1. © 2008 by Nelson, a division of Thomson Canada Limited 1 Customer Behaviour A Managerial Perspective First Canadian Edition Jagdish N. Sheth Emory University Banwari Mittal Northern Kentucky University Michel Laroche Concordia University

2. © 2008 by Nelson, a division of Thomson Canada Limited 2 CHAPTER 13 Creating Market Values for the Customer

3. © 2008 by Nelson, a division of Thomson Canada Limited 3 Value Delivery Value delivery has two dimensions: Value delivery has two dimensions:  Effectiveness  Efficiency

4. © 2008 by Nelson, a division of Thomson Canada Limited 4 Dimensions of Value Delivery Efficiency (Resource conservation) POORGOOD Effectiveness (Need/Want Fulfillment) GOODEffectiveness Best Value POOR Poor Value Efficiency Value

5. © 2008 by Nelson, a division of Thomson Canada Limited 5 Tools for Creating Customer Value User ValuesPerformanceSocialEmotional Quality improvement Innovations Mass customization Warranties and guarantees Price exclusivity Limited availability Social image ads Exclusive offerings Emotional communications Payer ValuesPriceCreditFinancing Low price from lower margins Low price from increased productivity (achieved through economies of scale, modernized plant, automation, business process re-engineering) Acceptance of credit cards Offering of own credit card Deferred payment Leasing Customized financing Buyer ValuesServiceConveniencePersonalization Product display and demonstration Knowledgeable salesperson Responsiveness User support and maintenance service Convenient point- of-access Automated transaction recording Personal attention and courtesy Interpersonal relationships

6. © 2008 by Nelson, a division of Thomson Canada Limited 6 Creating Market Values for Users The user is primarily concerned that the product or service performs as desired and that its use delivers social and emotional benefits

7. © 2008 by Nelson, a division of Thomson Canada Limited 7 Performance Value Quality improvement Quality improvement Product innovations Product innovations Mass customization Mass customization Warranties and guarantees Warranties and guarantees

8. © 2008 by Nelson, a division of Thomson Canada Limited 8 R & D Leads to More Sales from New Products 0.010.071.63.3

9. © 2008 by Nelson, a division of Thomson Canada Limited 9 New Product Activity Leads to Gains in Market Share 0.01412

10. © 2008 by Nelson, a division of Thomson Canada Limited 10 Social and Emotional Values Prestige pricing Prestige pricing Limited availability Limited availability Social-image-based marketing communications Social-image-based marketing communications New exclusive offerings New exclusive offerings Emotional advertising Emotional advertising

11. © 2008 by Nelson, a division of Thomson Canada Limited 11 The types of value most important to payers involve low-cost and ease of making payments Creating Market Values for Payers

12. © 2008 by Nelson, a division of Thomson Canada Limited 12 Price Value To reduce price, companies can opt for two approaches: To reduce price, companies can opt for two approaches:  Accept lower margins  Reduce their own costs of production by improving productivity

13. © 2008 by Nelson, a division of Thomson Canada Limited 13 Low Price from Lower Margins The lower-margin approach consists of selling at a low-profit margin to attract customers The lower-margin approach consists of selling at a low-profit margin to attract customers  Strategic insight

14. © 2008 by Nelson, a division of Thomson Canada Limited 14 Low Price from Increased Productivity Economies of scale Economies of scale Modernized plant Modernized plant Automation Automation Business process reengineering Business process reengineering

15. © 2008 by Nelson, a division of Thomson Canada Limited 15 Credit And Financing Values Sellers may accept credit cards issued by third parties or banks Sellers may accept credit cards issued by third parties or banks Sellers may issue their own credit cards or give credit by other instruments Sellers may issue their own credit cards or give credit by other instruments Sellers may allow a delayed or deferred payment Sellers may allow a delayed or deferred payment

16. © 2008 by Nelson, a division of Thomson Canada Limited 16 In general, buyers are looking for good service before and after they make their selections In addition, they want their purchases to be convenient, not too time-consuming, and in a time and place that fits their schedule Creating Market Values for Buyers

17. © 2008 by Nelson, a division of Thomson Canada Limited 17 Service Value The service value is created by the distribution system The service value is created by the distribution system  Pre-purchase phase  Post-purchase phase

18. © 2008 by Nelson, a division of Thomson Canada Limited 18 Service in the Pre-purchase Phase Marketers can offer this value by: Marketers can offer this value by:  Having the product on display or ready for demonstration and/or for trial use  Hiring knowledgeable and responsive salespersons who can answer customer questions

19. © 2008 by Nelson, a division of Thomson Canada Limited 19 Service in the Post-purchase Phase Service in the post-purchase phase refers to all the assistance a marketer can provide to maintain the product use-ready Service in the post-purchase phase refers to all the assistance a marketer can provide to maintain the product use-ready  Product-use advice and support  Product maintenance

20. © 2008 by Nelson, a division of Thomson Canada Limited 20 Convenience Value and Personalization Value Convenient points of access Convenient points of access Automated transaction recording Automated transaction recording Interpersonal relationships Interpersonal relationships

21. © 2008 by Nelson, a division of Thomson Canada Limited 21 Measuring Value Delivery Find out what customers want Find out what customers want Organize to deliver those values Organize to deliver those values Measure how well, in customer perceptions, those values have been delivered Measure how well, in customer perceptions, those values have been delivered

22. © 2008 by Nelson, a division of Thomson Canada Limited 22 A Process for Determining Customer Value

23. © 2008 by Nelson, a division of Thomson Canada Limited 23 Assessment of the Customer’s Final Judgment The firm understands my needs and preferences well. I can trust the firm not to take advantage of me as a customer. The firm values and shows its appreciation for my business. The firm takes specific actions to keep me as a customer. I can identify myself with the firm’s products and its actions. The firm can count on me as its supporter. I enjoy dealing with the employees of this firm. I love this firm’s products. I love to do business with this firm. I expect to continue my relationship with this firm for a long time. Please rate the following statements on a 0-10 scale where 0 means you disagree entirely, and 10 means you agree wholeheartedly.