Creating Market Values for the Customer CUSTOMER BEHAVIOR: A MANAGERIAL PERSPECTIVE PART 4: Building Loyalty and Customer Value CHAPTER 13 Creating Market Values for the Customer Copyright © 2002 by South-Western. All rights reserved.

Value Delivery Value delivery has two dimensions: Effectiveness Efficiency Copyright © 1999 by Thomas Southwestern. All rights reserved.

Dimensions of Value Delivery Efficiency (Resource conservation) POOR GOOD Effectiveness (Need/Want Fulfillment) Best Value Poor Value Efficiency Value Copyright © 1999 by Thomas Southwestern. All rights reserved.

Tools for Creating Customer Value User Values Performance Social Emotional Quality improvement Innovations Mass customization Warranties and guarantees Price exclusivity Limited availability Social image ads Exclusive offerings Emotional communications Payer Values Price Credit Financing Low price from lower margins Low price from increased productivity (achieved through economies of scale, modernized plant, automation, business process re-engineering) Acceptance of credit cards Offering of own credit card Deferred payment Leasing Customized financing Buyer Values Service Convenience Personalization Product display and demonstration Knowledgeable salesperson Responsiveness User support and maintenance service Convenient point-of-access Automated transaction recording Personal attention and courtesy Interpersonal relationships Copyright © 1999 by Thomas Southwestern. All rights reserved.

Creating Market Values for Users The user is primarily concerned that the product or service performs as desired and that its use delivers social and emotional benefits Copyright © 2002 by South-Western. All rights reserved.

Performance Value Quality improvement Product innovations Mass customization Warranties and guarantees Copyright © 1999 by Thomas Southwestern. All rights reserved.

R & D Leads to More Sales from New Products 0.01 0.07 1.6 3.3 Copyright © 1999 by Thomas Southwestern. All rights reserved.

New Product Activity Leads to Gains in Market Share 0.01 4 12 Copyright © 1999 by Thomas Southwestern. All rights reserved.

Social and Emotional Values Prestige pricing Limited availability Social-image-based marketing communications New exclusive offerings Emotional advertising Copyright © 1999 by Thomas Southwestern. All rights reserved.

Creating Market Values for Payers The types of value most important to payers involve low-cost and ease of making payments Copyright © 2002 by South-Western. All rights reserved.

Price Value To reduce price, companies can opt for two approaches: Accept lower margins Reduce their own costs of production by improving productivity Copyright © 1999 by Thomas Southwestern. All rights reserved.

Low Price from Lower Margins The lower-margin approach consists of selling at a low-profit margin to attract customers Strategic insight Copyright © 1999 by Thomas Southwestern. All rights reserved.

Low Price from Increased Productivity Economies of scale Modernized plant Automation Business process reengineering Copyright © 1999 by Thomas Southwestern. All rights reserved.

Credit And Financing Values Sellers may accept credit cards issued by third parties or banks Sellers may issue their own credit cards or give credit by other instruments Sellers may allow a delayed or deferred payment Copyright © 1999 by Thomas Southwestern. All rights reserved.

Creating Market Values for Buyers In general, buyers are looking for good service before and after they make their selections In addition, they want their purchases to be convenient, not too time-consuming, and in a time and place that fits their schedule Copyright © 2002 by South-Western. All rights reserved.

Service Value The service value is created by the distribution system Pre-purchase phase Post-purchase phase Copyright © 1999 by Thomas Southwestern. All rights reserved.

Service in the Pre-purchase Phase Marketers can offer this value by: Having the product on display or ready for demonstration and/or for trial use Hiring knowledgeable and responsive salespersons who can answer customer questions Copyright © 1999 by Thomas Southwestern. All rights reserved.

Service in the Post-purchase Phase Service in the post-purchase phase refers to all the assistance a marketer can provide to maintain the product use-ready Product-use advice and support Product maintenance Copyright © 1999 by Thomas Southwestern. All rights reserved.

Convenience Value and Personalization Value Convenient points of access Automated transaction recording Interpersonal relationships Copyright © 1999 by Thomas Southwestern. All rights reserved.

Measuring Value Delivery Find out what customers want Organize to deliver those values Measure how well, in customer perceptions, those values have been delivered Copyright © 1999 by Thomas Southwestern. All rights reserved.

A Process for Determining Customer Value 1. What do target customers value? 2. Of all the value dimensions that target customers want, which are most important? 3. How well (poorly) are we doing in delivering the value that target customers want? 4. Why are we doing poorly (well) on important value dimension? 5. What are target customers likely to value in the future? Copyright © 1999 by Thomas Southwestern. All rights reserved.

Assessment of the Customer’s Final Judgment The firm understands my needs and preferences well. I can trust the firm not to take advantage of me as a customer. The firm values and shows its appreciation for my business. The firm takes specific actions to keep me as a customer. I can identify myself with the firm’s products and its actions. The firm can count on me as its supporter. I enjoy dealing with the employees of this firm. I love this firm’s products. I love to do business with this firm. I expect to continue my relationship with this firm for a long time. Please rate the following statements on a 0-10 scale where 0 means you disagree entirely, and 10 means you agree wholeheartedly. Copyright © 1999 by Thomas Southwestern. All rights reserved.