Page 170 - Marketing Management

CREATING LONG-TERM LOYALTY RELATIONSHIPS | CHAPTER 5 147

Summary

1. Customers are value maximizers. They form an expec- stated or implied needs. Marketers play a key role in
tation of value and act on it. Buyers will buy from the achieving high levels of total quality so that firms remain
firm that they perceive to offer the highest customer- solvent and profitable.
delivered value, defined as the difference between total 5. Marketing managers must calculate customer lifetime
customer benefits and total customer cost. values of their customer base to understand their profit
2. A buyer’s satisfaction is a function of the product’s per- implications. They must also determine ways to in-
ceived performance and the buyer’s expectations. crease the value of the customer base.
Recognizing that high satisfaction leads to high cus- 6. Companies are also becoming skilled in customer
tomer loyalty, companies must ensure that they meet relationship management (CRM), which focuses on
and exceed customer expectations. developing programs to attract and retain the right
3. Losing profitable customers can dramatically affect a customers and meeting the individual needs of those
firm’s profits. The cost of attracting a new customer is valued customers.
estimated to be five times the cost of keeping a current 7. Customer relationship management often requires
customer happy. The key to retaining customers is rela- building a customer database and data mining to de-
tionship marketing. tect trends, segments, and individual needs. A number
4. Quality is the totality of features and characteristics of a of significant risks also exist, so marketers must pro-
product or service that bear on its ability to satisfy ceed thoughtfully.

Applications

Marketing Debate Marketing Discussion
Online versus Offline Privacy Using CLV
As more firms practice relationship marketing and develop cus- Consider customer lifetime value (CLV). Choose a business
tomer databases, privacy issues are emerging as an important and show how you would go about developing a quantita-
topic. Consumers and public interest groups are scrutinizing— tive formulation that captures the concept. How would that
and sometimes criticizing—the privacy policies of firms and business change if it totally embraced the customer equity
raising concerns about potential theft of online credit card infor- concept and maximized CLV?
mation or other potentially sensitive or confidential financial in-
formation. Others maintain online privacy fears are unfounded
and that security issues are as much a concern offline. They ar-
gue that the opportunity to steal information exists virtually
everywhere, and it’s up to consumers to protect their interests.
Take a position: Privacy is a bigger issue online than
offline versus Privacy is no different online than offline.

Marketing Excellence customer service possible along with top-of-the-line,
high-quality merchandise. As a shoe retailer, the company
offered a wide range of products to fit most everyone’s
>>Nordstrom needs and price point. As it expanded into fashion and
Nordstrom is an upscale U.S. department store chain with apparel, it maintained these goals.
sales that topped $8 billion in 2009. John W. Nordstrom Today, Nordstrom sets the standard in customer ser-
originally started the company as a shoe store but grew it vice and loyalty. In fact, the company is so well-known for
over the years into a fashion specialty chain store selling this trait that urban legends of unusual acts of customer
top-quality, brand-name clothing, accessories, jewelry, service still circulate today. One of the best-known tells
cosmetics, and fragrances. how in 1975 a customer came into a Nordstrom store af-
From the beginning, Nordstrom has believed in and ter Nordstrom had purchased a company called Northern
stressed the importance of providing the highest level of Commercial Company. The customer wanted to return a