What is Customer Value?Critical Questions that Managers AskAgenda: Customer Value ConceptsWhat is the Nature of Customer Value?Customer Value DefinedSlide 6Distinguishing Customer Value from Related TermsSlide 85 Key Aspects of Customer ValueCustomer Value is a TradeoffSlide 11Customer Value is InteractiveSlide 13Slide 14Customer’s Goals (Value Hierarchy)Value Hierarchy in Action: Wine CoolersB2B Value Hierarchy in Action: RailroadSlide 18Dynamic Nature of Customer ValueSlide 20The Customer-Value-Oriented FirmWhat Does a Customer-Value-Oriented Firm Look Like?Customer Value LearningCustomer Learning MethodsCustomer Value in the Supply ChainCustomer Value Strategy and ManagementCustomer Value Strategy ProcessCustomer Value Strategy and PerformanceThe Bottom LineWhat is Customer Value?Understanding Customer Value, Value Strategies, and Value ManagementBA 332Critical Questions that Managers AskWhat is important to our customers?How do I know if we are delivering value to our customers?How do I judge whether we are offering superior value relative to competitors?1-2Exploring these questions requires a clearer picture of customer value and related conceptsAgenda: Customer Value ConceptsWhat is the nature of Customer Value?What is a Customer-Value-Oriented Firm?What do Value Strategies Look Like?1-3What is the Nature of Customer Value?1-4Customer Value DefinedCustomer Value is the customer’s perception of what they want to have happen in a specific use situation, with the help of a product or service, in order to accomplish a desired purpose or goal. (adapted from Woodruff & Gardial)1-5Customer Value DefinedCustomer Value is (adapted from Woodruff & Gardial)1-6Critical thing to remember: We’re defining customer value from a customer perspective, NOT from a product perspective!Distinguishing Customer Value from Related Terms Customer Value = Customer Satisfaction???Satisfaction is about falling short or exceeding expectations. 1-7Distinguishing Customer Value from Related Terms Customer Value = Customer Satisfaction???Satisfaction is about falling short or exceeding expectations REMEMBER THIS –1-8CUSTOMER VALUE = importance CUSTOMER SATISFACTION = performance5 Key Aspects of Customer ValueCustomer Value is … 1. Tradeoff of benefits and sacrafices 1-9Customer Value is a Tradeoff(Σ what I get) – (Σ what I give up) = XCustomer’s objective is to maximize X for themselves among perceived alternatives what I get hopefully is what I seek which are benefits.  what I give up are sacrifices. 1-10BENEFITS SACRIFICES5 Key Aspects of Customer ValueCustomer Value is …1. Tradeoff of benefits and sacrifices 1. Interaction of both product and service 1-11Customer Value is Interactive1-12Value JudgmentBuyer’s values and goalsUse situation and occasionProduct and service5 Key Aspects of Customer ValueCustomer Value is … 1. Tradeoff of benefits and sacrifices 2. Interaction of both customer and product 3. Relative to competitors, individuals, and situations1-135 Key Aspects of Customer ValueCustomer Value is …4.Goal-driven by customers desired attributes, desired outcome, and goals .1-14Customer’s Goals (Value Hierarchy)1-15 marketersworldProduct Attributes(physical product/servicecharacteristics)ANYTHING Firm Controls customersworldCustomer’s DesiredConsequences(what I want to happen)VSPositive (benefits) and Negative (sacrifices) effects ON the customerCustomer’s Goalsand Purposes(e.g. peace of mind)Value Hierarchy in Action: Wine Coolers1-16Self-esteem Belonging Family LifeEnd States (Goals) Carbonation Crisp Expensive Label Less Alcohol FillingAttributes RefreshingThirst QuenchSocialize EasierSophisticatedImpress OthersDesired Consequences More FeminineQualityReward-SatisfyingConsume LessAvoid Negativesof alcoholB2B Value Hierarchy in Action: Railroad1-17Peace of mindProfitabilityGrowthEasy to do business withIntegrated logistics providerInventory velocity: delivery speed (not turnover)Lack of variationCompetitive priceKnowledgeable account managerPrompt and effective problem resolutionCan use money elsewhereCan make effective decisions quicklyDon’t waste timeServe my customers better (keep my promises)Can go to one sourceCan save moneyEnd States (Goals) Desired Consequences Attributes5 Key Aspects of Customer ValueCustomer Value is …4.Goal-driven by __________________________________.5.Dynamic – in that it changes over time.1-18Dynamic Nature of Customer Value The challenge of understanding and competing on customer value becomes REALLY, REALLY HARD when you realize that it changes!What Makes Customer’s Perceptions of Value Change? the environment ( economy trends)Consumer: life changes  changes from other companies  things happening inside the company 1-195 Key Aspects of Customer ValueSummary – Customer Value is …1.Tradeoff2.Interactive3.Relative4.Goal-driven5.Dynamic1-20The Customer-Value-Oriented Firm1-21What Does a Customer-Value-Oriented Firm Look Like? A “Customer Value Culture” Commitment to InnovationOrganize everything we do as a company around delivering Customer ValueContinuous Learning About Customers1-22Customer Value LearningComes from many sourcesTakes many forms  1-23Customer Learning MethodsCustomer Interaction (e.g., sales call reports, presentations) 3rd Party Customer research (consultants) Analyzing market trends   1-24Customer Value in the Supply Chain1-25IntelSonyHPBest BuyYouCustomer Value Strategy and Management1-26Customer Value Strategy Process1-27 COMPETITIVEADVANTAGE Choose the ValueChoose the Value Communicate the ValueCommunicate the Value1.2.3.4.5.Customer Value Strategy and Performance1-28Customer Value Strategy & DeliveryCustomer SatisfactionCustomer RetentionBottom-line Financial PerformanceCustomer AcquisitionWoodruff & Gardial 1996The Bottom LineCustomers are more demanding than everBy better understanding customer value, we can develop better strategies to:  Satisfy & Retain Customers Acquire New Customers Differentiate the firm from competitors in the