Customer Value
Customer value refers to the perceived benefits that a customer receives from a product or service in relation to the cost incurred. It encompasses the overall satisfaction, utility, and worth that a customer derives from their purchase. Understanding and delivering customer value is essential for businesses to attract and retain customers, and to differentiate themselves in the market.
8 Key excerpts on "Customer Value"
eBook - ePubValue-based Marketing Strategy
Pricing and Costs for Relationship Marketing
- Santiago Lopez(Author)
- 2016(Publication Date)
- Vernon Press(Publisher)
...Chapter 3 The Value Concept 3.1 Definition of Value The concept of Value bridges marketing and economics into one framework useful for developing strategy and setting prices. From a marketing standpoint, Value can be defined as the set of benefits perceived by the customer in relation to the price and effort invested in obtaining it 22. Consumers only buy products that have Value for them. It is worth noting the difference between Value and positioning: Value expresses a logical relationship between benefits and price; and positioning, although it contains the same elements, simply refers to the image, or perception, of a product, brand or firm. The current trend is that sales should not ignore the customer´s needs in a quick and fleeting exchange of money for product (transactional marketing); what is really sought is to establish a long-term relationship that simultaneously benefits the customer and the company (relationship marketing). The reason is that securing new customers costs more than retaining them 23 ; it is not enough to just satisfy their needs, a step forward is required: retaining them long-term must be achieved (customer loyalty); this is the purpose that links relationship marketing with the concept of Value. A key issue in relationship marketing is that a product´s price must achieve customer loyalty, and be justified by the benefits it offers. This is only possible with a clear understanding of his needs, habits and preferences; thus, the product must satisfy them, without losing sight of the market context, the competition and the goals of the firm. Value may be represented as follows 24 : Value is the relationship between the sum of all the perceived benefits with the price and effort required to obtain the product...
eBook - ePubMarketing and Logistics Led Organizations
Creating and Operating Customer Focused Supply Networks
- Robert Mason, Barry Evans(Authors)
- 2017(Publication Date)
- Kogan Page(Publisher)
...Indeed, this is how many companies promote the term – for instance ‘Great Value’ is a top-selling sub-brand for Walmart in the United States: ‘as good as the national brand equivalent but cheaper’, the company argues, as there is no advertising or marketing expense to accommodate. But again, is there not more to what customers value than just a cheaper price or perceived great deal? So what is really meant by the term Customer Value? Below we highlight 10 ‘Customer Value fundamentals’ which help to throw more light on the understanding of what Customer Value may be and what it is not. The 10 Customer Value fundamentals 1 Value is all about the estimated perception of the customer The first fundamental is that value is always purely derived from the customer’s perceived estimation of what they deem a product or service to be worth. Jones (2007) encapsulates this, arguing that value is how much utility a product gives a customer, which is how well it satisfies their desires or demands. Bowersox, Closs and Stank (2000) argue something similar, proposing, ‘Value is the measure of desire for a product and its related services.’ Dolcemascolo (2006) states, ‘Value is that which gives a product worth in the eyes of the customer.’ But how does the customer perceive what the worth of a product or service is to them? Well, it is argued that the worth of a product or service can be viewed as being derived from a combination of two factors: the perceived benefits a product or service provides and the degree of perceived sacrifices or costs deployed in obtaining it. Potential benefits can clearly come in many forms, such as from the product or service itself, the service received in association with the securing or use of the product or service, the personnel involved in the retail of the product or service, or the image of the product or service. Potential sacrifices can also come in numerous ways...
- Callie Daum, Vibrant Publishers(Authors)
- 2020(Publication Date)
- Vibrant Publishers(Publisher)
...The total customer cost is, in its entirety, the money, energy, intellectual time, and time related to the marketing offer. This is an important equation to know because it can be used to help succeed in selling products and services. The organization can look at improving the total Customer Value by increasing the benefits of the product, service, personnel or image. It can reduce the total customer cost buy decreasing the energy, time, and intellectual time. Or, it can it can reduce cost of the product or service to help with increasing sales or in the long term reduce operating costs with value passed on to the customer. Organizations utilize Customer Value assessments to better understand the Customer Value by looking at the customer’s wants, needs or expectations. The assessment looks at things like: • Do customers prefer the solution the organization is offering? • Are customers getting what they want when they want it from the organization? • Is the financial value attractive that the organization provides? • Does the customer think the organization is important? If an organization wishes to deliver a higher value add to the customer, it can lower the price which increases the value delivered to the customer and therefore increases the incentive to purchases. This delivered value is essentially a profit given to the customer. Some marketers argue that not all buying behavior can be rationalized. In these cases, this type of behavior can be explained by things like: • Loyalty to long term relationships • Lowest price seeking • Low level of funds Ultimately, buyers operate under different limitations that can affect their behavior that cannot be explained by the model mentioned above. Customer Satisfaction Customers development their own judgements of value and what the value of a product or service is to them. Looking at customer satisfaction, they customers actually look at how well a product or service performs for them according to their expectations...
eBook - ePubA new era of Value Selling
What customers really want and how to respond
- Thomas Menthe(Author)
- 2019(Publication Date)
- tredition(Publisher)
...Considering the TCO of an offering is different than looking purely at the purchase price of a product plus its attached maintenance contract costs. Therefore, the TCO needs to be analyzed for the customer during the value selling process. The role of marketing to create value for its customers is the key to delivering superior products and, as Rust et. al among others declare, this can deliver superior value to firms’ shareholders in consequence (Rust et al., 2000) and, more importantly, create satisfied and loyal customers, who want to place future purchases with the seller (Rust & Zahorik, 1993). 2.2 Value of Goods and Relationships In their research (2005), Lindgren and Wynstra investigated value in business markets from the perspective of business marketing, purchasing and supply management in respect to two aspects: the value of goods and services, as well as the value of buyer-supplier relationships. The research stream of value of goods and services found different definitions for value such as: Value is the quality a person gets for price or value is what one gets for what they give. Competitive advantage is the capability to attract customers with offers that the buyer perceives as providing superior value against competitors’ offers and customers will buy from those competitors that they assume offer the best value. The product’s perceived value is defined by Dodds & Monroe as: Vendor's product minus product price minus costs of owning/using it. These offerings must consider value not only in non-monetary terms but also also primarily in monetary terms. Other researchers examined the concept of relationship value regarding the economic value of customers, since buyer and supplier companies do not only do business because of value from goods and services, but because of a firm's reputation, innovation capacity, expertise or market leadership...
eBook - ePubProfit Maximization Through Customer Relationship Marketing
Measurement, Prediction, and Implementation
- Lerzan Aksoy, Timothy Keiningham, David Bejou, Lerzan Aksoy, Timothy Keiningham, David Bejou(Authors)
- 2014(Publication Date)
- Routledge(Publisher)
...Strategies for building loyalty include specialized customer service, customized product offerings, personal interactions, and added product or service benefits, particularly as surprises and delights (Collinger 2003). We close this section by connecting the elements of loyalty to Customer Value. Figure 1 posited a “value chain” from loyalty to purchasing, to Customer Value to company performance. The link between brand loyalty and Customer Value can be isolated and expanded as follows: What Consumers Have or Make… What Company Offers or Gets… Brand affinity or commitment Product offerings Purchase behavior Revenue from sales Individual-level Share of wallet Market-level Market share Brand or company relationship Customer Value A key connecting point is that both loyalty and Customer Value are centered on the idea of relationships over time. Brand loyalty rests upon a commitment to buy over time and Customer Value represents the financial inflow to a company from repeat purchases. Implicit in the abundance of research and writing about brands, brand loyalty and brand equity over the past years is the idea that brand or customer loyalty translate directly into financial performance. One of our objectives is to make that connection more explicit and conceive of loyalty as it pertains to Customer Value. Customer Value The value of a customer can be partitioned into two parts, the value realized in the past and future. Customer long-term value (CLV) of a customer has been defined as “the present value of the future cash flows attributable to the customer relationship over the lifetime of that relationship (Pfeifer and Bang, 2005, p. 49).” The idea of CLV is to quantify how much profit the firm expects to make from some customer in the future. Historical value quantifies the profits a customer has generated in the past. We use the term “long-term” rather than “lifetime,” which is used by many other authors, for two reasons...
eBook - ePubMalcolm McDonald on Marketing Planning
Understanding Marketing Plans and Strategy
- Malcolm McDonald(Author)
- 2016(Publication Date)
- Kogan Page(Publisher)
...Unfortunately, despite exhaustive research by academics and practitioners around the world, this elusive concept has proved almost impossible to pin down: what constitutes [customer] value – even in a single product category – appears to be highly personal and idiosyncratic. Nevertheless, the individual customer’s perception of the extra value represented by different products and services cannot be easily dismissed: in the guise of measures such as customer satisfaction and customer loyalty it is known to be the essence of brand success, and the whole basis of the new science of relationship marketing. Accounting value Finally, there is the accountant’s definition of value added: Value added = sales revenue − purchases and services Effectively, this is a snapshot picture from the annual accounts of how the revenue from a sales period has been distributed, and how much is left over for reinvestment after meeting all costs, including shareholder dividends. Although this figure will say something about the past viability of a business, in itself it does not provide a guide to future prospects. One reason that the term ‘value added’ has come to be used rather carelessly is that all these concepts of value, although different, are not mutually exclusive. Porter’s value chain analysis is one of several extremely useful techniques for identifying potential new competitive market strategies. Rappaport’s SVA approach can be seen as a powerful tool that enables managers to cost out the long-term financial implications of pursuing one or other of the competitive strategies that have been identified...
eBook - ePubCustomer Relationship Management
A Global Perspective
- Gerhard Raab, Riad A. Ajami, G. Jason Goddard(Authors)
- 2016(Publication Date)
- Routledge(Publisher)
...This should be a consideration when calculating the lifetime value of customers. Obviously, customers do not necessarily have to follow each step in succession, as a dissatisfied customer may opt to stop doing business with a given firm after their first transaction. In such situations, if the firm had spent more time understanding the benefits that a customer desires, there might not have been such a gap between the product or service offered, and what was expected by the customer. Thus, a key component in calculating CLV is the mindset of the customer. The customer mindset is defined as everything that is in the customer’s mind concerning the firm (Berger, et al, 2006, pp. 156–167). Since the customer’s mindset determines customer behavior, it is of paramount importance for a customer-focused company to understand as many aspects of the customer’s mindset as are possible. While marketing does help to shape the customers’ opinions about a given brand or company, firms must strive for finding the proper balance between marketing expenditure and firm profitability. If too many marketing dollars are spent on a percustomer basis, the profitability of the firm could erode. Once again, it is clear that having good intelligence concerning the desires and expectations of the customers will improve the profitability and duration of the relationship between the firm and the client. The mindset of the customer can best be described using the ‘five As’ as is itemized below: awareness association attitude attachment advocacy Awareness is here defined as the ability of the customer to recall the brand, and to generally recognize the firm’s products and services. Association deals with the customer’s perceptions of the uniqueness, strengths, and benefits of a product or service. This influences the customer’s attitude concerning the product or service. A positive attitude is defined as having a positive opinion with regards to quality and satisfaction of a product or service...
eBook - ePubCustomer Lifetime Value
Reshaping the Way We Manage to Maximize Profits
- David Bejou, Timothy L. Keningham, Lerzan Aksoy(Authors)
- 2013(Publication Date)
- Routledge(Publisher)
...Customer equity includes: Value Equity-the customer's objective assessment of the utility of a brand. This assessment is driven by the product's quality, price and convenience. Brand Equity-the customer's subjective and intangible assessment of the brand built through image and meaning. This assessment is influenced by brand awareness, the consumer's attitude toward the brand, and the firm's corporate citizenship. Relationship Equity—a subjective predisposition to stay with a brand because of its familiarity, difficulties of switching, or a trust in the brand's sales staff. The components of customer equity are in essence proposed to be the key drivers of a firm's efforts to improve customers' CLV. They provide an action component for each strategy: how to leverage aspects of the customer and brand experience to grow customers in the way that is desired. In other words, they are levers to migrate customers using one or more of the six implementation strategies. Prioritization among the customer equity components can be made based on the ROI calculated for each component. An assumed "take" (probability of migration on the part of customers) will have to be used to calculate the impact on greater spending and consequently an improved CLV. The three components of customer equity can then be rank-ordered according to the potential impact from improvements on each. Conclusion Customers are the preeminent assets of any firm: the source of all profits. Unfortunately, most of a firm's customers do not produce an ac ceptable rate of return. Therefore, knowing which customers represent the best assets to the firm is critical to effective strategy development, and ultimately to maximizing profitability. Customer lifetime value analysis provides the critical metric for correctly identifying a company's best customers...
