Chapter TWO
Building customer satisfaction, value,
and retention
Customer Value
• Customer value refers to the perceived
benefits a customer receives from a product
or service relative to the cost of acquiring it.
• It is the balance between what a customer
gives (price, time, effort) and what they
receive (quality, experience, benefits). (Kotler,
P., & Keller, K. L. (2019)
Formula:
• Customer Value=Perceived Benefits−Perceived Costs
🔹 Types of Customer Value:
1.Functional Value – Performance & efficiency of
the product/service.
2.Emotional Value – Feelings & psychological
satisfaction.
3.Social Value – Influence on social status or
belonging.
4.Monetary Value – Worth relative to price paid.
Customer Satisfaction
• Customer satisfaction is the measure of how
well a product or service meets or exceeds
customer expectations. (Zeithaml, V. A., Bitner,
M. J., & Gremler, D. D. (2020)
• It reflects the customer’s post-purchase
experience and determines brand loyalty.
Factors Influencing Customer Satisfaction:
1.Expectations vs. Experience – If performance
meets or surpasses expectations.
2.Quality & Service – Consistency in delivering
value.
3.Customer Support – Assistance and
responsiveness.
4.Brand Trust – Reliability and reputation.
The nature of high performance business
• A high-performance business is an organization
that consistently outperforms competitors,
adapts to market changes, and sustains long-
term success.
• It focuses on innovation, efficiency, customer
satisfaction, and strategic agility to maintain a
competitive edge.
Key Characteristics of High-Performance Businesses
1.Customer-Centric Approach
Prioritizes customer needs and delivers exceptional
value.
Uses market research and feedback to refine
products/services.
1.Strategic Vision & Leadership
Has a clear long-term vision and well-defined
objectives.
Leaders drive innovation and inspire teams toward
excellence.
Operational Excellence
• Uses efficient processes, quality management, and
continuous improvement.
• Optimizes supply chains, technology, and resources for
maximum productivity.
Agility & Innovation
• Quickly adapts to market changes, technological
advancements, and disruptions.
• Encourages a culture of innovation and creativity.
Employee Engagement & Talent Development
• Invests in training, skill development, and employee well-
being.
• Fosters a high-performance culture with motivated and
skilled teams.
Attracting and Retaining Customers
• Attracting and retaining customers is crucial
for business success.
• It involves creating awareness, delivering
value, building relationships, and maintaining
customer loyalty.
Strategies for Attracting Customers
✅ Understand Your Target Market
• Conduct market research to identify customer
needs and preferences.
• Segment customers based on demographics,
behavior, and interests.
✅ Strong Branding & Positioning
• Develop a unique value proposition (UVP) that
differentiates your brand.
• Build a strong brand identity with a compelling
message.
✅ Effective Marketing & Promotion
• Use digital marketing (SEO, social media, PPC ads) to reach a
wider audience.
• Leverage influencer marketing and content marketing to
attract potential customers.
✅ Competitive Pricing & Offers
• Offer discounts, free trials, and promotions to encourage
first-time buyers.
• Implement referral programs to attract customers through
word-of-mouth.
Customer & Company profitability
1. Customer Profitability
• measures how much profit a business earns from
a specific customer or group of customers over a
given period.
• It helps businesses determine which customers
contribute the most to their bottom line.
Key Aspects of Customer Profitability:
• Revenue per customer: The total revenue generated from a
specific customer.
• Cost to serve: The expenses incurred in acquiring, servicing,
and retaining a customer.
• Customer lifetime value (CLV): The predicted profit a
business will earn from a customer throughout their entire
relationship.
• Customer segmentation: Identifying high-profit and low-
profit customers to optimize marketing and service strategies.
2. Company Profitability
• Company profitability is the overall financial performance of a
business, measuring how efficiently it generates profit from its
revenues and resources.
Key Metrics for Company Profitability:
• Gross Profit Margin = (Revenue - Cost of Goods Sold) ÷
Revenue
• Operating Profit Margin = Operating Profit ÷ Revenue
• Net Profit Margin = Net Profit ÷ Revenue
• Return on Investment (ROI): Measures the return generated
from investments.
How Customer and Company Profitability Are Related?
• Customer profitability directly impacts company
profitability—businesses with more profitable
customers tend to be more profitable themselves.
• Companies can improve profitability by focusing on
high-value customers and reducing costs associated
with low-profit customers.
• Understanding both helps in making data-driven
decisions on pricing, marketing, and customer service.
Total Quality Management (TQM)
• is a management approach focused on improving
the quality of products and services through
continuous improvement and customer
satisfaction.
• It involves the participation of all employees in an
organization and aims to enhance processes,
culture, and customer experience.
Key Principles of TQM
1. Customer Focus – The ultimate goal is to meet or exceed customer expectations.
2. Continuous Improvement – On going efforts to improve processes, products, and
services.
3. Employee Involvement – Every employee plays a role in quality improvement.
4. Process-Centered Approach – Focus on efficient and standardized processes to
reduce errors.
5. Integrated System – Departments work together for overall quality enhancement.
6. Fact-Based Decision Making – Use data and analysis for problem-solving.
7. Communication – Open and effective communication is necessary for success.
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