Slide 1Critical Questions that Managers AskAgenda: Customer Value ConceptsWhat is the Nature of Customer Value?Customer Value DefinedCustomer Value DefinedDistinguishing Customer Value from Related TermsDistinguishing Customer Value from Related Terms5 Key Aspects of Customer ValueCustomer Value is a Tradeoff5 Key Aspects of Customer ValueCustomer Value is Interactive5 Key Aspects of Customer Value5 Key Aspects of Customer ValueCustomer’s Goals (Value Hierarchy)Value Hierarchy in Action: Wine CoolersB2B Value Hierarchy in Action: Railroad5 Key Aspects of Customer ValueDynamic Nature of Customer Value5 Key Aspects of Customer ValueThe 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 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)1-6Critical 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 expectations1-7Distinguishing Customer Value from Related Terms Customer Value = Customer Satisfaction???Satisfaction is about falling short or exceeding expectationsREMEMBER THIS –1-8CUSTOMER VALUE = ImportanceCUSTOMER SATISFACTION = Performance5 Key Aspects of Customer ValueCustomer Value is … 1. Tradeoff of benefits and services1-9Customer 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 sacrifices2. Interaction of both and1-11Customer 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 customer’s desired attributes, desired outcomes, and end goals.1-14Customer’s Goals (Value Hierarchy)1-15 Marketer’s WorldProduct Attributes(physical product/servicecharacteristics)ANYTHING Firm Controls Customer’s WorldCustomer’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 customer’s desired attributes, desired outcomes, and end goals.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, etc.) Consumers: Life ChangesChanges from other companies Things happen inside the company 1-195 Key Aspects of Customer ValueSummary – Customer Value is …1. Tradeoff- between benefits and sacrifice2. Interactive- between the product or service itself and the customer3. Relative- to competitors, individuals, and to the use occasion4. Goal-driven- customers do not buy products they buy ways to achieve goals.5. Dynamic- changes over time.1-20The 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 Value hierarchies Value mapsOther analytical tools1-23Customer Learning MethodsCustomer Interaction (e.g., sales call reports, presentations) Customer Research (interviews, panels, surveys, observation)3rd Party Customer research (consultants) Secondary Reports (journals, industry reports, etc.)Analyzing market trends  Analyze customer complaints Mining customer databases to looking for buying patterns, market segments, and changes in buying patterns1-24Customer Value in the Supply Chain1-25IntelSonyHPBest BuyYouCustomer Value Strategy and Management1-26Customer