1)Customer Value Creation 97

8/14/2019 1)Customer Value Creation 97

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Different Customer RolesHow to Create Value for all these Roles


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The purpose of a business isto create a customer.Peter Drucker

The purpose of business isto create and keep a

customer.Peter Drucker


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In the factory we make cosmetics; in

the drugstore we sell hope.- Charles Revson

No theater could sanely flourish untilthere was an umbilical connectionbetween what was happening on the

stage and what was happening in theworld.- Kenneth Tynan


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On a broader perspective, customer and

consumer are the same. In reality, person who purchases need not be

the consumer.

A customer is a person or an organizationalunit that plays a role in the consummation oftransaction with a marketer.

A customer can play three different role intransaction (Seth & Mittal)


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Households

Consumers

Businesses

MentalActivities

Physicalactivities

UsersBuyers

Payers

Customertypes

Behavior

Roles


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Three Roles of the Customer

The User the person who actually usethe product or receive benefits of theservice.

The Payer the one who finances thepurchase.

The Buyer- the person who procure theproduct from the market place.


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Five roles people play in consumer buying decision (Philip

Kotler) Initiator first suggest the idea of buying the product or service Influencer Whose view or advice influences the decision Decider decides on whether / what / how / where to buy. Buyer makes the actual purchase.

User Consumes or uses the product or receives the benefit ofthe service.

Participants in the business buying process Initiators: requests for the purchase of product/service Users: who will use the product. (In many cases users are

initiators.) Influencers: define specifications & provide info for evaluation Deciders: decides on product requirements and/or suppliers. Approvers: authorize proposed actions of deciders or buyers. Buyers: have formal authority to select supplier and initiate

buying. Gate Kee ers: have ower to revent sellers or info reachin


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Role Specialization dividing the role

between the above three. User is neither payer Nor buyer Baby

food, Pet foods, gift items etc. User is payer but not buyer Shares,

Travel services, Institutional buying User is buyer but not payer- Sponsorships,

Insurance reimbursements

User is buyer and payer- small business,restaurants & pubs, FMCG (bought for ownuse)


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Customer Delivered Value = Total customer benefits Total customer

costs.

Customer will buy a product that he perceives tobe providing highest value.

Derived from comparing a products perceived

performance vis--vis the expectations.

When the performance fall below expectations,the customer gets dissatisfied.


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Customer = User + Buyer + Payer

1. User --- Performance/Quality,

2. Buyer --- Service & Convenience

3. Payer --- Price discounts / payment terms


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Total Customer Benefits:

Performance + Social + EmotionalBenefits Benefits

Benefits

Buyer Benefits (Service, Convenience &Personalization)

Payer Benefits (Price, Credit & financing)

Total Customer Cost : Price + procurement costs (time & efforts) + Use

related costs + Disposal costs


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User

Values

PerformanceQuality improvements

InnovationsMass customizationsWarranties/guarantees

SocialPrice Exclusivity

LimitedavailabilitySocial Image adsExclusive

offerings

EmotionalEmotional

SymbolsBrand that

meets your self-

concept

Payer

Values

PriceLow price from low

marginsLow price from increased

productivity

CreditAcceptance of

credit cardsOwn credit card

DeferredPayment

FinancingLeasingCustomized

Financing

Buyer

Values

ServiceProduct Display & Demo

Knowledgeable Sales

staffResponsiveness

ConveniencePoint of accessAutomated

transactionrecording

PersonalizationPersonal

attention

Interpersonalrelationships

Tools for Creating Market Values


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Universal Value - Performance Value:

Physical performance better than competingalternatives.

Product performs that way consistently.

1. Quality Improvements 2. Innovation 3. Mass Customization

4. Warranties & Guarantees


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Quality Improvement

Better performance value by building quality into theproducts. Zero defects by eliminating product failurescompletely.

Innovation Increasing performance value by designing new features

to products (Automobiles with navigation devices, computers withvoice conversion to written text etc.) Companies should build a culture of innovation (3M of

US) Mass Customization

Offer customized products to individuals at same price. Warranties & Guarantees Helps to alleviate fears on product failure (Sears

satisfaction guarantee; LL Bean - Life time warranty)


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Personal Values: Social & Emotional Personal values that satisfy customers wants are the social

& emotional values. Social values are derived from the association of a product

with one or more social groups in society. Prestige Pricing: Product will be sold in limited target markets, leading to

Exclusivity. Leads to Irrational buying & conspicuous consumption.

Children get driven by peer group and poor use it insuranceagainst product failure.

Limited Availability: Sold in limited quantity/edition to provide social value for

their owners. Sale basis Possession value ( not real value ). Van Gogh,

Rolls Royce.


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New Exclusive offerings :

something which competition do not offer (Jaguars-Budget car rentals) Social Image Based Marketing Communication: Stem not just from advertising - product design,

price, Place etc. Draw back it leads to consumerism &

materialism. Emotional Communications:

Communications that evoke some emotionalexperience valentine day gifts as symbols of Love.

Ads which transmit -- hope, wish, longing etc


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UNIVERSAL VALUE - PRICE

Represents the relative affordability of the product. Degree ofeconomic sacrifice that the customer has to make for the purchase. Price means both initial purchase price and the cost of maintaining the

product. Low Price from Lower margins Cutting prices below competitors prices to attract their customers. Outcome of a strategic insight some companies figure out the

formula to offer the required price value. Low price from increased productivity The firm strives for lowest cost of production Economies of scale Modernized Plant outdated plants bring in inefficiencies. Automation- Technology and machines to substitute human labor. Business Process Reengineering redesigns the process from a

blank slate


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Personal Values - Credit & Financing

Credit: Payers seek credit and financing values because they improveaffordability by creating deferred payments or providing credit.

Sellers may allow credit cards by third parties

Sellers will issue their own credit cards

Sellers may allow delayed or deferred payment.

Sears had credit cards reaching 40 m households, before otherretailers.

Financing goes beyond credit. Involves specific payment schedules

designed for a customer.

Leasing helps customers to defer large cash outlay but also offer tax

benefits. Ideal for heavy machinery. Installment payment (EMI)

Financing possible for both services and products, for consumables and

durables

Ethical Issue in credit card and financing -- huge interest rates.


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SERVICE VALUE (contd) Post-Purchase Phase Service Generally known as after-sales service or after-sales-product

support.

Product-Use Advice and Support Assistance in using the product. Way to differentiate from

competition. 1993 GE commissioned customer answer facility; answers customer

questions on toll-free-lines with on-line product information andinstant display of customer records.

Quality of advice is a user value, but ease of obtaining is buyervalue.

Product maintenance Significant value accrues from the product maintenance service. Toyota-Lexus gives the customer a loaner car. Product down time can be of immense consequence in Indl.

Products.


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Personal Values Convenience Value &Personalization

Convenient Point of access Locate the distribution and retail facilities conveniently and keep them

open 24 hours (Dominos convenience value by delivery-at-home). McDonald---- into the business of real estate Smaller service centers at diverse locations. Automated Transaction Recording

Automation is a significant means of offering convenience. ATMs for Banking; Telephone based automated response systemused by banks, Document companies (FedEx)

Credit card reader providing for pay-at-the-pump convenience. Personalization / Interpersonal relationship Accrues from personnel treating customers with personal attention

and courtesy. Especially important in service industry. Showing courtesy is providing value and can build differential

advantage in service business. (Jet Airways, Marriot) To deliver personalization value, co.s need to engage in frequent,

personalized communications.

1)Customer Value Creation 97

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