Customer Experienced-Value

Value

benefits Benefits
sacrifices

The equation shows that manager can

enhance customer-perceived value by Sacrifices
increasing the benefits or decreasing the
sacrifice required
 Sacrifices
Money • Price of the product or service

• Purchasing process may include exhaustive pre-

purchase work in searching for solutions and
Transaction costs comparing alternatives
• Travel and accommodation cost

• Purchasing can be a very stressful and frustrating

experience
Psychic costs • Struggling to come up with gift ideas, traveling on
crowded public transport, paying inflated prices,
etc.
 Risks
• Occur when customer is not fully sure that the
Performance product will do what is required
element of
psychic Physical • Customer feels that there may be some bodily
harm done by product
cost
• There is danger of economic loss from the
Financial purchase
variety of
forms • Customer feels that their social standing or
Social reputation is at risk

• Customer’s self-esteem or self-image is

Psychological endangered by an act of purchase or consumption
How Do Customers Reduce

Seek word-of- Seek additional

Negotiate
Delay purchase mouth information from
service contracts
endorsement advertising copy

Build a Seek Buy with credit

Buy established
relationship with performance card (protection
brands
a supplier guarantees if product fails)

Negotiate Take out Request pre- Read

discounts insurance purchase trial testimonials
Total Cost
full meaningful estimates of lifetime costs
costs of using, and servicing

disposing

What is thought of as ‘consumption’ can be broken down

into a number of activities or stages?

Search Ownership Consumption

Purchase Use Disposal

When

Value-in-
Value-in- Value-in-use experience
exchange • Value is realized only • Value is realized as
• Money to products when customers customers interact in
• Value created by the consume customer lifecycle
firm and embedded • Value is co-created • E.g. experience in
in the products by customers enjoying humor in
ads
 Compete Five C’s

Conflict Competition Co-existence Co-operation Collusion

• Destroy the • Perform better • Allow other • Formation of • Conspire with
competition, than companies to strategic competitors to
e.g. BA v Laker competitors at operate in their alliances, e.g. restrain
Airways meeting own niche, IBM & Sun competitive
customer providing they Microsystems behaviours, e.g.
requirements, don’t enter your O.P.E.C.
e.g. Procter & market e.g.
Gamble v Cross® v BIC
Unilever
 what are
the sources
 Proposition
explicit or Michael Treacey and Fred Wieserma
implicit promise
Product Customized
Low Price
Innovations Solutions

Company does a
limited number of
Provide best Adapt their offers
things very
products, services to meet the needs
efficiently, at very
or solutions to of individual
low cost and pass
customers customers
on those savings
to customer
Customization
CRM aims to fit the Customization has both cost
offer.
and revenue implications.
• It is not a one-size-fits-
all approach!

But
It may generates customization
Companies should competitive may mean the
be aware of and advantage and is loss of economies
responsive to appealing to of scale, thus
customers’ differing customers increasing unit
requirements costs
Mass
The use of flexible process
and organizational structures
to create varied and even
individually tailored value
propositions to order.

In most cases, this is achieved

with only a limited cost or
lead-time penalty.
Form
Bundle-to- Assemble-to- Engineer-to-
Match-to-order Make-to-order
order order order
• Selection of • Bundling of • Assembly of • Manufacture • Customer co-
existing existing products or of customized designs
standard products and services from products products or
products or services to existing including services which
services to suit customer standardized components are then
match requirements components • Example: made-to-
customer • Example: or process tailored suits order
requirements conferences • Example: • Example:
• Example: cars insurance aircraft

MINOR MAJOR
Mass Customisation Questions

Customization, however, does not

universally mean that customers pay
Do customers
want customised more!
products and
services?
Some customized products eliminate
unimportant features

Are customers
What degree of
willing to pay a
customisation
premium for
is desired?
customisation?
 7 Marketing Mix
Used by marketing people to
Product
develop value proportions
Physical Combining together various
Price
Evidence components

People Promotion

Process Place

Product
• Solvay Interox, a chemicals
company, customizes its
hydrogen peroxide product for
textile industry customers
Price
• Dell Computer offers lower
prices to its larger relationship
customers than its small
office-home office (SOHO)
customers
7 Marketing Mix
Promotion Place
• Ford customizes • Procter and Gamble delivers
communications to its direct to store for its major
dealership network. retail customers but not
smaller independents.

Process People Physical evidence

• Xerox customises its service • Hewlett Packard creates • Thomson and other major tour
guarantee and recovery dedicated virtual project operators overprint their
processes for individual groups for its consultancy point-of-sale material with
customers clients travel agency details
 Products
Customers buy solutions to their problems
not the products Product-
Product Incremental
service Branding
Innovation Benefits
Products Bundling
Core Doing MBA to
Hierarchy
(Basic benefits) enhance salary
and develop Lawn
career Sony Mower cut
IT Product Mercedes
Walkman grass
Enabling Doing MBA beautifully
(Products and requires:
services to deliver building,
core) classroom, IT
Operates
Augmented Teaching method Apple iPod more Services Ferrari
(Differentiation quietly
factors)
“

Ted Levitt
”
 Service

Improving Improving Service Service

Service Service Level Recovery
Quality Guarantees Agreement Programs
Two Major Perspectives

• This is consistent with Philip Crosby’s view of quality.

Conformance to • Conformance to specification might mean producing
specification error-free invoices, delivering on-time, in-full as
promised to customers, or acknowledging a customer
complaint within 24 hours.

• Joseph M. Juran advanced the point of view that

quality means creating products that are well suited to
Fitness for customer requirements, and which therefore meet
purpose their expectations.
• It is the customer, not the company, who decides
whether quality is right.
Gronroos Model
TECHNICAL

Technical

• The quality of the

outcome of a service
performance

Functional SERVICE
QUALITY
• The quality of the
performance of a service

Reputational REPUTATIONAL FUNCTIONAL

• The quality of the service

organization’s image
SERVQUAL Model
Reliability Ability to perform the promised service dependably and accurately

Assurance Knowledge and courtesy of employees and their ability to convey trust and confidence

Tangibles Appearance of physical facilities, equipment, personnel and communication materials

Empathy Provision of caring, individualised attention to customers

Responsiveness Willingness to help customers and to provide prompt service

 SERVQUAL

If these four gaps (1-4) are

closed then
GAP 5 WILL CLOSE
Service Guarantee
A service guarantee is an explicit promise to the customer that a prescribed level of service will be
delivered. It can be either specific or general.
Service Level
A contractual commitment between a service provider and customer that specifies the mutual
responsibilities of both parties with respect to the services that will be provided and the standards at which
they will be performed.

SLA Metrics
Availability Usage Reliability Responsiveness User satisfaction
• The percentage of • The number of • The percentage of • The speed with • This can be
time that the service users that time that the which a demand measured at the
service is can be served service is for service is time the service is
available simultaneously. withdrawn or fails fulfilled. delivered or
in the time period periodically
throughout the
agreed service
period.
Service Recovery
Service recovery includes all the actions taken by a company to resolve a service failure

What Customer want?

Distributive Justice
• What the firm offers by way of
recovery and whether this offsets
the costs incurred by the customer
from service failure
• Distributive outcomes include
compensation, re-performance,
apologies
Procedural Justice Interactional Justice
• The customer’s perception of the • The customer’s perception of the
process they went through to get performance of the people they
satisfaction following service failure encounter during the service
• Some service recovery processes recovery process
deliver prompt recovery, others • Customers generally expect the
delayed; some require complaints to people they encounter to show
be justified and prods provided empathy, politeness, courtesy,
expertise and effort
 Process
Business
process A set of activities performed
by people and/or technology
in order to achieve a desired
outcome

Processes
are more It can be used to compete
than
simply and to create more value
workflow both for companies and
customers
 Complaints

Their
They have been
expectations are Complaints
treated unfairly
underperformed
Complaints-Handling

A successful complaints Research suggests that

handling process negative word-of-mouth
enables companies to can be very influential. Unhappy customers are
capture customer Up to two-thirds of likely to tell twice as
complaints before customers who are many people about their
customers start dissatisfied do not experience than
spreading negative complain to the customers with a
word-of-mouth or take organisation. They may, positive experience.
their business however, complain to
elsewhere. their social networks.
How to Improve
Make the complaints-handling policy and processes visible and accessible to customers and employees
Design your complaints-handling policy and processes to a well-known and well-accepted standards
Enable web-based complaints capture
Empower employees to resolve complaints
Install a dedicated free-phone line to receive complaints
Link complaints to customer satisfaction and retention goals
Appoint a complaints management executive
Teach customers how to complain; publish your process!
Ensure all employees understand the complaints management process
Reward customers who complain
Collect complaints data and analyze root causes
Use technology to support complaints-handling and deliver useful management reports
Why don’t

They feel the company doesn’t care.

Perhaps the company or the industry has a
reputation for treating customers poorly
It takes too much time and effort

They fear retribution. Many people are

reluctant to complain about the police, for
example
They don’t know how to complain.
 People
It might involve winning, growing
and maintaining the customers’
business, handling customer
Who has the customer contact
queries and complaints,
role in your company?
representing the customers’
interest, and ensuring customers’
satisfactions

Watch the people in all of your

touch points!
 Physical Evidence

intangible-
dominant
 Customer Communication
Disintermediation
3 Key Processes • Direct communication
• Remove intermediaries
Disintermediation
Personalisation
• Tailor offers and communications
Personalisation
Interactivity
Interactivity • The internet has revolutionized the scope
for interactivity
 Channels

Online

Offline