BUILDING CUSTOMR SATISFACTION.

Transcription

1 CHAPTER- 2. BUILDING CUSTOMR SATISFACTION. For long term sustainability, business entities need to build customer satisfaction. Customer satisfaction involves - Customer creation. - Customer maintenance/ Retention. Customer Creation: Q: How can a business entity create customer? Q: How do today s customers make their choices from product available? Possibly, buyers buy from that business entity they perceive offers the highest customer delivered value. CUSTOMER DELIVERED VALUE: CDV is the difference between Total Customer Value and Total Customer Cost. Total Customer Value is the bundle of benefit customers expect from a product/ service. Total Customer Cost is the bundle of cost customer expect to incur in evaluating/ obtaining of using product or services. Eg.- Two Wheeler. Choice - Hero Honda Splendor / Kawasaki Bajaj Boxer. Customer value is made up of: - Product Value - Preference - Durability - Reliability - Service Value - Delivery - Maintenance - Personal Value - Knowledge - Handling - Image Value - customers perception of corporate image. Customers costs are made up of - Monitory cost. - Time cost. - Energy cost. - Psychic/ psychological costs. CDV = TCV / TCC - 1 -

2 Deviation from CDV could be due to, - Policy of buying lowest price products. - Long term benefits not appreciated. - Other reason (Personal Friendship). Long term benefit is not appreciated always. When it comes to cost, people goes for lower one without realizing that they may now profit for a longer period. Eg.- Philips CFL of 18 watts (135/=) Chinese CFL of 18 watts (35/=) Customer Satisfaction: Person s feelings of pleasure/ disappointment due to a comparison of a product perceived performance with his/ her expectations. Eg.- Satisfaction = Fn (Perceived Performance, Expectations). High satisfaction happens when perceived performance exceeds expectations. Buyer s expectations influenced by Past performance - Friend s/ associated advice - Competitor information/ Promise - Marketer s information/ Promise Successful companies raise expectations & deliver performances. i.e., Aim for total customer satisfaction. Q: How to deliver/ produce customer value & satisfaction? A: Use concept of Value Chain. VALUE CHAIN: - Proposed by Michael Porter. - Tool to create higher customer value. - Identifies main activities that creates (value + cost) in a business. Five Primary Activities: Four Secondary Activities: - Inbound Logistics. - Procurement. - Operations. - Technology Development. - Outbound Logistics. - HR- Management. - Marketing/ Sales. - Firm Infrastructure. - After Sales Service

3 Task of Business Entity is to examine costs & performance in each value creating activity & try to improve it. Success depends on - Performance of each unit. - Co-ordination. Core business process involving cross functional inputs or co- operation needs to be managed smoothly. Specifically, - New product realization process. - Inventory management process. - Order- to- remittance process - Customer service process Customer Retention: Market oriented strategic planning. Customer can be retained through - Setting high switching barrier. - Delivering high customer satisfaction (better approach). Achieved through Relationship Marketing. Relationship Marketing: Customer development cycle/ process. Starting point Suspects/ Anyone who may possibly buy product/ service. Prospect: People who have strong potential interest in product & ability to pay for it. Disqualified Prospect: Company rejects due to poor credit/ unprofitibality. Client: Buy only from company when they buy. Advocate: Customer who praise company & encourages others to buy. Partner: Customer & company work together actively to promote company. Developing loyal customer increases company revenues. However, company needs to spend more to built customer loyalty

4 SUSPECTS PROSPECTS DISQUALIFIED PROSPECTS 1 ST TIME CUSTOMER REPEAT CUSTOMER INACTIVE OR EX- CUCTOMER CLIENTS ADVOCATES PARTNERS Q: How much should a company invest in customer relationship building? A: Returns/ Profits from customer loyalty should b more than investment in customer relationship building. Based on above, five levels of company investment in CRB emerges. 1. Basic Marketing: - Sales person simply sales product. 2. Reactive Marketing: - Sales persons sales product. - Encourage customer to call if he/ she has any complaint/ question/ Comment. 3. Accountable Marketing: - Phone customer once after sales to check whether product is meeting expectations. - Also ask for suggestions to product/ service. 4. Proactive Marketing: - Company contacts customers from time to time with suggestions about improved products uses / new products. 5. Partnership Marketing: - Company & Customers work together to discover ways to increase customer savings/ performance. Marketing tools to develop stronger customer bonding/ satisfaction could be - Adding financial benefits. - Adding social benefits. - Adding structural benefits. Adding Financial benefits: Types could be Frequency Marketing Programs. - Club Marketing Programs. Frequency Marketing Program is designed to provide rewards to customers who buys frequently and or in substantial amount

5 Club Marketing Program is affinity group created for increasing bonding. Club membership offered on purchase of product or on payment of some additional fee. Typically, first company to introduce FMP/CMP gets maximum benefit (especially if competitor is slow to respond) After some time, when all companies offer FMP/CMP, these may become financial burdens. Adding Social Benefits: Company personnel work on increasing social bonds with customers by individualizing/ personalizing their customer relationship. Effort is to convert customer to client. Eg.- ITC on notebooks donating some money, personalized cheque book. Adding Structural Benefits: Supply customers with special equipment/ services to help them manage their work. Eg.- computer hardware supplier may offer basic computer training. Ultimately, Marketing has been the act of attracting & retaining profitable customer. Profitable Customer: Person/ Household/ Company that over time yields revenue that exceeds by an acceptable amount the company s cost of attracting/ selling/ servicing hat customer