Unit 10 - Part 1: Value
What are the main elements of social value?
Network effects, preference formation, social capital, and social relationships.
Why is employee turnover so high among front-line workers?
One reason is that many are hired based on technical knowledge rather than attitude. People skills in customer service are often more important than aptitude.
In addition to social capital, what other element of social value is an important consideration?
Social relationships
What are the limitations of EVC usage in marketing?
Some customers may not believe our claims about our product, especially claims that purport lower life-time costs. Further, it ignores functional benefits that the product may provide.
What is total cost of ownership or life cycle cost?
The cost of owning a product over its entire useful life.
What is value generally defined as?
The difference between what a customer pays and the bundle of benefits he receives.
Why is customer management an important element of experiential value?
The experiential value a customer perceives in a product or service is often closely tied to the way the organization manages its customers.
What is the economic value to the customer?
The theoretical maximum price that a customer should be willing to pay for a product.
What is a network effect?
The value of a product or service for a customer increases significantly as more and more customers adopt it.
What is a good example of a design decision creating value to customers?
There are many of these. Think of the Model T Ford that was designed to be all black for all vehicles—people were attracted for this very reason. Think of Apple. They changed all earbuds and phones to a sleek white and gray.
How can companies use multi-attribute analysis?
They can use it to discern why some of their attributes are so low and improve their ratings on them. They could use it as an impetus for negative marketing campaigns to bring down the importance of an attribute or they could do in the inverse for something they do well on. They could determine they just need to target different customers.
Are companies generally delivering good quality experience?
They seem to think so. In fact, over 80% believe that they provide superior customer service. Their customers, however, think they are underdelivering, and one study found that only 8% of customers believe that organizations provide superior customer service.
How do marketers use multi-attribute models?
They use these simple frameworks to capture how consumers evaluate products with different features and gain an understanding of consumers' preferences for various attributes and brands.
Give an example of the network effect.
Think of YouTube. As it becomes a destination site, more and more people visit them, encouraging other consumers to upload their videos, which in turn provides even more positive feedback to viewers who visit the site.
How do companies create experiential value?
Through branding, design, customer experience & customer service, and/or emotional benefits.
How does design fit contribute to an improved experience?
Unique designs are a way to distinguish yourself as a company in an advertising setting. Further, it can be used to as very powerful tool to create value to a customer. People like things that look cool or sleek.
For each aspect of their marketing program listed below on the left, identify the most salient type of customer value from the choices on the right. Value calculator on the Peloton website to help you determine how much you could save on Peloton equipment/subscription over a gym membership- Resistance knob that will automatically adjust based on the instructor's recommended resistance during a class- Leaderboard to work alongside other members- Sleek modern design that mimics the look of cool racing cycles- Peloton branded apparel- Workout alongside others with a list of other users in class with you and the ability to text chat- Financing plans to spread out payments over 12, 24, or 36 months- Over 1000 classes across many exercise categories not tied to just the equipment you purchase-
Value calculator on the Peloton website to help you determine how much you could save on Peloton equipment/subscription over a gym membership-Economic Value Resistance knob that will automatically adjust based on the instructor's recommended resistance during a class-Functional Value Leaderboard to work alongside other members-Social Value Sleek modern design that mimics the look of cool racing cycles-Experiential Value Peloton branded apparel-Experiential Value Workout alongside others with a list of other users in class with you and the ability to text chat-Social Value Financing plans to spread out payments over 12, 24, or 36 months-Economic Value Over 1000 classes across many exercise categories not tied to just the equipment you purchase-Functional Value
What is increasing return to scale?
When a firm increases its resources by a certain percentage and output increases by a greater proportion.
What is an increasing return to scale and to what principle does it relate to?
When a firm increases its resources by a certain proportion and output increases by a greater proportion. This relates to the network effect.
When does a product have functional value?
When a product has the same economic benefits but also different features.
When does a product have economic value?
When a product provides tangible monetary savings either at the time of purchase or over its long-term use.
The functional value of a product to a customer is BEST understood by understanding the product's
functional benefits
Life cycle cost assessment is even more important in ______ settings where competitive pressures are a larger factor, and you may have to do more work to convince the customer that the lowest price doesn't mean the lowest cost per se when the life cycle of that product is considered.
industrial
Which of the following is NOT one of the variables included a basic calculation of customer lifetime value? profit or contribution margin during a period of time a discount rate across a period of time the period of time market capitalization of the company over a period of time retention probability during a period of time
market capitalization of the company over a period of time
The process by which a firm understands the needs of its customers through market research is described as _______; by contrast, the process by which a firm creates its own products based on its own vision of the future is described as ____________ .
market-driven; market driving
Customer value has two sides: capturing value through customer ____________ and delivering value through customer_____________.
profitability; experience
Customer __________ is the percentage of customers who stay with a company in a given period, while customer __________ is the percentage of customers who leave a company within a given period of time. Answer 1:Correct!retention rate Answer 2:Correct!churn rate
retention rate; churn rate
The group of customers who receive high value from customer experience and who provide high value to the company are referred to as
star customers
EVC has three important concepts, which are:
(1) It is the max price a customer is willing to pay for a product and therefore a company should charge less than this to incentivize switching to this product. (2) It is calculated based on the total life cycle cost that includes purchase and after purchase costs, so it is critical to compare products on the same time frame. (3) It is relative, not absolute, and is estimated based off of existing products used by the customer.
Which of the following statements about economic value to the customers (EVC) is FALSE? (note, we could also call this total economic value or TEC - same thing) Any two customers will derive the same EVC for the same product. EVC is the maximum price that a customer should be willing to pay for a product. EVC is calculated as the total life cycle cost or cost of ownership over the entire life of the product When comparing two products, it is important to compare them on the same time frame A firm generally charges less than EVC in order to provide some incentive to the customer to switch
Any two customers will derive the same EVC for the same product.
Why is social value an important value?
Because consumer preferences are constructed and heavily influenced by their peers, as research has documented.
What does social capital afford consumers?
Boasting rights and money (think Instagram Influencers)
From the customer's perspective, why does branding create value?
Branding signals quality, status, and image, which contribute to the psychological value added to the customer and allows the prices for strong brands to exceed price increases justified by the increased cost of superior quality alone.
How can organizations close the gap between their perception of good service and the actual experience of customers?
By establishing employee satisfaction. Employee satisfaction stems from high-quality support services and policies. Satisfied employees use these services and policies to deliver value to the customer. This is known as the concept of service-profit chain. Thus, organizations should attend to the needs of front-line employees, product offering, and how they manage customers.
Which method for building experiential value is most likely to have the most variability for consumer-based service organizations such as hotels and restaurants? Customer Service Features Functions Design Branding
Customer service
Because technology is allowing companies to cut costs, what must companies be careful to avoid when offloading tasks to customers?
Don't make the tasks to difficult. Keep it simple.
What are the major marketing implications of EVC?
EVC can be used as a powerful basis for segmentation and targeting customers. It can be useful for introducing new products and determining their positioning against existing products.
What are the types of customer value?
Economic, functional, social, and experiential
Why are emotional benefits so important for customer experience?
Emotional bonds are important to customers and emotional value is difficult to create, so it adds a distinct competitive advantage.
Regarding product offerings, how do firms usually respond to increased competition and what is the result of this?
Firms often add more offerings and/or increase the complexity of offerings that are very difficult for front-line workers (and even upper management) to understand. Some firms offer fewer, simpler product offerings to assuage this tendency.
Why do consumers have the tendency to create and suggest content for firms?
First, consumers want to reciprocate the benefit that a site's content provides. Second, users feel empowered by offering ideas and suggestions. Third, consumers build social capital through such actions.
Who is most responsible for delivering superior customer service?
Front-line employees who often have the least compensation and the least training.
How can retention of front-line employees be improved?
Hiring practices for one. Additionally, the respect, training, and benefits given to the employees are also key elements of employee retention.
What is experiential value?
Intangible psychological and emotional value that can be derived from brands or great service.
Why is customer service and customer experience an important value-creating tool?
It can be the source of significant competitive advantage to your organization and aid in the process of helping your product or organization stand out by cultivating a certain customer experience.
What are the limits of the multi-attribute model?
It is compensatory in nature (one bad feature can be made up for by a good feature), but most customers shop in a non-compensatory fashion. A conjunctive model or another model that accounts for the fact that a consumer will not choose a product unless it meets a minimum threshold level on all attributes. Second, consumers make tradeoffs but don't always know how to articulate them into a multi-attribute analysis. Also, features are not benefits—they provide them. Features wars can arise from too much emphasis on functional value.
What is the concept of feature fatigue?
It is the concept that as features are added to a product offering the perceived capability of the product is increased, but perceived usability decreases. Prior to use, capability appears to matter more to customer, but customers place greater emphasis on usability.
What does preference for a brand (j) equal in a multi-attribute analysis?
J = Σ (importance of attribute i)∙(rating of brand j on attribute i)
With respect to the customer needs-offering process, what type of process was used when Steve Jobs created products prior to conducting research?
Market-driving
