Chapter 1: Customer Focus, Customer Performance, and Profit Flashcards
what are some keys to long run survival with regards to customers?
- proactively identifying needs
- thinking - customer first
_________ and _________ drive customer profitability
customer satisfaction and loyalty
describe the cycle of underwhelming customers and shareholders starting with having minimal or no customer focus
- minimal or no customer focus leads to
- Unfocused competitive position
- Minimal customer satisfaction
- low customer loyalty
- excessive customer turnover
- higher cost of marketing and sales
- below average profits
- Short-run strategies to improve sales
- Stagnant shareholder value
- pressure for short-run results
customer satisfaction index
average of the customers’ satisfaction ratings
(the six-category scale ranges from “very dissatis- fied” to “very satisfied.” The levels of customer satisfaction are rated from zero for “very dissatisfied” customers to 100 for “very satisfied” customers.)
a good value of customer satisfaction depends on what?
- historical levels
- competition
- industry benchmarks
- organizational/departmental goals
- incremental gains vs. philosophy of CS excellence
- what the average means –> ie how spread is it, are more customers just somewhat satisfied? Or are there those who are incredibly satisfied and those who are very dissatisfied? –> can thus de-average it to show what the percentages are in each category
why does a business care so much about when a dissatisfied customer leaves?
because it costs much more to attract a new customer than to retain a current customer
they are likely to “walk and talk” to others
what are the three main components that lead to a strong customer focus?
- customer leadership
- voice of the customer
- customer metrics
describe customer leadership
- sets tone for a company’s customer focus by starting at the top
involves:
- senior management leadership committed to strong customer focus
- employee customer training
- customer involvement –> feedback that is shared across organization so employees learn how their hob affects the customer, how customers use the company’s products, and what problems customers encounter
describe voice of the customer
No report or management presentation can replace the words articulated by a customer. Without the voice of the customer, companies may believe they are creating a superior customer experience when in fact they are not.
- see/observe customer experience
- learn from customer solutions
- listen to customer complaints and use negative feedback as a way to understand sources of cust dissatisfaction and to address them
What are some important customer metrics
- customer satisfaction
- customer retention
- customer loyalty
retained customers are _____________
profit drivers
to hold market share in a mature market a business must ________________
replace lost customers
the higher the ______ rate the greater the profit impact
Customer Retention rate
- Higher CR = longer customer life and therefore lifetime value
customer lifetime value increases _______ with increase in customer retention
exponentially
Formula for customer loyalty index
CLI = (customer history + purchase amount + desire to repurchase + product preference + would recommend) / 5
- with each of these characteristics being rated as 100 (for long, above avg, high, strong, would rec), 50 (for avg or maybe between the categories), and 0 (for short, below avg, low, weak, or no)
