Chapter 3

Building Customer
Satisfaction, Value,
and Retention
PowerPoint by Karen E. James
Louisiana State University - Shreveport
2003 Prentice Hall, Inc.

To accompany A Framework for Slide 1 of 18

Objectives
Understand how companies
deliver customer value and
satisfaction.
Identify the factors that make a
high performance business.
Understand how companies
attract and retain customers.
2003 Prentice Hall, Inc.

To accompany A Framework for Slide 2 of 18

Objectives
Realize how companies can
improve both customer and
company profitability.
Understand how companies can
deliver total quality.

2003 Prentice Hall, Inc.

To accompany A Framework for Slide 3 of 18

Customer Value
Customers seek to maximize value by
estimating which offer (product/firm)
delivers the most value (CPV)
forming an expectation of value and acting
upon it (purchase)
evaluating their usage experience against
the expectations

Satisfaction results when expectations

are equaled or surpassed
2003 Prentice Hall, Inc.

To accompany A Framework for Slide 4 of 18

Customer Perceived Value

Perception of delivered value is a
function of:
Total customer costs
Total customer value

Firms at a disadvantage must:

Reduce perceptions of costs or
enhance perceptions of value
2003 Prentice Hall, Inc.

To accompany A Framework for Slide 5 of 18

Customer Satisfaction
Satisfaction is defined as . . .
a persons feelings of pleasure or
disappointment resulting from
comparing a products perceived
performance (or outcome) in
relation to his or her
expectations.
2003 Prentice Hall, Inc.

To accompany A Framework for Slide 6 of 18

Customer Satisfaction
To maximize satisfaction . . .
Dont exaggerate the product /
services capabilities in advertising
or other communications
Dissatisfaction

will result
FTC may become involved

Dont set expectations too low

Market
2003 Prentice Hall, Inc.

size will be limited

To accompany A Framework for Slide 7 of 18

High Performance
Businesses
Keys to Success
Stakeholders
Processes
Resources
Organization
2003 Prentice Hall, Inc.

Identify several
stakeholder
groups for your
University
How might the
needs of these
groups conflict
with each other?

To accompany A Framework for Slide 8 of 18

High Performance
Businesses
Keys to Success
Stakeholders
Processes
Resources
Organization
2003 Prentice Hall, Inc.

New product
development
Customer attraction
and retention
Order fulfillment
Reengineering work
flows
Building cross
functional teams

To accompany A Framework for Slide 9 of 18

High Performance
Businesses
Keys to Success
Stakeholders
Processes
Resources
Organization
2003 Prentice Hall, Inc.

Resources include
labor, materials,
machines, energy,
and information
Outsourcing vs.
ownership: Own
and nurture core
competencies

To accompany A Framework for

Slide 10 of

High Performance
Businesses
Keys to Success
Stakeholders
Processes
Resources
Organization
2003 Prentice Hall, Inc.

Organization refers
to the organizations
policies, structures,
and corporate culture
Corporate culture:
shared experiences,
stories, beliefs, and
norms within an
organization

To accompany A Framework for

Slide 11 of

Core Business Practices

Market Sensing
Customer Acquisition
Customer Relationship
Management
Fulfillment Management
New Offering Realization
2003 Prentice Hall, Inc.

To accompany A Framework for

Slide 12 of

Customer Retention
Reducing customer churn (defection)
is highly desirable
Define and measure retention rate
Identify causes of attrition
Estimate profit lost from customer
defection (customer lifetime value)
Estimate cost to reduce defection; take
appropriate action
2003 Prentice Hall, Inc.

To accompany A Framework for

Slide 13 of

Drivers of Customer Equity

Brand Equity
Relationship Equity
Value Equity

2003 Prentice Hall, Inc.

To accompany A Framework for

Slide 14 of

Strong Customer Bonds

Keys to Success
Adding Financial
Benefits

Frequency
programs
Club
memberships

Adding Social
Benefits
Adding Structural
Ties
2003 Prentice Hall, Inc.

To accompany A Framework for

Slide 15 of

Strong Customer Bonds

Keys to Success
Adding Financial
Benefits
Adding Social
Benefits
Adding Structural
Ties
2003 Prentice Hall, Inc.

Personalize
customer
relationships

To accompany A Framework for

Slide 16 of

Strong Customer Bonds

Keys to Success
Adding Financial
Benefits
Adding Social
Benefits
Adding Structural
Tie
2003 Prentice Hall, Inc.

Create long-term
contracts
Charge less for
ongoing
purchases
Link product to
long-term service

To accompany A Framework for

Slide 17 of

20 80 30 Rule

20 20% of your customers

80 Generate 80% of your profit
3 Half of your profit is lost
serving the bottom 30%
0 of your customer base
2003 Prentice Hall, Inc.

To accompany A Framework for

Slide 18 of