Customer Satisfaction, Loyalty and

Customer Relationship Management

Prof. Aparna Kanchan 1

Learning Objectives

 Basic Marketing Concepts

 Understanding customer satisfaction and its
measurement
 Having insights on customer loyalty, importance
and benefits
 Insights on how to build loyal customers
 Understanding customer databases, customer
relationship management and strategies

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Kotler on Marketing

It is no longer
enough to
satisfy
customers. You
must delight
them.

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The Marketing Concept
• Holds that achieving organizational goals depends on determining the
needs and wants of target markets and delivering the desired
satisfactions more effectively and efficiently than competitors do.
• Customer focus and value are paths to sales and profits
• The marketing and selling concepts are often confused. The primary
differences are:

• The selling concept takes an “inside-out” perspective (focuses on

existing products and uses heavy promotion and selling efforts).

• The marketing concept takes an “outside-in” perspective (focuses on

customer needs, values, and satisfaction).

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Customer Satisfaction and Loyalty - the Backbone of
Company’s Sales Process

Find customers Win customers Keep customers

Finding Winning Keeping

Its all about finding, winning and keeping customers…

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Customer Satisfaction and its Measurement

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Core Marketing Concept
Need
Market Want
Demand

Profitable
Customer
Relationship Products
Transaction & Services
Relationship Ideas

Value &
Satisfaction

Building and maintaining profitable customer relationships by delivering superior

customer value and satisfaction
- Philip Kotler 7
Customer-Orientations

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Customer Satisfaction

What is
customer
satisfaction? • Customer satisfaction (CSAT) is
a measure of how well a
company’s products and services
meet customers’ expectations.

• It reflects your business’ health

by showing how well your
products are resonating with
buyers.

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 What is Customer Satisfaction?
Customer satisfaction is an overall customer attitude towards a
service provider, or an emotional reaction to the difference between
what customers anticipate and what they receive, regarding the
fulfillment of some need, goal or desire.

Satisfaction represents a veritable key of modeling the acquisition behavior of the

customer, being supported by three groups of variables:

1.Cognitive variables, based on the qualitative superiority of the products given by

the performance.

2.Affective variables, based on the emotions produced to the customers.

3.Conative variables, based on the interaction between the provider and the
customer in the buying act.

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Customer Satisfaction

Satisfaction is 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 expectations, the customer

is dissatisfied.

If it matches expectations , the customer is satisfied.

If it exceeds expectations, the customer is highly satisfied or

delighted.
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Customer satisfaction and Product/ Service Quality

Satisfaction will also depend on product and service quality

But what is Quality?

 Fitness for use
 Conformance to requirements
 Freedom from variation
 Totality of features and characteristics of a product or
service that bear on its ability to satisfy stated or
implied needs

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Customer Satisfaction Requirements

 Proper research before hand

 Proper offering
 Proper pricing
 Proper availability

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How do buyers form their expectations

 Past buying experiences

 Advice from friends and associates

 Marketer’s information and promises

 Competitors information and promises

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Total Customer Satisfaction

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Measuring Satisfaction

 Periodic surveys
 Customer loss rate
 Mystery shoppers
 Monitor competitive performance
 Customer Complaints

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The Generic Value Chain

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What is Customer Perceived Value?

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.

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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

CPV = TCB- TCC 19

Dell Re-established its Commitment to Value

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Steps in a Customer Value Analysis
• Identify major attributes and benefits that customers
value

• 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

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Establishing Value

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Customer Loyalty, its Importance and
Benefits

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 What is Loyalty?

Loyalty is 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.

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 Importance of Customer Loyalty

 More size of the wallet

 High conversion rate

 Higher profitability

 Less costly

 Higher volume and frequency

 Resource planning

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 BENEFITS OF HAVING A LOYAL CUSTOMER
 Loyal customers are not actively searching for different
suppliers.

 Loyal customers are not open to pitches from competing

companies.

 When a customer has brand loyalty, they are not easily

influenced by low price. They are willing to pay more for the
same quality product or service that they are accustomed to
and enjoy.

 Loyal customers are open to other goods or services provided

by particular business. 26
 How to build Customer Loyalty
Find customers Win customers Keep customers
1) Create a Customer Loyalty
Program
Finding Winning Keeping
2) Referral Program

3) Encourage Customer
Feedback

How to keep customers? First things first…

What to do? - What is the problem? Where is the problem?
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Types of Customer Loyalty

Behavioral Measures: Customer’s regularity and

frequency of purchases as a sign of loyalty.

Attitudinal Measures: Use of attitudinal data to indicate

the emotional and psychological connection

Composite Measures: Combination of first two

measurements.

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Attracting & Retaining Customers

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Customer Retention – Ways to reduce churn

Equip staff with better training and tools

Prompt response to customer complaints
Design processes of least resistance
Effective organization structure to address customer
complaints
Provide incentives to effective staff

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Need for Customer Retention

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Customer Relationship Management

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Customer Relationship Management
Process of carefully managing detailed information about
individual customers and all customer “touch points” to
maximise loyalty
A customer “touch point” is any occasion on which a customer
encounters the brand/ product
Actual experience
Personal and mass communication
Casual observation

Companies use information gathered

 Personalized marketing
 Permission marketing 34
 Framework for CRM

• Identify prospects and

customers
• Differentiate customers by
needs and value to company
• Interact to improve knowledge
• Customize for each customer

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CRM Dimensions

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How does CRM Help an Organization?

• Enhance the bottom-line

• Generation of leads
• Increased Referrals
• Customer Support
• Improve Product and Services

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 Attracting and Retaining Customers

• Reduce the rate of defection

• Increase longevity
• Enhance share of wallet
• Terminate low-profit customers
• Focus more effort on high-profit customers

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Loyalty Programs

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Remember…..remember……
remember…..remember…

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