Customer Value,Satisfaction

and Relationships
Session 2
 What is Customer Value?

Tuesday, June 20, 2017 2

 Communicating Customer Value
PRODUCT-ORIENTED MARKET-ORIENTED
VISION/MISSION VISION/MISSION
STATEMENTS STATEMENTS
COMPANY
We sell lifestyle and self expression;
Revlon We make cosmetics. success and status;
memories, hopes and dreams.

Disney We run theme parks. We provide fantasies and

entertainment -- a place where
America still works the way it is
supposed to.

We offer products and services that

Wal-Mart We run discount stores.
deliver value to middle Americans.

Tuesday, June 20, 2017 3

 Value for Rich Vs Value for Poor-Are they same?
Item Dharavi Warden Road Poverty Premium
(a higher income
(a slum in Mumbai) neighborhood in
Mumbai)

Credit
(Annual Interest) 600-1,000% 12-18% 53.0

Municipal grade water

(per cubic meter) $1.12 $0.03 37.0

Phone Call
(Per minute) $0.04-0.05 $0.025 1.8

Diarrhea medication
$20.00 $2.00 10.0

Rice (per Kg)

$0.28 $0.24 1.2
Tuesday, June 20, 2017 MM1_Section E_MK 101 44
 Customer Value and Firm Profitability

Customer Value

High Low

High Market Skimming Short-term

e.g. Apple Iphone 6

Profitable

Exit
Low Market Penetration
Mobile airtime service

Tuesday, June 20, 2017 5

How to create value for customers?

Tuesday, June 20, 2017 6

 Fair & Lovely

Tuesday, June 20, 2017 7

 Where is the customer value?
•A young, dark-skinned girl’s father laments
he has no son to provide for him, as his
daughter’s salary was not high enough – the
suggestion being that she could not get a
better job or get married because of her dark
skin.
•The girl then uses the cream, becomes
fairer, and gets a better-paid job as an air
hostess – and makes her father happy.
Tuesday, June 20, 2017 8
 Where is the customer value?

A poor woman using Fair & Lovely “has a

choice and feels empowered because of an
affordable consumer product formulated for
her needs.”
Hammond and Prahalad (2004)

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 How to create value for B2B
customers?

Tuesday, June 20, 2017 10

 Can your suppliers build value
propositions
• Value propositions
– All Benefits- most simple statements of
benefits
– Favorable PODs- Assumes Comparative
Value (eye on competition not customer)
– Resonating Focus- requires Customer value
research (eye on customer)

Tuesday, June 20, 2017 11

 Customer Value Model
• Price based competition among suppliers-Sign of weak
customer relationship
• Case Study :
– An IC company’s supplier give 10 cent discount to
match competitor suppliers’ price.
– Salesperson said his value proposition was service.
– The supplier firm’s value was eroded….

Where did the supplier salesperson go wrong?

Tuesday, June 20, 2017 12

 Tata Steel Case Study
• Tata Steel was shipping large tonnages of steel coils to
the wheel manufacturer located about 1,500 miles away
resulting in significant freight costs.

• Steel being a commodity was under constant pricing

pressure in the market.

How can Tata Steel as a supplier make

profits from selling to its customers?
Tuesday, June 20, 2017 13
 Customer Value Management

• The two firms decided that it was more appropriate to punch the
steel coils to obtain ‘doughnut-shaped’ blanks at Tata Steel and ship
the blanks to the customer.

• Both firms decided to locate the punching presses at Tata Steel’s

facility leading to a reduction in freight costs by over 75 per cent.

• The width of the coils was changed to optimize the production of

blanks and a more advanced method of punching was used to
generate maximum number of blanks with minimum scrap
generation.

• This built in high switching costs since a lot of customization of the

value chain had been implemented.

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Tuesday, June 20, 2017 15
 Ad analysis

Tuesday, June 20, 2017 16

 Microfridge Discussion

Tuesday, June 20, 2017 17