Customers (Cont’d)
• Advocates = customers intend to recommend
others to buy and use products and services once
customer satisfied
• Partners = customers being trusted by company,
successfully retain customers
Improve loyalty and retention
Interacting with customers
• Listening to customers
• Understanding customer’s point of view
• Give suggestions and solution to customer
Developing loyalty programs
• Provide rewards to customers
Personalizing Marketing
• Serve as clients
Database Key Concepts
• Customer database
• Database marketing
• Mailing list
• Business database
• Data warehouse
• Data mining
Database Key Concepts
• Customer database • Collection of
• Database marketing comprehensive
• Mailing list information about
• Business database individual customers
• or prospects
Data warehouse
• Data mining
Database Key Concepts
• Customer database • Process of building,
• Database marketing maintaining, and
• Mailing list using customer
• Business database databases and other
• databases to contact,
Data warehouse
transaction and build
• Data mining
customer
relationship.
Database Key Concepts
• Customer database • a set of names,
• Database marketing address, and
• Mailing list telephone numbers.
• Business database
• Data warehouse
• Data mining
Database Key Concepts
• Customer database • Contain business
• Database marketing customers’ past
• Mailing list purchase, past
• Business database volumes, prices, and
• profits, buyer team
Data warehouse
member names
• Data mining
Database Key Concepts
• Customer database • Capture, query, and
• Database marketing analyze it to draw
• Mailing list inferences about an
• Business database individual customer’s
• needs and responses.
Data warehouse
• Data mining
Database Key Concepts
• Customer database • Extract useful
• Database marketing information about
• Mailing list individuals, trends,
• Business database and segment from
• mass of data.
Data warehouse
• Data mining
Databases can be used in five ways
• To identify prospects
• To decide which customers should receive a
particular offer
• To deepen customer loyalty
• To reactivate customer purchases
• To avoid serious customer mistakes
Chapter 6
Analyzing
Consumer Markets

Marketing Management 13th edition

by Philip Kotler & Kevin Lane Keller
Learning Objectives
After studying this chapter, you should able to:
• Explain how consumer characteristics will
influence buying behavior
• List the major psychological processes influence
consumer responses to the marketing program
• List the buying decision process
• Explain how marketers analyze consumer
decision making
What Influences Consumer Behavior?

Cultural
Cultural Factors
Factors

Social
Social Factors
Factors

Personal
Personal Factors
Factors
Cultural Factor
• Culture
-is the fundamental determinant of a person’s wants and behaviors acquired
through socialization processes with family and other key institutions.

• Subculture
-provide more specific identification and socialization for their member.
-including religions, nationalities, racial group and geographic region.
 Fast Facts About
American Culture
• The average American:
▫ chews 300 sticks of gum a year
▫ goes to the movies 9 times a year
▫ takes 4 trips per year
▫ attends a sporting event 7 times each year
Social Classes
• Upper uppers
• Lower uppers
• Upper middles
• Middle
• Working
• Upper lowers
• Lower lowers
Characteristics of Social Classes
• Within a class, people tend to behave alike
• Social class conveys perceptions of inferior or
superior position
• Class may be indicated by a cluster of variables
(occupation, income, wealth)
• Class designation is mobile over time
Social Factor
• Reference groups
• Family
• Social roles
• Statuses
Reference groups
• Membership groups
• Primary groups- person interacts fairly continuously
and informally,
 e.g. family, friends, neighbors
• Secondary groups- person interacts more formally
and require less continuously ,
e.g.religious, professional
Reference groups
• Aspirational groups
group are those a person hopes to join

• Dissociative groups
 groups are those whose values or behavior an
individual reject
Family

• is the most influential primary reference group

• family of orientation- consists of parents and
siblings
• family of procreation- consists of one’s spouse
and children
• that can be direct or indirect influence describes
children’s hints, requests and demand
Roles and status
• define a person’s position
• e.g. vice president position is higher than a
manager or clerk
• people choose products that reflect and
communicate their role and actual or desired
status in society
Personal Factors
Age
Self- Life cycle
concept stage

Lifestyle Occupation

Values Wealth
Personality
Personal Factors
• Age
-our taste in food, clothes, furniture is often
related to our age

• Stage in The Life Cycle

-cycle of the life can be marriage, childbirth,
illness, relocation, divorce, career change,
widowhood, as giving rise to new needs
Personal Factors
• Occupation and Wealth
-influences consumption patterns
-e.g. Office lady will buy work clothes, high heel,
or lunchboxes
-economic circumstances influence product
choices like spendable income, debts, attitudes
toward spending and saving
Brand Personality
• Sincerity (honest, down-to-earth, cheerful)
• Excitement (up to date, imaginative, daring)
• Competence (reliable, successful, intelligent)
• Sophistication (charming and upper class)
• Ruggedness (outdoorsy and tough)
Lifestyle Influences
• Multi-tasking
consumer will doing two or more
things at the same time
• Time constrained
 consumer prefer convenient product like fast
food service
• Money constrained
consumer more prefer to lower-cost
products or service
Table 6.2 LOHAS (Lifestyles of Health
and Sustainability) Market Segments

• Sustainable Economy
• Healthy Lifestyles
• Ecological Lifestyles
• Alternative Health Care
• Personal Development
Model of Consumer Behavior
Key Psychological Processes
• Motivation
• Perception
• Learning
• Memory
Motivation
• Freud’s Theory
• Maslow’s Theory
• Herzberg’s Theory
Freud’s Theory

• behavior is guided by subconscious motivations

• person cant fully understand his or her own
motivations
• e.g. less conscious to shape, size, material, color
and brand name
Maslow’s Theory

• behavior is driven by lowest, unmet need

Physiological needs
Safety needs
Social needs
Esteem needs
Self-actualization needs
Maslow’s Hierarchy of Needs
Herzberg’s Theory

• two factor theory that distinguishes dissatisfies

from satisfiers
▫ dissatisfiers
 factors that cause dissatifation
▫ satisfiers
factors that cause satisfaction
• absence of dissatisfiers is not enough; satisfiers
must be present to motivate a purchase.
Herzberg’s Theory
2 implications:
• 1) Sellers should do their best to avoid
dissatisfiers.

• 2) Sellers should identify the major satisfiers or

motivators of purchase in the market and supply
them. These satisfiers will make the major
difference as to which brand the customer buys.
Herzberg’s Two-Factor Theory
Perception
• Selective Attention
• Selective Distortion
• Selective Retention
• Subliminal Perception
Selective Attention
• Voluntary attention is something purposeful
• Some finding:-
People are more likely to notice stimuli that relate
to a current need
People are more likely to notice stimuli they
anticipate
People are more likely to notice stimuli whose
deviations are large in relationship to the normal
size of the stimuli
Perception cont’

Selective Attention
Selective Distortion
-is the tendency to interpret information in a way
that fits our preconceptions
-often distort information to be consistent with
prior brand and product belief and expectations
Selective Retention
• to retain information that supports our attitudes
and beliefs
• Likely remember good point about a favor brand
Subliminal Perception
• is a selective perception
• subliminal refer to information that is perceived
below level of conscious awareness
Perception cont’

Perception cont’

Subliminal Perception
Learning

• Change in behavior arising from experience

• Through drives, stimuli, cues, responses, and
reinforcement
Memory

• Is an organism’s ability to store, retain, and

recall information and experiences
I.Short term memory (a tempory and limited
repository of information)
II.Long term memory ( a more permanent,
essentially unlimited repository)
Buying Decision Process
Stage 1: Problem Recognition
• Recognizes a problem or need triggered by:-
i. Internal stimuli
a normal need
e.g. hunger, thirst

i. External stimuli
a stimulus that comes from outside an organism
Stage 2: Information Search
• Consumer often search for limited amounts of
information

• Two level of involvement with search

Heightened attention
Active information search
Sources of Information
• Personal
family, friends, neighbors, acquaintances
• Commercial
advertising, Web sites, salesperson, displays
• Public
mass media
• Experiential
handling, examining, using the product
Stage 3: Evaluation of Alternatives
• measure products’ ability to solve problems
• some basic concept:-
1. Consumer is trying to satisfy a need
2. Consumer is looking for certain benefits from
the product solution
3. Consumer sees each product as bundle of
attributes with varying abilities for delivering
the benefits sough to satisfy this need
Beliefs and Attitudes
belief
descriptive thought that a person holds about
something
attitudes
a person’s enduring favorable or unfavorable
evaluations, emotional feelings, and action
tendencies toward some object or idea
Expectancy-Value Model
• a model of attitude formation posits that
consumers evaluate products and services
by combining their brand beliefs
Table 6.4 A Consumer’s Evaluation
of Brand Beliefs About Laptops
Stage 4: Purchase Decision
• Consumer forms preferences among the brand
in the choice set
Noncompensatory Model of Consumer Choice
Intervening Factors
Noncompensatory Model of
Consumer Choice
• Conjunctive
Sets a minimum acceptable cutoff level for each
attribute and chooses
E.g. If Linda decided all attributes had to rate at
least a 5, she would choose product B
• Lexicographic
Choose the best brand on the basis of its perceived
most important attribute
Noncompensatory Model of
Consumer Choice
• Elimination-by-aspects
Compares brands on an attribute selected
probabilistically
Eliminates brands that do not meet minimum
acceptable cutoffs
Intervening Factors
• Two general factors can intervene between the
purchase intention and the purchase decision
I.Attitudes of other
II.Unanticipated situational factors
Perceived Risk
• Functional
• Physical
• Financial
• Social
• Psychological
• Time
Stage 5 : Postpurchase Behavior
• involves all the consumers' activities and the
experiences that follow the purchase
1. delight (performance > expectations)
2. satisfaction (performance = expectations)
3. dissatisfaction (performance < expectations)
Other Theories of
Consumer Decision Making
Involvement
• Elaboration Likelihood Model
central route
-much thought and rational consideration
peripheral route
- thought and result of brand association
- e.g. celebrity endorsement
Low-involvement marketing
strategies
• Many products are bought under conditions of
low involvement and the absence of significant
brand differences
▫ E.g salt
Variety-seeking buying behavior

• Low involvement but significant brand

differences
• Consumers often do a lot of brand switching
▫ E.g cookies
Other Theories of
Consumer Decision Making, cont’
Decision Heuristics
• Availability
base their predictions on the quickness and ease
with which a particular example of an outcome
comes to mind
Other Theories of
Consumer Decision Making, cont’
• Representativeness
base their predictions on how representativeness
or similar the outcome is to other examples
• Anchoring and adjustment
initial judgment then adjust it based on additional
information
Other Theories of
Consumer Decision Making, cont’
• Mental Accounting
-refers to the way consumers code, categorize and
evaluate financial outcomes of choices
Mental accounting is based on a set of key
core principles:-
▫ Segregate gains
- each dimension evaluated separately
▫ Integrate losses
- to view additional expenditure favorably
▫ Integrate smaller losses with larger gains
-more likely to be absorbed by the larger pay amount
▫ Segregate small gains from large losses
-the popularity of rebates on big-ticket purchases
Profiling the customer Buying-
Decision Process