What is Customer Value Understanding Customer Value Value Strategies and Value Management Critical 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 Exploring these questions requires a clearer picture of customer value and related concepts 1 2 Agenda Customer Value Concepts What is the nature of Customer Value What is a Customer Value Oriented Firm What do Value Strategies Look Like What is the Nature of Customer Value 1 3 1 4 Customer Value Defined Customer Value is the customer s perception of what he she wants 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 5 Customer Value Defined Customer Value is the customer s perception of what he she wants 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 Critical thing to remember We re defining customer value from a customer perspective NOT from a product perspective Remember CUSTOMERS DON T BUY PRODUCTS 1 6 Distinguishing Customer Value from Related Terms Customer Value Customer Satisfaction Satisfaction is about falling short or exceeding expectations REMEMBER THIS CUSTOMER VALUE CUSTOMER SATISFACTION 5 Key Aspects of Customer Value Customer Value is 1 Tradeoff of and 1 7 1 8 Customer Value is a Tradeoff what I get what I give up X BENEFITS SACRIFICES Customer s objective is to maximize X for him herself among perceived alternatives 5 Key Aspects of Customer Value Customer Value is 1 Tradeoff of and 2 Interaction of both and 1 9 1 10 Customer Value is Interactive Buyer s values and goals Value Judgment Use situation and occasion Product and service 5 Key Aspects of Customer Value Customer Value is 1 Tradeoff of and 2 Interaction of both and 3 Relative to and 1 11 1 12 5 Key Aspects of Customer Value Customer Value is 4 Goal driven by customer s desired and Customer s Goals Value Hierarchy Positive benefits and Negative sacrifices effects ON the customer Customer s Goals and Purposes e g peace of mind Customer s World Customer s Desired Consequences what I want to happen VS ANYTHING Firm Controls Product Attributes physical product service characteristics Marketer s World 1 13 1 14 Value Hierarchy in Action Toothpaste Good health Peace of Mind Look good Happiness Clean Feeling In mouth Healthy Gums Feel good About myself Healthy teeth Smile more Brush more often No plaque Tartar Control Fluoride Flavor Appearance Price End States Goals Consequences of Customer Product Interaction Attributes 15 B2B Value Hierarchy in Action Railroad End States Goals Peace of mind Profitability Growth Can use money elsewhere Desired Consequences Can make effective decisions quickly Can save money Don t waste time customers better Serve my keep my promises Can go to one source Competitive price Knowledgeable account manager Lack of variation Easy to do business with Integrated logistics provider Inventory velocity delivery speed not turnover Attributes Prompt and effective problem resolution 1 16 5 Key Aspects of Customer Value Customer Value is 4 Goal driven by customer s desired and 5 Dynamic in that it Dynamic 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 1 17 1 18 5 Key Aspects of Customer Value Summary Customer Value is Interactive 1 Tradeoff 2 3 Relative 4 Goal driven 5 Dynamic The Customer Value Oriented Firm 1 19 1 20 Customer Value in the Supply Chain Samsung Intel Best Buy You LG What 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 Customers 1 21 1 22 Customer Value Learning Takes many forms Value maps Comes from many sources Customer 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 Analyzing customer complaints Mining customer databases to looking for buying patterns market segments and changes in buying patterns 1 23 1 24 Customer Value Strategy and Management Customer Value Strategy Process 1 2 3 4 5 Choose the Value Communicate the Value 1 25 C O M P E T I T I V E A D V A N T A G E 1 26 Customer Value Strategy and Performance Customer Value Strategy Delivery Bottom line Financial Performance Customer Satisfaction Customer Acquisition Woodruff Gardial 1996 Customer Retention 1 27 The 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 marketplace 1 28