Week 4
Welcome to BUS 529
Marketing Management
Instructor: Dr. Larry Sau Kei Leung
Marketing Management BUS529
Traditional Vs Customer-Oriented Organizations
⚫Is the difference between the prospective
customer’s evaluation of all the benefits
and all the costs of an offering and the
perceived alternatives.
Customer perceived value (CPV)
⚫Is the perceived monetary value of the
bundle of economic, functional, and
psychological benefits customers expect
from a given market offering.
Total customer value
⚫Is the bundle of costs customers expect to
incur in evaluating, obtaining, using, and
disposing of the given market offering
(e.g. monetary, time, energy, and psychic
costs.)
Total customer cost
Customer perceived value = difference
between what the customer gets and what
he or she gives for different possible
choices.
Customer perceived value
calculation
Determinants of Customer
delivered Value
Raising
functional or Reduce Various
emotion types of costs
benefits
How do marketers increase
perceived value?
⚫V1 Vs V2
⚫Choose V1 if V1:V2>1
⚫Choose V2 if V1:V2<1
⚫Indifferent (Not interested) if V1:V2=1
How do customers choose Value 1
and Value 2 ?
⚫Customers will compare the offers and
estimate which offer will deliver the most
perceived value and act on it.
Customers are value maximizers
Not concerned about
Too Rational
buyer-seller relationships
Perceived value varied in
Purchase the item under
different personal
external pressures
situations
Criticism of perceived value
You either
⚫Increase total customer value
⚫Decrease total customer cost
What would you do if you are
disadvantaged in the market?
Home Depot
⚫https://www.youtube.com/watch?
v=9SRYQApB3k4
Case Report 4
⚫A deeply held commitment to re-buy or
re-patronize a preferred product or service
in the future.
⚫To generate high customer loyalty, deliver
superior customer value is essential.
What is Loyalty ?
⚫ The whole cluster of benefits the company
promises to deliver
⚫ Itis more than the core positioning of the
offering.
⚫ About the resulting experience customers will
gain from the market offering
⚫ It should be specific, pain-focused and exclusive
Value Proposition
⚫We help (X) do (Y) by doing (Z)
⚫E.g. We help our local customers to feel
good and do good by fueling them up with
artisanal coffee in a community-focused
space.
Something like this…
⚫Includes all the experiences the customer
will have on the way to obtaining and
using the offering.
A Value-delivery system
⚫Can customers always receive promised
value?
⚫What factors will determine the successful
delivery of promised value?
Think about it…..
⚫ Itis a customer’s feelings of pleasure or
disappointment resulting from comparing a
product’s perceived performance (or outcome)
in relation to his or her expectations.
⚫ Companies do not necessarily need to achieve
the highest satisfaction in customers. Do you
know why?
What is satisfaction?
Past buying experience Friends
Marketers and
Associate’s advice Competitiors information
& promises
How do customers form
expectation?
Stay loyal longer Buy more Talk favorably
Pays less attention
Less sensitive to Costs less to serve
to competing
price than new customers
brands
Why customer satisfaction?
⚫Low level – Abandon and bad-mouth the
company
⚫Middle level – Easy to switch when a
better offer comes along
⚫High level – Likely to repurchase and
spread good word of mouth.
How do customers react at
different levels of satisfaction?
⚫What is product or service quality?
⚫Is the totality of features and
characteristics of a product or service that
bear on its ability to satisfy stated or
implied needs.
Satisfaction depends on product
or service quality…
⚫Whenever the seller’s product or service
meets or exceeds the customer’s
expectations.
⚫A company satisfies most of its
customers’ needs most of the time is
called a quality company.
The seller delivering quality
means…
⚫Is an organization-wide approach to
continuously improving the quality of all
the organization’s processes, products,
and services.
Total quality management (TQM)
•Product or service quality
•Customer Satisfaction
•Company profitability
These are highly related…
⚫A profitable customer is a person,
household, or company that over time
yields a revenue stream that exceeds by an
acceptable amount of company’s cost
stream of attracting, selling and servicing
that customer.
⚫Focus on lifetime stream of revenue and
cost, not on the profit from a particular
transaction.
Who is a profitable customer ?
⚫Describes the net present value of the
stream of future profits expected over the
customer’s lifetime purchases
⚫Help plan customer investment and adopt
long-term perspective.
Customer life-time value (CLV)
⚫The total of the discounted lifetime values
of all of the firm’s customers.
⚫The more loyal the customers, the higher
the customer equity
⚫Value equity, brand equity and relationship
equity are drivers of customer equity.
Customer Equity
• Customer’s objective assessment of the
Value Equity utility of an offering based on perceptions
of its benefits relative to its costs.
• Customer’s subjective and intangible
Brand Equity assessment of the brand, above and
beyond its objectively perceived value
Relationship • Customer’s tendency to stick with the
brand, above and beyond objective and
Equity subjective assessments of its worth.
Three customer equity drivers
Brand
Management
Value Relationship
Management Management
Integrated Management
Approach
⚫ Customer relationship management (CRM) is a
technology for managing all your company's
relationships and interactions with customers and
potential customers.
⚫ The goal is simple: Improve business relationships. A
CRM system helps companies stay connected to
customers, streamline processes, and improve
profitability.
⚫ Watch
this video https://www.youtube.com/watch?
v=sQD7kaZ5h0s
Customer Relationship
Management
The end of Week 4
