Customer Value

Kotler on
Marketing
It is no longer
enough to satisfy
customers. You
must delight them.

The 4 Ps
Marketing Mix

Product
Product Variety
Quality
Design
Features
Brand Name
Packaging
Sizes
Services
Warranties
Returns

Price
List Price
Discounts
Allowances
Payment Period
Credit Terms

Promotion
Sales Promotion
Advertising
Sales Force
Public Relations
Direct Marketing

Place
Channels
Coverage
Assortments
Locations
Inventory
Transportation

Old Economy vs. New Economy

Old Economy

New Economy

Organize by product units

Focus on profitable transactions
Look primarily at financial scorecard
Focus on shareholders
Marketing does the marketing
Build brands through advertising
Focus on customer acquisition

Organize by customer segments

Focus on customer lifetime value
Look also at marketing scorecard
Focus on stakeholders
Everyone does the marketing
Build brands through behavior
Focus on customer retention and
growth
Measure customer satisfaction and
retention rate
Underpromise, overdeliver

No customer satisfaction
measurement
Overpromise, underdeliver

OLD

NEW

Product

Consumer

Price

Cost

Place

Convenience

Promotion

Communication

Value and Satisfaction

Expectatio
n
8

Performance
10

Expectatio
n
10

Performance
8

If performance is lower than expectations, satisfaction is low.

If performance is higher than expectations, satisfaction is high.

Why is Customer
Satisfaction
Receiving So Much
Attention?

The SQIP Diamond

Service

Image

VALUE

Quality

Price

Understand Satisfaction
Drivers Service
Quality

Emotional
Factor

Customer
Satisfaction
Price
Product
Quality
Access to
products &
Services

Consumers definition of Value

Low price
Whatever I want in a product or
service
The Quality I get for the price I pay
What I get for what I give

Customer Value
Is the customers perceptions of what
they want to happen (i.e. the
consequences) in a specific use
situation with the help of a product or
service offering in order to accomplish
a desired purpose/goal

Five approaches to Customer

Value

The total value of their relationship

with your company
The potential value of their relationship
The profitability of their relationship
The insights they can provide your
company
The influence they can yield over other
customers

Types of customer value

Product value
Services value
Personnel value
Image value

Form Utility: Raw Material (converted ) Finished Goods

Place Utility: Channel of distribution (Physical
Distribution) Customer
Time Utility: Warehousing (Availability) Customers
Ownership: Seller (Transfer goods to) Customers

Customer Perceived Value

Customers evaluation
of the difference
between all the
benefits and all the
costs of a marketing
offer relative to those
of competing offers.

Wal-Mart

Customer Value: Best

Price

Determinants
of Customer
Delivered
Value

Different forms of satisfaction

measurement
Feedback
Forms

Annual
Customer
Satisfactio
n Surveys

Online
Polls
Customer
Service
Feedback

CRM
Softwar
e

FocusPhone or
Groups Fax
Surveys
(Fomal/
informal)

Online
Questionnaires

The Generic Value Chain

The Customer
Development
Process

Customer Lifetime Value

Is defined as the net present value of the

profits stream from a customer relationship

It measures how much business the

customer is expected to do with your
company during the lifetime of their
relationship.

CLTV calculations(Simple)

CLV= Average transaction value * Frequency of purchase *

customer life expectancy

e.g. One loyal pizza customer buying on average one pizza

per week over a 10 year period would be
=Rs. 70 * 52 *10
=Rs.36400 to the company

Link b/w the CRR and the ACL

Average customer lifetime(years)
= 1/ 1-retention rate
e.g. If the customer retention rate is 90 percent per
annum(meaning that we lose 10 percent of our existing
customer base each year), then the average customer
lifetime will be ten years

Linking profitability and loyalty

High profitability and Short term

customers(Butterflies)
Low Profitability and Short term
customers(Strangers)
Long term customers and Low
profitability(Barnacles)
High profitability and Long term customers
(True friends)

Butterflies
-good fit between
customers offerings and
customers needs
-high profit potential

Strangers
-little fit between
company s offerings and
customers needs
-lowest profit potential

True friends
-good fit between
customers offerings
and customers needs
-highest profit potential

Barnacles
-limited fit between companys
offerings and customers needs
-low profit potential

Allocating marketing investment

according to customer value

HOME TASK

Why would you feel more brand loyalty

for a company that tried to immediately
resolve a complaint via E-mail, or a
company that had a customer service
representative call within two business
days to resolve the problem over
the phone?

HOME TASK

Find a company that has

gained a significant customer
loyalty rate by fundamentally
changing the buyer-seller
relationship?

HOME TASK GUIDELINES

Not to be copied directly from any source (i.e. Book, Magazine, Internet
and even from your friend/mate)
Handwritten
Ruled sheets to be used (one sided)
Details on top of the page:
Home Task Date
Name
Roll no.
Regd. no.
Class & Section
Topic / Question
Examples / References are Mandatory
Prepare a Marketing File and document every home task activity in it.
You are required to bring your Marketing File in every lecture.