INSTITUTE: University School of

Business
DEPARTMENT ..Management..
Masters of Business Administration
Subject Name: Customer Relationship Management
Code: BAB-754

Creating Customer Value and

Satisfaction DISCOVER . LEARN .
EMPOWER 1
 Customer
Relationship
Management
Course Outcome
CO Title Level
Number

Remember
To answer as to how customer relationship  
CO1 management works and the factors that Will be covered in
influence its success this lecture
Understand
To understand customer needs, fulfill customer  
CO2 requirements, resolve customer complaints and
retain customers
Understand
To understand the approaches to and
CO3 guidelines used to analyze challenges in CRM
and make strategies to resolve the same.

2
 Objectives
1. Customer Value, Customer Satisfaction,
Customer Loyalty and how do we deliver them?
2. What is the lifetime value of customers?
3. How can companies cultivate strong customer
relationships?
4. How can companies both attract and retain
customers?
5. What is database marketing?
 To Win Customers and
….Beat Competition!!!

Customer-
centered

X Traditional
 To Win Customers and
….Beat
Competition!!!
Satisfaction

Value Loyalty
Customers’ Perceived Value
Customers are value maximizers
Delivered
Total Benefits Total Costs Value
Money

Product

Time

Service

Effort

Personnel

Psychological

Image
 Steps in Customer Value
Analysis

Identify features & benefits Assess company’s

customers value Assess qualitative importance and competitors’
of attributes & benefits performance on different
values against rated
performance

Examine ratings of specific segments Monitor customer values over tme

 Delivering High Customer
Value

Value Proposition Value Delivery System

 Total Customer Satisfaction

Perceived Buyer’s
Performance Expectation Satisfaction

_ =
Total Customer Satisfaction
Satisfaction is Related to Loyalty
Total Customer Satisfaction
Influence of Customer Satisfaction
Total Customer Satisfaction
Monitoring Customer Satisfaction

Periodic Surveys
Customer Loss Rate

Mystery Shopper
Competitors’ Performance
 Total Customer Satisfaction
Satisfaction Will Also Depend on Quality
 What is Quality?

• Totality of features and characteristics of products or services that

satisfy stated or implied needs

Product or Service Expectations

Meets or exceeds

= or >
 Customer Lifetime Value
Art of attracting and keeping profitable customers
 Maximizing Customer Lifetime Value

Customer Profitability

Customer Equity Lifetime Value

Customer Classification Matrix
 Customer Classification Matrix
• This categorization shows there are several different ways companies
can serve profitable customers.
• Most valuable customers are in the passive category, generating high
revenue at little costs. These are the most profitable customers, which
company should pay special attention to.
• Some customers generating high revenue, could at the same time be
expensive (carriage trade quadrant) – these may be profitable, if
revenue exceeds the costs to serve.
• There could be customers who are easy to serve, but also bring little
profits (bargain basement quadrant).
• Finally, the last quadrant (aggressive) is listing customers generating
high costs and bringing low revenue.
• By performing CPA, companies could assign their customer to above
quadrants and apply different strategies towards each of the quadrants.
• For example:
• Aggressive - company could renegotiate with these customers their
delivery terms / pricing / scope of services (to increase revenue), or
reconsider internal processes to decrease costs of serving to those
customers. Finally, a company could request an increased price for
their services, ultimately losing unprofitable customers.
• Bargain basement - company could focus on increasing revenue for
these customers, starting with conducting research whether these
customers are expecting different services, their price sensitivity, etc.
• Passive - since passive customers generate most profit the company,
company should consider investing their capital into better serving
these customers, increasing their satisfaction and loyalty.
• Carriage trade - company should focus on reducing the cost to
serve, investigating cost factors and looking for ways to streamline
internal processes.
Customer Profitability and Strategic Alignment
 Maximizing Customer Lifetime Value
Customer Profitability Analysis

C1 C2 C3
Highly
P1 + + + profitable
product

Profitable
P2 + product

Unprofitable
P3 - - product

Highly
P4 - unprofitable
product

High-profit Mixed-bag Losing

customer customer customer
 Maximizing Customer Lifetime Value
Customer Profitability Analysis

Customer Portfolios
• acquaintances
Activity-Based Costing
• friends
• partners
 Maximizing Customer Lifetime Value
Measuring Customer Lifetime Value
Yea Yea Yea Yea Yea Yea Yea Yea
r r r r r r r r
0 1 2 3 4 5 6 7

Number of Customers

Revenue per Customer

Variable Cost per Customer

Margin per Customer

Acquisition Cost per Customer

Total Cost or Profit

Present Value
Cultivating Customer Relationships
 Customer Relationship Management
Key to retaining customers is relationship marketing

2. Differentiate customers in terms of:

1. Identify prospects and customers a. Their needs
b. Their value to your company

3. Interact with individual customers to 4. Customize products, services

improve knowledge about needs and and messages to each customer
build stronger relationships
Customer Relationship Management
Increasing Value of Customer Base

1. Reduce customer defection

2. Increase longevity of relationship

3.Enhance growth potential

of each customer

4. Make low-profit
customers profitable
or weed out

5. Focus on high-value customers

 Customer Relationship Management
Focuses on attracting and keeping right customers,
and satisfying their needs
Customer Relationship Management
Attracting and Retaining Customers

Reducing Defections Retention Dynamics

 Partners

Advocates

Members

Clients

Repeat Inactive or
Customer Ex-Customers

1st-Time
Customer

Prospects

Disqualified
Potentials Prospects
 Customer Relationship Management
Building Customer Loyalty

Interacting with Customers Creating Loyalty Programs

Personalizing Marketing Creating Institutional Ties

Customer Database and Database Management

Customer Database

Data Warehousing

Data Mining
 Customer Database and Database Management

Choose which customers

Identify prospects receive a particular offer Deepen loyalty

Reactivate customer purchases Avoid mistakes

Creating Customer Value,
Satisfaction and Loyalty
 Objective:
How is this created?

• Through customer value

• Steps in customer value analysis?
• Through customer satisfaction
• The CRM Framework?
• Through customer loyalty
• Customer retention: using database
 Customer Value

• What customer gets from a product & what he

has to give to attain it
 Steps:
Customer Value Analysis
• Know major attributes & benefits
• Assess importance
• Assess performances
• Examine ratings
• Monitor customer values
 Customer Satisfaction

Measured

by number of repeat and happy customers

 CRM Framework

• Identify customers
• Differentiate customers
• Interact
• Customize for each customer
 Customer Loyalty

Measure of success
of supplier in retaining

a long term
relationship with customer
 Customer Retention

• Use Database

-Identify/attract prospects
-Target offers
-Deepen loyalty
-Reactivate customers
-Avoid mistakes
 References:
1.Brealey, R. (1983). Risk and return on common stocks. Cambridge, MA: MIT Press. Brennan, R.,
Canning, L., & McDowell, R. (2010).
2.Business-to-business marketing (2nd ed.). London: Sage Publications. Capon, N., & Glazer, R.
(1987).
3.Marketing and technology” a strategic alignment. Journal of Marketing, 51(July), 1–14. Cui, A. S.
(2013).
4.Portfolio dynamics and alliance termination: The contingent role of resource dissimilarity. Journal
of Marketing, 77, 15–32. Day, G. (1977).
5.Diagnosing the product portfolio. Journal of Marketing, 41(April), 29–38. De Reyck, B., Grushka-
Cockayne, Y., Lockett, M., Calderini, S. R., Moura, M., & Sloper, A. (2005).
6.The impact of project portfolio management on information technology projects. International
Journal of Project Management, 23(7), 524–537. Fournier, S., & Avery, J. (2011).
7.Putting the relationship back into CRM. Sloan Management Review, 52(3), 63–72. Frei, Frances X.
(2008, April 1–14).
8.The four things a services business must get right. Harvard Business Review (Prod. #: R0804D-
PDF-ENG). Friend, S. B., & Johnson, J. S. (2014).
9.Key account relationships: An exploratory inquiry of customer-based evaluations. Industrial
Marketing Management, 43, 642–658. Gabas-Varini, E. (2003).
10.Project portfolio management: Get more value from IT investments. Whitepaper, available at
http://projectmanagement.ittoolbox.com/documents/ document.asp?i=897
THANK YOU

For queries you can reach me on

Email: bhupinder.chahal@cumail.in