Chapter 5 Notes
Value – Creating loyal customer is the heart of every business. The only value that a company will ever
create the value that comes from customers – the ones you have now and the ones you will have in the
Profit Centre – Consider the traditional organization where the centric goals is the acquire profit
Customer-Perceived Value – is the difference between the prospective customers evaluation of all the
benefits and all the costs and offering and the perceived alternatives.
Total Customer Benefits – The perceived monetary value of the bundle of economic, functional and
psychological benefits customers expect from a given market offering because of the product, service,
people, and image.
Total Customer Costs – Is the perceived bundle of costs customers expect to incur in evaluating,
obtaining, using, and disposing of the given market offering, including monetary, time, energy and
Applying Value Concepts – The real cost of anything is the cost of acquiring it. The buyer will choose
whichever source delivers the highest perceived value.
Decision-making theory – Can help increase total customer benefit by improving economic, functional,
and psychological benefits of it product, services, people and or/image
Customer Value Analysis Steps
1. Identify the major attributes and benefits customers’ value. Customers are asked what
attributes, benefits, and performance levels they look for in choosing a product and vendors.
2. Assess the quantitative importance of the different attributes and benefit.
3. Assess the company’s and competitors performances on the different customer values-againt
their rated importance.
4. Examine how customers in a specific segment rate the company’s performance against a specifc
major competitor on an individual attribute
Choice Processes and Implications
1. The buyer might be under orders to buy at the lowest price.
2. The buyer will return before the company realizes the komatsu tractor is more expensive to
3. The buyer enjoys a long-term friendship with the komatsu salespeople. The point is the buyers
operate under various constraints and occassonally make choices that give more weight to their
personal benefit than to the company’s benefit. MKT702
Chapter 5 Notes
Delivering High Customer Value
Loyalty – “a deeply help commitment to rebuy or repatronize a preferred product or service in the
future-despite situational influences and marketing efforts having the potential to cause switching
Value Proposition – Consists of the whole cluster of benefits the company promises to deliver, it is
more than the core positioning of the offering.
The value-delivery system – includes all the experiences the customer will have on the way to
obtaining and using the offering.
Satisfaction – A persons feelings of a pleasure of disappointment that result from comparing a
product’s perceived performance (or outcome) with his or her expectations.
Factors shaping satisfaction, and changing operations and marketing as a result, when firms
measure customer satisfaction regularly because it is one key to customer retention.
Companies need to recognize, however, the customers vary in how they define good performance.
Good delivery could mean early delivery, on-time delivery, or order completeness, and two
customers can report being “highly satisfied” for different reasons.
Periodic surveys track customer satisfaction directly and ask additional questions to measure
repurchase intention and the respondent’s likelihood or willing to recommend the company and
brand to others.
Companies need to monitor their competitor’s performance. They can monitor their customer less
rate and contact and contact customers who have stopped buying or who have switched to another
supplier to find out why.
Influence of Customer Satisfaction
For customer-centered companies, customer satisfaction is both a goal and a marketing tool.
Companies need to be especially concerned with their customer satisfaction level today because the
internet provides a tool for consumers to quickly spread both good and bad word of outh to the rest
of the world.
Companies think they’re getting a sense of customer satisfaction by tallying complaints, but studies
show that while customers are dissatisfied with their purchases about 25 percent of the time, only
about 4 percent complain. The other 95 percent either feel complaining is not worth the effort or
don’t know how or to whom to complain. MKT702
Chapter 5 Notes
Procedures that can help to recover customer goodwill
1. Set up a 7-day, 24-hour toll-free hotline ( by phone, fax, or email) to receive and act on
2. Contact the complaining customer as quickly as possible. The slower the company is to respond,
the more dissatisfaction may grow and lead to negative word of mouth.
3. Accept responsibility for the customer’s disappointment, don’t blame the customer
4. Use customer service people who are empathic
5. Resolve the complaint swiftly and to the customer’s satisfaction. Some complaining customers
are not looking for compensations to much as a sign that the company cares.
Product and Service Quality
Quality – The totality of features and characteristics of a product or service that hear on its ability
stated or implied needs. This is clearly a customer-centred definition. A company that satisfies most
of its customer’s needs most the time is called a quality company.
Impact of Quality
Product and service quality, customer satisfaction, and company profitability are intimately
connected, higher levels of quality result in higher levels of customer satisfaction.
Maximizing Customer Lifetime Value
It’s not always the company’s largest customers, who can demand considerable service and deep
discounts, who yield the most profit. The smallest customers pay full price and receive minimal
service, buy the costs of transacting with them can reduce their profitability. Midsize customers who
receive good service and pay nearly full price are often the most profitable.
A profitable Customer – A person, household, or company that over time yields a revenue stream
exceeding by an acceptable amount the company’s cost stream for attracting, selling, and service
Many companies measure customer satisfaction, but few measure individual customer profitability.
Customer Profitability Analysis – A useful type of profitability analysis is shown. Customers are
arrayed along the columns and products along the rows.
Customer Profitability Analysis (CPA) – Best conducted with the tools of an accounting technique
called activity-based-costing (ABC).
Measuring Customer Lifetime Value
Customer Lifetime Value (CLV) – describes the net present value of the value of the stream of
future profits expected over the customer’s lifetime purchases. MKT702
Chapter 5 Notes
Cultivating Customer Relationships
Customers enact precision marketing designed to build strong long-term relationships. Information
is easy to differentiate, customize, personalize and dispatch over networks at incredib