Session Two: Customer Value

1. Session Two:Customer Value Presented By Dr. Mark Moon To MACC Program Sept. 28, 1999

2. Objectives • To define value through the customer’s eyes • To understand the customer value hierarchy, its levels and the linkages between them • To address the strategic and managerial advantages of thinking in terms of a value hierarchy

3. The Customer Value Determination Process Select Target Customers Identify Customer Value Dimensions Determine Strategically Critical Value Dimensions Predict Customer Value Change Determine Customer Satisfaction With Value Delivery Explore Causes of Value Delivery Problems Develop/Implement Action Plans

4. How Is A Value Judgment Created? The User and His/Her Goals Use Situation Or Occasion Product/ Service Value Judgment

5. Therefore, Customer Value is Dynamic Changes In Value Over Time Positive Value Neutral Value Time OT1 OT2 OT3 OT4 OT5 OT6 OT7 OT8 ... Negative Value Pur- chase Valuation Devaluation Valuation OTi = Occasion Trigger

6. The Customer Value Hierarchy The Customer’s Desired End States ~Focus is on the user’s core values, purposes and goals ~Tend to be few and “long term” in nature. The Consequences of Product Use ~Focus is on the user-product interaction ~Customer’s subjective opinion of what the product does for him/herself or organization ~Both positive (benefits) and negative (sacrifices) ~Tend to be “short term” in nature, as they are tied specifically to product use Attributes ~Focus is on the product/service ~Product/service components, features, or characteristics ~ Tend to be fairly objectively defined

7. Example of a Customer Value Hierarchy for Salsa Good Parent Desired End States Enjoy Life Take Good Care of Family Good Health Frugal Enjoy with Others Feel Good Convenient Saves Me Money Nutritious Consequences Tastes great Pleasing to the eye Quick snack No Waste Low Fat Spicy Wide mouth jar Thick Fresh Ingredients Consistency Between Jars Attributes Variety of ingredients Price

8. Business-To-Business Value Hierarchy Desired End States We don’t surprise our customers Profit Enjoy doing business Creating more business opportunity No surprises I won’t push as hard during negotiations We’re on the leading edge They’re with us in hard times as well as good Increases our product quality Consequences Helps promote our products I feel comfortable picking up the phone Helps reduce our set up time Consistent Products Understands Where We Are Going Product/Service Availability Responds To Our Problems Brings Us Leads Attributes Price Listens Stretches With Us Financially Hands On Relationship Open Communication Technical Support

9. National Public Accounting Firms’ Value Hierarchy for Future Employees Desired End States Survive and thrive Customer loyalty Individual personal success Broadened customer relationship Flexibilty to retool and evolve over time Better answers to customer problems Ability to price our product to its value Less litigation Consequences Thought leaders Ind. Can hit the ground running New product service oppy Saves us time and money in training Not afraid to be more than acct Move away from commodity products Broad-based business acumen Appreciates diversity Attributes Interest in operational matters Big picture thinking Global perspective

10. National Public Accounting Firms’ Value Hierarchy for Future Employees Desired End States Client loyalty Career/job satisfaction More money to UT More bottom line for customers More bottom line for us Expands our business Decreased turnover Broadens customer relations Takes us into strategic stages of customer world Increased personal efficiency Better answers to customers Good, dedicated people Create more services Consequences Differentiate us from competitors Thought leader Experts Trusted advisor to client Increased org efficiency Effective use of information Problem solver Creative - think out of box Efficient Attributes Good listener Can use technology for per. development and problem solving Flexible Open minded

11. Customer Value Results From Consequence Trade-Offs Perceived Benefits Perceived Value Perceived Sacrifices Psychological Stress Money Time Risk Mental Effort

12. Managerial Implications of the Customer Value Hierarchy • An attribute-only perspective is insufficient. Managers who have a clear understanding of the entire value hierarchy will 1) be better able to meet consumer needs and 2) have better criteria for comparing the merits of alternative product offerings. • It suggests a “top down,” rather than a “bottom up,” approach to decision making, including new product development, communications strategies, distribution, etc. • As a decision making target, the higher levels of the hierarchy are relatively more stable than the lower levels. • Attributes tend to focus on current offerings and improving them, whereas higher levels of the hierarchy encourage different, creative approaches to fulfilling consumer needs.