Customers Want Top Value

What is CV?
Managerial Implications
Value-Creating organizations

Ashish Singhal BIM Bangalore

 The Meaning of Value
(Customer Value)
Customer Value: long-existing concept,
emerged from ancient trade practices

Value: “satisfaction of customer

requirements at the lowest total cost of
ownership, acquisition and use “

Relative worth or importance

 The Meaning of Value (Customer Value)
cont’d.

Value: excellence based on desirability or

usefulness
Value: represented as magnitude or quantity
(how much, how many, how good? etc.)

“Value” as in customer value is influenced by

management’s values (the abstract concepts
of what is right, worthwhile, or desirable)
Ashish Singhal BIM Bangalore
Customers’ Perception of Value
■ Tradeoff between
benefits received from
offer versus sacrifices to
obtain goods/services
offer

Ashish Singhal BIM Bangalore

 Perceived Value
Customers evaluate experiences as:

Dis-satisfaction -
Satisfaction 0
High satisfaction +

Such assessments impact future purchase

decisions and ongoing relationships with
organizations
Ashish Singhal BIM Bangalore
 Why Superior Customer Value?

 Designing and delivering superior customer value

propels organizations to market

leadership positions in highly competitive
global markets

Customer Value (CV) eliminates tradeoffs

customers face in the new economy

Ashish Singhal BIM Bangalore

 The Importance of
Superior Customer Value
Continual creation of business experiences to
exceed customer expectations
■ Value is a strategic driver
■ Global and domestic
businesses
utilize value for differentiation
Outstanding value: continued business
success (lifetime customers)
Ashish Singhal BIM Bangalore
 Companies Practicing CV
Focus on 9 Key Criteria
Innovation
Social Responsibility
Quality Management
Quality of Products and Services
Long-term Investment Value
Financial Soundness
Effective/Efficient use of Corporate Resources
Employees’ Skills/Abilities
The Constant Creation/Addition of Value
Ashish Singhal BIM Bangalore
Value-Driven Marketing Strategies
Assist in 10 Areas
Understanding customer choices
Identifying customer segments
Increasing their competitive options
Avoiding price wars
Improving services quality
Strengthening communications
Focusing on what is meaningful to customers
Building customer loyalty
Improving brand success
Developing strong customer brand success and relationships

Ashish Singhal BIM Bangalore

 Customers Seek…..
fair prices
acceptable/good value
valued business transactions/relationships
innovativeness
image status
value-added services
convenience in goods and outlets

Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY

 The S-Q-I-P Approach
Value is a combination of:

-> Service , Quality , Image, Price

■ Theservice factor must reign supreme in value-

creating organization.

The S-Q-I-P elements do not exist

independently; they involve tradeoffs
considering the costs of developing and
sustaining a leadership position
Ashish Singhal BIM Bangalore
 The SQIP Diamond
Service

Image VALUE Price

Quality

Ashish Singhal BIM Bangalore

 Customer Value:
Marketing Management Implications

Maximizing customer value is an evolving

challenge for service marketers:
Reasons:
New breed of smarter more demanding
customers
Increased competition resulting from
technology
Decreasing quality gaps and globalization
Ashish Singhal BIM Bangalore
 Marketing Management Implications
(cont’d)
Solutions:
Management must now focus on:
Using customer value-based decision-making
Stressing customer retention strategies
Finding a need to adapt more effectively and
efficiently to customers by adding new types of
value providers (adders)
Developing sound strategic responses to
changing business environment
Delivering superior value to customers!
Ashish Singhal BIM Bangalore
Purpose
The Value Matrix

High Well- Intentioned Value-Creating

Low Adversarial Bureaucratic

Low High
Process
Adapted from Capowski, G. (1995)
 The Value Matrix
A useful management tool for value creation

 Organizations should view themselves relative to their

competitors’ position on the matrix

Consists of 4 quadrants
Well-intentioned, Value-
creating, Adversarial and The value matrix maps
Bureaucratic an organization’s purpose
There is only one ideal for and process orientation
success
value-creating
Ashish Singhal BIM Bangalore
 CV = Purpose + Process

High in purpose - understanding business

and customers’ desires
High in process - knowing how to utilize
internal procedures to respond to
customers effectively and efficiently
Many organizations fail to master both
purpose (customer focus) and process
(customer support) activities
-> Why is this the case?
Ashish Singhal BIM Bangalore
The Value-Creating Organization
Organizations (along with individual employees)
should be seen as value-creating entities
Value-creating organizations solve individual
customer problems
A strong competitive edge can be gained by
consistently providing superior customer value
In order to create and deliver superior customer
value organizations must be strong in both
purpose and process.

Ashish Singhal BIM Bangalore

 Value Calculus
Perceived product
or service
attributes

Perceived
substitute product
or service
attributes Perceived benefits
Value =
Perceived price
Perceived product
or service price

Perceived
substitute product
or service price
 Value Creation Index
Innovation
Quality
Customer Relations
Management Capabilities
Technology
Brand Value
Employee Relations
Environmental & Community Issues

Source: Kalafut, P. and Low, J. (2001) “The Value Creation Index”,

Strategy and Leadership, Vol. 20, No. 5, 9-15.
How Southwest Airlines Creates
Superior Value

Clear Service
Focus

Process Recruitment
Mastery and Training

Treat Employees
as Customers

Maverick
Teamwork
Culture
How Starbucks Creates Superior Value

Service
Consistency

Roasting Recruitment
Technology and Training

Create the right

Store Atmosphere

Brand Treat Employees

Consistency as Partners
 Value Development
Exercise
Select one of the following businesses:
- Auto dealership
- Gas station/minimart
- Airline
- Mid-priced hotel chain (business travelers)
- Quick service restaurant (i.e., Wendy’s)
Prepare a 2-column chart with GOTS on the left side
and COSTS on the right side
Brainstorm ways to increase GOTS and reduce COSTS

Ashish Singhal BIM Bangalore