•Different

Customer Roles
•How to Create Value for all these Roles
SECONDARY ACTIVITIES
Firm Infrastructure
Human Resource Management
Technology Development M

Consumers
Service a
Inbound r
Operations Marketing
Suppliers

Logistics (After g
& i
Outbound Sales &
(Manufacturing Sales n
(Raw - Logistics Personal
or
Material & Attention
Processing) (Distrbn.)
Spares) During
Sale)
PRIMARY ACTIVITIES
 Traditional Physical Process Sequence
Make The Product Sell The Product

Design Advertise/
Procure Make Price Distribute Sell Service
Product Promote

Value Creation & Delivery sequence

Choose / Envision Value Provide / Deliver Value Communicate- Value

Custom- Target Value Mkg

Pdt. Serv Pric Pers. Sales
er Segm- Market- Positi- Mix Mfg. Distr Advtg
entation Dvlpt. Dvlp ing Sales Promn
ing oning Plng.

Strategic Marketing Tactical Marketing

 Value = benefits – cost
 or
 Value = benefits/costs

 Customer Delivered Value =

 Total customer benefits – Total customer
costs.

 Customer will buy a product that he perceives to

be providing highest value.
 On a broader perspective, customer and
consumer are the same.
 In reality, person who purchases need not be
the consumer.

 A customer is a person or an organizational

unit that plays a role in the consummation of
transaction with a marketer or can be the
user also.
 A customer can play three different role in
transaction (Seth & Mittal)
 Businesses

Households Mental Buyer

Users
Activities s
Consumers
Physical
activities
Behavior Payer
s
Customer
types Roles
 Three Roles of the Customer

 The User – the person who actually use the

product or receive benefits of the service.

 The Payer – the one who finances the

purchase.

 The Buyer- the person who procure the

product from the market place.
 Role Specialization – dividing the role
between the above three.
 User is neither payer Nor buyer – Baby

food, Pet foods, gift items etc.

 User is payer but not buyer – Shares,

Travel services, Institutional buying

 User is buyer but not payer- Sponsorships,

Insurance reimbursements
 User is buyer and payer- small business,

restaurants & pubs, FMCG (bought for own

use)
 Customer Delivered Value =
 Total customer benefits – Total customer
costs.

 Customer will buy a product that he perceives to

be providing highest value.
 Derived from comparing a product’s perceived
performance vis-à-vis the expectations.

 When the performance fall below expectations,

the customer gets dissatisfied.
 Customer = User + Buyer + Payer

 1. User --- Performance/Quality,

 2. Buyer --- Service & Convenience

 3. Payer --- Price discounts / payment terms

 Total Customer Benefits:

 Performance + Social + Emotional

Benefits Benefits
Benefits

 Buyer Benefits (Service, Convenience &

Personalization)
 Payer Benefits (Price, Credit & financing)

 Total Customer Cost :

 Price + procurement costs (time & efforts) + Use
related costs + Disposal costs
 Tools for Creating Market Values
User Performance Social Emotional
Values •Quality improvements •Price Exclusivity •Emotional
•Innovations •Limited availability Symbols
•Mass customizations •Social Image ads •Brand that meets
•Warranties/guarantees •Exclusive offerings your self-concept

Payer Price Credit Financing

Values •Low price from low •Acceptance of •Leasing
margins credit cards •Customized
•Low price from increased •Own credit card Financing
productivity •Deferred Payment

Buyer Service Convenience Personalization

Values Product Display & Demo •Point of access •Personal
Knowledgeable Sales staff •Automated attention
Responsiveness transaction •Interpersonal
recording relationships
 Universal Value - Performance Value:
 Physical performance better than competing
alternatives.
 Product performs that way consistently.

 1. Quality Improvements
 2. Innovation
 3. Mass Customization
 4. Warranties & Guarantees
 Quality Improvement
 Better performance value by building quality into the
products. Zero defects – by eliminating product failures
completely.
 Innovation
 Increasing performance value by designing new features
to products (Automobiles with navigation devices, computers with
voice conversion to written text etc.)
 Companies – should build a culture of innovation (3M of
US)
 Mass Customization
 Offer customized products to individuals at “same price”.
 Warranties & Guarantees
 Helps to alleviate fears on product failure (Sears –
satisfaction guarantee; LL Bean - Life time warranty)
 Personal Values: Social & Emotional
 Personal values that satisfy customers ‘wants’ are the social
& emotional values.
 Social values are derived from the association of a product
with one or more social groups in society.
 Prestige Pricing:
 Product will be sold in limited target markets, leading to
‘Exclusivity”.
 Leads to Irrational buying & conspicuous consumption.
Children get driven by peer group and poor use it insurance
against product failure.
 Limited Availability:
 Sold in limited quantity/edition to provide social value for
their owners.
 Sale basis Possession value ( not real value ). Van Gogh,
Rolls Royce.
 New Exclusive offerings :
 something which competition do not offer (Jaguars
-Budget car rentals)
 Social Image Based Marketing Communication:
 Stem not just from advertising - product design,
price, place etc.
 Draw back – it leads to consumerism &
materialism.
 Emotional Communications:
 Communications that evoke some emotional
experience valentine day gifts as symbols of Love.
 Ads which transmit -- hope, wish, longing etc
 UNIVERSAL VALUE - PRICE
 Represents the relative affordability of the product. Degree of
economic sacrifice that the customer has to make for the purchase.
 Price means both initial purchase price and the cost of maintaining the
product.
 Low Price from Lower margins
 Cutting prices below competitors prices to attract their customers.
 Outcome of a strategic insight – some companies figure out the
formula to offer the required price value.
 Low price from increased productivity
 The firm strives for lowest cost of production
 Economies of scale
 Modernized Plant – outdated plants bring in inefficiencies.
 Automation- Technology and machines to substitute human labor.
 Business Process Reengineering – redesigns the process from a
blank slate
 Personal Values - Credit & Financing
 Credit: Payers seek credit and financing values because they improve
affordability by creating deferred payments or providing credit.
 Sellers may allow credit cards by third parties
 Sellers will issue their own credit cards
 Sellers may allow delayed or deferred payment.
 Sears had credit cards reaching 40 m households, before other
retailers.
 Financing goes beyond credit. Involves specific payment schedules
designed for a customer.
 Leasing helps customers to defer large cash outlay but also offer tax
benefits. Ideal for heavy machinery.
 Installment payment (EMI)
 Financing possible for both services and products, for consumables and
durables
 Ethical Issue in credit card and financing -- huge interest rates.
 UNIVERSAL VALUE - SERVICE
 Performance value (utility) is built into the system by the
manufacturer or service designer.
 Service Value is created by the distribution system.
 Pre-purchase Service
 Product on Display or Demonstration
 Retail stores appeal is basically due to merchandise-on-display.
Provides edge to retailing over telemarketing or E-com marketing
 Product availability in trial sizes; food etc available for sampling/
taste, Free samples or trial memberships /ownerships.
 Knowledgeable Salespersons:
 Sales person at a discount /retail store will have less product
knowledge than those in specialty store.
 Professional Sales person provides information and also help in
choosing the right product. Computer sales, Selling suits, sports
items to athletes
 Personal Values – Convenience Value &
Personalization
 Convenient Point of access
 Locate the distribution and retail facilities conveniently and keep them
open 24 hours (Domino’s convenience value by delivery-at-home).
 McDonald---- into the business of real estate
 Smaller service centers at diverse locations.
 Automated Transaction Recording
 Automation is a significant means of offering convenience.
 ATM’s for Banking; Telephone based automated response system
used by banks, Document companies (FedEx)
 Credit card reader providing for pay-at-the-pump convenience.
 Personalization / Interpersonal relationship
 Accrues from personnel treating customers with personal attention
and courtesy. Especially important in service industry.
 Showing courtesy is providing value and can build differential
advantage in service business. (Jet Airways, Marriot)
 To deliver personalization value, co.’s need to engage in frequent,
personalized communications.
 SERVICE VALUE (contd)
 Post-Purchase Phase Service
 Generally known as after-sales service or after-sales-product support.

 Product-Use Advice and Support

 Assistance in using the product. Way to differentiate from competition.
 1993 GE commissioned customer answer facility; answers customer
questions on toll-free-lines with on-line product information and instant
display of customer records.
 Quality of advice is a user value, but ease of obtaining is buyer value.

 Product maintenance
 Significant value accrues from the product maintenance service.
 Toyota-Lexus gives the customer a loaner car.
 Product down time can be of immense consequence in Indl. Products.