5

Chapter

Value for Customers

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Chapter Objectives

1. What is customer value? How do consumers

use it to make decisions?
2. When are customers satisfied? What are the
benefits of having satisfied customers?
3. How do companies establish, develop, and
enhance mutually beneficial relationships
with customers?
4. What activities establish, develop, and
maintain customer sales?
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5
Chapter

If you are in a new restaurant…

What do you expect before entering?

What makes you happy after eating there?

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Objective 1

What is customer value? How do

consumers use it to make decisions?

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D
E
Customer Value is the difference
F
I
N
between the benefits a customer
E
D receives and the total cost
incurred from acquiring,
using, and disposing
of a product.

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 Customer Value
E Customer Value = Perceived Benefits – Perceived Costs
X
P
L
A
I
N
E
D

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 Product Benefits
A
P
P
L Functional
I
E
D

Benefits Brand

Service

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 Product Costs
A
P Purchase
P Price
L
I Usage
E Costs
D

Costs

Maintenance

Disposal

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 Customer Value
A
P
P
L
I
E
Product
D Customer
Benefits
Value

Service
Benefits Price &
Other
Costs

Brand
Benefits

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 Price-Performance Value Map
A
P
P
L
I
E
D

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 Value Map Explained
A
P
 Products selling price (Cost) vs customers’ perceived
P performance (Benefits)
L
 The Fair Value Zone (FVZ):
I
E  Benefits = Cost
D
 Left of the FVZ:
 Under perform (Benefits < Costs)

 Right of the FVZ:

 Deliver higher value (Benefits > Costs)

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A
P
P
L
I
E
Group Discussion:
D
Discuss and draw a price-performance

value map for coffee in the market

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Objective 2

When are customers satisfied? What are

the benefits of having satisfied customers?

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D
E Customer Satisfaction is the
F
I
N
degree to which a product
E
D meets or exceeds customer expectations.

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 Customer Satisfaction
E
X
Negative Neutral Positive
P
L
A • Dissatisfied • Satisfied • Delighted
I • Defect • Switchable • Loyal
N
E
D

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 Customer Satisfaction
A
P Loyalty
P
L
I
E
D
Larger share Product
of wallet champion

Lower costs

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 Measuring Customer Satisfaction
A
P
P Customer Satisfaction
L
I
E
D

Internal External

JD Power
ACSI

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 Customer Loyalty
A
P
P
L No
I Loyalty
E
D

Degrees of Loyalty

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 The Value of a Customer
A
P
P Profit
L
I
E 80% of Profits No Profits (loss)
D
20% of Customers 20% of Customers

20% of Profits
60% of Customers

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 Customer Lifetime Value
A
P The present value of all profits expected to be
P earned in the future from a customer.
L
I
E
D

Customer Average Cost to

Profit
Lifetime = Purchases
per Year
X margin - service the
customer
Value

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 Fire Your Customers
T
H
I
N In 2007, Sprint fired 1,000
K customers for being
A “problematic.”
B
O
U
These customers called an
T average of 90 times per month,
often as much as 12 times a day,
I
T demanding credit to their
account.

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 Customer Retention
A
P
P
L
I
E
D

Former
Customers

New
Customers

Current
Customers
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 Service Recovery Paradox
P
L Highly effective service recovery can result
A
N
T
in higher levels of customer satisfaction
I
N than in cases where a service
G
failure did not exist.
S
E
E
D
S

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Objective 3

How do companies establish, develop, and

enhance mutually beneficial relationships
with customers?

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D
E
Relationship Marketing is the
F
I
N
organizational commitment to
E
D developing and enhancing long-term,
mutually beneficial
relationships with
profitable or potentially
profitable customers.
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 R ELATIONSHIP M ARKETING
E
X
P
L
Loyalty
A
I
N
E
Customer
D Relationships

Retention

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 Relationship Marketing
A
P
P
L Reduced
I Anxiety
E
D Added Sense of
Value Belonging

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Objective 4

What activities establish, develop, and

maintain customer sales?

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D
E Customer Relationship
F
I
N
E
Management is comprised of the
D
activities that are used to establish,
develop, and maintain
customer sales.

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 Customer Relationship
Management
E
X
P
L External
A Gather information
processes
I
N
E
D

Internal
Use information
processes

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 Customer Relationship Management
A
P
P Customize
L Products
I
E
D

Establish Identify
Dialogue customers

Differentiate
Customers

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Visual Summary

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