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CUSTOMER PERCEIVED VALUE VALUE PROPOSTION CUSOMER DELIVERED VALUE CUSTOMER LIFETIME VALUE VALUE CHAIN

Traditional Organization vs. Customer-Oriented Organization

Marketing and Customer Value

Marketing involves satisfying consumers' needs and wants. The task of any business is to deliver customer value at a profit. A company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value.

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Customer Value
It is defined as the difference between what a customer gets from a product, and what he or she has to give in order to get it. In order to generate more thought about customer value, and to reach out to a customer base, a business might promote a customer value proposition. The customer value proposition is basically a promise of benefits from a vendor to customers.

Customer-perceived value (CPV) is the difference between the prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives
Customer-perceived Value

Economic Evaluating Functional Obtaining Using Psychological


Total Customer Benefit Total Customer Cost
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Disposing

Total customer benefit is 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 cost 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 psychological costs.

Customerperceived value
Total customer benefit

Total customer cost

Determinants of Customer Perceived Value

Product benefit
Services benefit

Monetary cost Time cost Energy cost Psychological cost


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Personal benefit
Image benefit

Value Proposition

Volvo
Core positioning: Safety
Other benefits: Good performance Design Environmentally friendly

The value proposition consists of the whole cluster of benefits the company promises to deliver; it is more than the core positioning of the offering. For example, Volvos core positioning has been safety, but the buyer is promised more than just a safe car; other benefits include good performance, design, and safety for the environment. The value proposition is thus a promise about the experience customers can expect from the companys market offering and their relationship with the supplier.

Whether the promise is kept depends on the companys ability to manage its value delivery system. The value delivery system includes all the experiences the customer will have on the way to obtaining and using the offering. At the heart of a good value delivery system is a set of core business processes that help deliver distinctive consumer value.

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Value is Related to Customer Benefits Utility the want-satisfying power of a good or service Types of Utility Form Place Time Ownership

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Increasing Value to the Customer Raise benefits Reduce costs Raise benefits and reduce costs Delivering value often means substantial investment in infrastructure and capabilities. The company must become proficient at customer relationship management, internal resource management, and business partnership management.

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Customer relationship management follows the company to discover who its customers are, how they behave, and what they need or want. It also enables the company to respond appropriately, coherently, and quickly to different customer opportunities.

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Customer Loyalty
A deeply held 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 behavior.

Satisfaction
A persons feelings of pleasure or disappointment that result from comparing a products perceived performance to (or outcome) to expectations.

Customer Satisfaction

Expectations

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Customer Expectations

Previous purchases
Friends advice Marketers / competitors

Expectations

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Product and Service Quality Performance Conformance

Quality

Satisfaction

Profitability
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Customer Lifetime Value

Lifetime Value of a customer can be understood as the Total Profit estimated to result from an ongoing business relationship with a customer over the life of relationship. Goods and services with high lifetime value may justify comparatively higher marketing expenditure and or salesperson compensation or lifetime proceeds.

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Communicating Value in the Sales Message Product quality Channel deliverables (supply chain) Integrated marketing communications (IMC) Synergy between sales and marketing

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Communicating Value in the Sales Message Execution of marketing mix programs Quality of the buyer-seller relationship (trust)

Service quality
Salesperson professionalism

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Communicating Value in the Sales Message Brand equity Corporate image/reputation

Application of technology
Price

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The Value Chain


Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm has combination of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business.

These nine value-creating activities consist of five primary activities and four support activities.

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The Primary activities cover the sequence of: 1) Bringing materials into the business (inbound logistics) 2) Converting them into final products (operations) 3) Shipping out final products (outbound logistics) 4) Marketing them (marketing and sales) 5) Servicing them (service).

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The Support activities:

1) Technology development
2) Human resource management 3) Firm infrastructureare handled in certain specialized departments, as well as elsewhere. 4) Procurement and hiring

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