Best Notes on Customer Value

Customer Value: In this article, we are covering the second part of Customer Relationship Management Complete Notes which is important for different competitive exams like Business and Marketing Exams, Management and Leadership Exams, Information Technology Exams, Sales and Customer Service Certification Exams, MBA Entrance Exams, Industry-Specific Exams etc.

Notes on Customer Value

This is the second part of CRM Notes – Customer Value where we are going to cover Introduction of Customer Value, Components of Customer Value, Concept of Value in Business Markets, Customer Information, Benefits of a Customer Database, Customer Behaviour, Customer Behaviour in Relationship Perspective and Factors Influencing Customer Behaviour.

Introduction of Customer Value

Customer value is defined in the marketplace not in the factory or an agency. A small but growing number of companies in the markets draw on their knowledge of what customers value or they value to gain marketplace advantages over their less knowledgeable competitors. There is a market for offering as two elemental characteristics: its value and its practice.

Companies have to look at the changing basis for competition in today’s environment and for the future. This paper argues for being more customer-focused, not as a nicer, more socially acceptable way of life but because customer value is becoming a commercial imperative. We live in a world which is more dynamic than ever.

Businesses have always had to face competition, but at least in the past companies knew who their competitors were; they knew the competitors’ products and their strengths and weaknesses. All of the competition lay within established market sectors, and they were mostly, if not entirely, domestic. Indeed, it isn’t so far back when most were regional. Today, companies faced that has changed.

Competitors cross sector boundaries with increasing ease. For example, the distinction between banks, insurance companies, fast food companies become increasingly blurred, as does the distinction between such organizations and anyone else who has a large customer base and a strong financial position. In today’s world, music stars start airlines, or launch fast-food businesses or soft-drinks companies.

The products, competitors and markets are becoming increasingly globalized. However, basis for the competition is changing. It looks like an iceberg, on the surface; the features on which we compete are the same as ever: products, quality, price, service, and customer base and market access.

But if you look beneath the surface, you see that these features are now dependent on other issues – they are the product of culture, processes and systems, and the structure of our business. Products/services are obviously at the heart of competition. The problem is that they keep changing: our competitors will not stand still.

For example, product innovation is much more rapid than in the past. Product cycles are getting shorter, and products, even when delivered by global corporations, are getting more customized. New production and distribution even decision support systems make this possible, but systems development is closely aligned to what the market needs.

Components of Customer Value

The components of customer value are deceptively simple. Product quality, service quality, price, and image shape a customer’s perception of value. A firm’s strategy and performance in these areas are integrated by customers into a perception of the value proposition. This is particularly important for first time customers.

In this highly competitive business environment, the customer will compare the perceived value of competitive offerings. The ultimate “winner” in the battle for the customer’s pocket book is the firm that delivers the “best value” from the customer’s perspective.

Components of Customer Value
Components of Customer Value

Once a customer has made a purchase decision, a fifth component of value emerges. That component is the relationship between the customer and the vendor. Over time the relationship component can develop into an extremely important element.

Unfortunately, firms often have explicit strategies to develop the other four components of value but simply expect the relationship to happen naturally and spontaneously. Such an expectation can be unrealistic.

Each of these components can and should be broken down into much more detail to be managerially useful. Let’s use a full line department store as an example, since most of us have experience with such purchases. Product quality refers to the tangible features that a customer evaluates.

For a department store, product quality can be partitioned into two dimensions. One-dimension deals with the characteristics of the store itself. These characteristics would probably include location, accessibility, convenient parking, store design and layout, lighting, signs, fixtures, and furnishings.

The other product dimension would include characteristics of the products themselves. These would probably include characteristics such as variety and assortment of products in each area.

Other product mix characteristics might include the quality of the products, specific brands, and merchandise displays. In total, it may be possible for customers to identify thirty, forty, or even fifty different characteristics of the store and products that shape perceptions of value.

In addition to the product characteristics, service factors also shape value perceptions. These might include the availability, knowledge, and helpfulness of cashiers and clerks or the ease of making returns and exchanges. Service factors would also include the customer service issues of call centers, complaint handling, and information availability. Since products are often fairly homogeneous across competitors, these service factors have become increasingly important to customers in differentiating between competitors.

In fact, many managers feel that service factors are the only area to create a real competitive difference. Price factors would include everyday prices, sales prices, acceptance of credit cards, and promotional financing. Price might also include life cycle costs that the customer would incur such as maintenance, repair, and operating costs. Customers balance the product and service performance of a firm against these price considerations in some way to form perceptions of value.

Important Links
Join FREE WhatsApp Group for Exam Help
Join Our Telegram Channel for All Updates
Download Nishant eAcademy App
Courses & Test Series with Quality Content
Download Previous Year Question Papers
Subscribe to YouTube for Free Videos
Premium eBooks & Notes

Concept of Value in Business Markets

A number of aspects need to be considered in defining the concept of value in business markets. Christopher (1982) considers value in terms of the price a customer is willing to pay for a product offering, and points out that willingness to pay needs to be understood in terms of the set of perceived benefits that the product offering provides to a customer firm.

He relates this aspect of value to the notion of a customer surplus, which he expresses as the amount by which the monetary equivalent of the set of perceived benefits exceeds the price paid for it. Reuter (1986) introduces the notion of “usage value” which represents the value associated with the performance of the product in a given customer application.

As Reuter (1986, p. 79) writes, “Especially in industrial products, the value analyst is primarily concerned with use value—the performance and reliability of the product — rather than its existing value (based on prestige or aesthetics, cost value, or exchange value).” Usage value appears to be closely related to the concept of a product offering’s value-in-use (Wind 1990). Forbis and Mehta (1981) emphasize the aspect of competition in considering value.

They introduce the concept of “economic value to the customer (EVC),” which refers to the maximum amount a customer firm would be willing to pay, given comprehensive knowledge of a focal product offering and the other, available competitive product offerings. This suggests that customer firms consider the value of a product offering relative to alternative offerings.

In sum, the concept of value in business markets: is perceptual in nature and should be expressed in monetary terms; needs to be viewed with respect to the set of benefits that the customer receives from usage of the product offering; and is inherently framed against a competitive backdrop.

Thus, we define value in business markets as the perceived worth in monetary units of the set of economic, technical, service and social benefits received by a customer firm in exchange for the price paid for a product offering, taking into consideration the available alternative suppliers’ offerings and prices.’

Customer Information

The most often used information in a CRM database is the customer information. This can include personal information, such as contact addresses and phone numbers, as well as family size, location, and other demographic information. Many companies also use their CRM database to record purchase information, service calls, customer support needs, and even warranty information. Anything relative to customer interaction can be placed in a CRM database.

  • Customer information database includes personal information, such as contact addresses, phone numbers etc.
  • It also includes family size, location and other demographic information and geographical location.
  • CRM database to record purchase information, service calls, customer support needs, and even warranty information.
  • Customer related databases might be maintained in a number functional area; e.g., sales, marketing, logistics and accounts.
  • Customer Information Database
  • Databases might require quite different operational purposes
  • E.g.: Opportunities, campaigns, enquiries, deliveries and billing.
  • Customer related data can have a current, past and future perspectives, focusing upon current opportunities, historic sales or potential opportunities etc.

Information to be included in Customer Database

  • Contact names
  • Job title and job definitions
  • Demographic or psychographic information
  • Name of the company
  • Address
  • Methods of contact
  • Buying history
  • Sources of lead
  • Sources of sale
  • Special needs of customers

Benefits of a Customer Database

By using a customer database to keep in touch with, and market to, your customers, you can:

  • Increase awareness of your brand
  • Enhance marketing opportunities
  • Build and strengthen relationships between you and your customers
  • Build trust in your products and services
  • Increase your profits

Customer Behaviour

Customer or consumer behavior is the study of how individuals make decisions to spend their valuable resources (Time, money, effort) on consumption-related items. It includes what they buy it, why they buy it, where they buy it, how often they buy it, and how often they use it.

According to belch and belch “consumer behavior is the process and activities people engage in when searching for, selecting, purchasing, using, evaluating and disposing of products and services so as to satisfy their needs and desires.”

Customer Behaviour in Relationship Perspective

  • Understanding customer is the central part of the marketing process to know why a customer or buyer makes a purchase.
  • Without such an understanding, business will find it hard to respond to the customer’s needs and wants.
  • Some business still produces the product without knowing the importance of the customer.
  • Organization clearly understands the benefits wanted by customers, reasons for purchase, repurchase etc.
  • Importance of customer behavior
  • Production policies
  • Price policies
  • Decision regarding channel of distribution
  • Decision regarding sales promotion
  • Exploiting market opportunities
  • Customers do not always act or react predictably.
  • Consumer’s preferences are changing and becoming highly diversified.
  • Rapid introduction of new products
  • Implementing the ―marketing concept

Factors Influencing Customer Behaviour

Psychological Factors

  • Motivation
  • Perception
  • Learning
  • Beliefs and attitude

Personal Factors

  • Age and Life cycle stage
  • Occupation
  • Life style
  • Personality and self-concept

Cultural Factors

  • Culture
  • Sub culture
  • Social class

Social Factors

  • Reference groups
  • Family
  • Roles and status

FAQs on Customer Value

What is Customer information database?

It includes personal information such as contact addresses and phone numbers, as well as family size, location and other demographic information. many companies also use their CRM database to record purchase information, service calls, customer support needs, and even warranty information’s.

What is customer profile analysis?

The marketer builds up a customer profile that gives an indication of who might typically use their outlet. Customer profile is affected by the macro business environment.

What do you mean by customer database?

A customer database is most often used by businesses to gather customer contact details (with permission) and buying history, so information about products and services can then be sent to customers, or segments of customers.

What is meant by group customers?

Group customer are referred as industrial market which consists of all the individuals or organizations who acquire goods and services that enter into the production of other products or services that are sold, rented or supplied to others.

What do you mean by customer lifetime value?

Customer lifetime value (CLV), lifetime customer value (LCV), or lifetime value (LTV) is the net present value of the cash flows attributed to the relationship with a customer. The use of customer lifetime value as a marketing metric tends to place greater emphasis on customer service and long-term customer satisfaction, rather than on maximizing short-term sales.

Leave a Comment

error: Content is protected !!
Scroll to Top
Last updated: September 16, 2023 Updated on 9:25 AM