Customer Value Creation 97

8/8/2019 Customer Value Creation 97

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Different Customer RolesHow to Create Value for all these Roles


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Inbound

Logistics

(Raw -

Material &

Spares)

Operations

(Manufacturingor

Processing)

Outbound

Logistics

Marketing

&

Sales

(Distrbn.)

Service

(After

Sales &

Personal

Attention

During

Sale)

Technology Development

Human Resource Management

Firm Infrastructure

M

a

r

g

i

n

PRIMARY ACTIVITIES

SECONDARY ACTIVITIES

Supp

lie

rs

Co

nsu

me

rs


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Design

ProductProcure Make Price

Advertise/

PromoteDistribute Sell Service

Make The Product Sell The Product

Traditional Physical Process Sequence

Custom-

er Segm-

entation

Target

Market-

ing

Value

Positi-

oning

Mkg

Mix

Plng.

Pdt.

Dvlpt.

Serv

Dvlp

Pric

ingMfg. Distr

Pers.

Sales

Sales

PromnAdvtg

Choose / Envision Value Provide / Deliver Value Communicate- Value

Strategic Marketing Tactical Marketing

Value Creation & Delivery sequence


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Value = benefits cost or Value = benefits/costs

Customer Delivered Value = Total customer benefits Total customer

costs.

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


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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 or can be theuser also.

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 use theproduct or receive benefits of the service.

The Payer the one who finances thepurchase.

The Buyer- the person who procure the

product from the market place.


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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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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 improve

affordability 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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UNIVERSAL VALUE - SERVICE Performance value (utility) is built into the system by the

manufacturer or service designer. Service Value is created by the distribution system. Pre-purchase Service Product on Display or Demonstration

Retail stores appeal is basically due to merchandise-on-display.Provides edge to retailing over telemarketing or E-com marketing

Product availability in trial sizes; food etc available for sampling/taste, Free samples or trial memberships /ownerships.

Knowledgeable Salespersons:

Sales person at a discount /retail store will have less productknowledge than those in specialty store.

Professional Sales person provides information and also help inchoosing the right product. Computer sales, Selling suits, sportsitems to athletes


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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.


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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 and instant

display of customer records. Quality of advice is a user value, but ease of obtaining is buyer value.

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.

Documents

Customer Value Creation 97