MODULE 2

CREATING/CHOOSING CUSTOMER VALUE

 Customer value
 Satisfaction and loyalty
 Customer relationships
 Life time value of customers
 Customer databases
 Buying decision process
 Market segments and targets
 Product life cycle strategies
 Brand positioning, Brand equity
CUSTOMER VALUE
Customer Value is the incremental benefit which a customer derives from consuming a product after paying in
return. The term value signifies the benefit that a customer gets from a product. It is the difference between the
benefits (sum of tangible and intangible benefits) and the cost. Customer value is dependent on the three factors –
Quality, Service and Price.
It is a primary reason why a customer should buy from you
Value in marketing is also known as Customer perceived value
Value creation is an ongoing process.
To sustain any company should work on the value proposition continuously.
Customer Value Proposition consists of three things

Relevancy. Explain how your product solves customers’ problems or improves their situation.
Quantified value. Deliver specific benefits.
Differentiation. Tell the ideal customer why they should buy from you and not from the competitor

Unique value proposition should be in the language of the customer

CUSTOMER VALUE PROPOSITION

CVP is an internal document consisting of 3 to 5 good reasons as to why a customer should buy a product or
service from you and it becomes basis for creating websites, marketing strategies, promotions, advertisements,
headlines, slogans, taglines and presentations. Ex: Uber – The smartest way to get around, Apple iphone – The
experience is the product.

It is a promise of value to be delivered by the organization to its customers

It is a primary reason why a customer should buy from you

Customer value is benefits versus cost

It is a promise of value to be delivered by the organization to its customers

It is a primary reason why a customer should buy from you

It is a reflection of you and your business

DIFFERENT WAYS TO CREATE CUSTOMER VALUE
Pricing changes can make the customer believe they are getting more value. You might consider reducing the
price, or keeping the same price and giving something extra over the competition, such as added service, better
attention, or an add-on to the product.
Offering distribution channels and payment options that make it convenient for your customer.
Create and enhance a brand image for the company that reinforces your customer relationship and aligns with
their values.
Increasing the ease of using and understanding your product – from the customer’s perspective.
Making your customer feel that you value their patronage by going beyond the acceptable minimum effort.
SATISFACTION AND LOYALTY
Customer satisfaction is defined as a measurement that determines how happy customers are with a company’s
products, services, and capabilities. Customer satisfaction information, including surveys and ratings, can help a
company determine how to best improve or changes its products and services.
CUSTOMER LOYALTY
Customer loyalty is a emotion and it is a bond which has to be built slowly and strategically. It is a step by step
process.
Loyal customers will not leave you even if they get discounts or offers from competitors.
They spread a word about your product
They work as an unpaid marketing guy.
They become your promoter.
Loyal customers purchase repeatedly
Use what they purchase
Interact with you through a variety of different channels
Are your biggest proponents, sending others to you and providing proactive (and reactive) positive feedback
BENEFITS OF CUSTOMER LOYALTY
Increase Brand Awareness
Customer Engagement improves
Prospect generation
Loyal customers will give you honest feedback which will help you in business forecasting
CUSTOMER RELATIONSHIPS
It refers to the process used by businesses to engage with customers and foster long-term relationships with them.
Right from assisting customers with their day-to-day queries to creating long-term policies that lead to customer
success, customer relations encompasses a lot of activities.
Great customer relationship management happens when the focus is on listening to customers, serving their needs with
relevant, personalized content, and delivering an exceptional customer experience.

WAYS TO BUILD CRM

1. Tailored recommendations -With
31% of customers saying they wish their shopping experiences were more personalized, retailers have a huge
opportunity to drive sales with tailored recommendations.
2. Personalized email - Email personalization goes beyond including a customer’s first name in a subject line. The key
to great email personalization is letting your customers know that you care about them and making their shopping
experience as easy and fun as possible.
3. Text message conversations - With more people than ever using their smartphones to shop (especially since the
coronavirus pandemic), it’s a no-brainer to use SMS to reach your customers. In fact, SMS has
6-8x higher engagement than email and a 32% response rate. Plus, SMS messages are way more fun than phone calls.
4. Loyalty programs - More than 70% of millennials and Gen Z belong to loyalty programs, compared to less
than 20% of Baby Boomers.
5. Clienteling - Clienteling requires a high level of knowledge about what matters to your customer. That’s why
it’s broken down into two main functions
(Clienteling is a technique used by retail sales associates to establish long term relationships with key customers
based on data about their preferences, behaviors and purchases)
6. Collecting customer data from interactions - Leveraging this information to craft intimate, personally-
relevant brand experiences for customers
LIFE TIME VALUE OF CUSTOMERS
Customer lifetime value (CLV) is a measure of the total income a business can expect to bring in from a typical
customer for as long as that person or account remains a client. Ex- Coffee shop, Restaurants

Advantages of Customer Lifetime Value

Improve Customer Retention: One of the biggest factors in addressing CLV is improving customer
retention and avoiding customer attrition.
Drive Repeat Sales: Some retailers, tech companies, restaurant chains and other businesses have loyal
customer bases that come back again and again.
Encourage Higher-Value Sales: Netflix is an example of a business that improved CLV through higher pricing
but learned years ago that increasing costs too quickly may scare off long-time customers.
Increase Profitability: Overall, a higher CLV should lead to bigger profits. By keeping customers longer and
building a business that encourages them to spend more, you should see the benefit show up on your bottom line.
STEPS TO MEASURE CUSTOMER LIFETIME VALUE
1. Determine Your Average Order Value: Start by finding the value of the average sale. If you have not been tracking
this data for long, consider looking at a one- or three-month period as a proxy for the full year.
2. Calculate the Average Number of Transactions Per Period: Do customers come in several times a week, which
might be common with a coffee shop, or only once every few years, which could be the case at a car dealership? The
frequency of visits is a major driver of CLV.
3. Measure Your Customer Retention: Finally, you’ll need to figure out how long the average customer sticks with
your brand. Some brands, like technology and car brands, inspire lifelong loyalty. Others, like gas stations or retail chains,
may have much less loyal customers.
4. Calculate Customer Lifetime Value: Now you have the inputs. It's time to multiply the three numbers together to
calculate CLV per the formula below.
Customer Lifetime Value Formula
Here is the formula for customer lifetime value:
CLV = Average Transaction Size x Number of Transactions x Retention Period
CUSTOMER DATABASES
A customer database is the collection of information that is gathered from each person. The database may include
contact information, like the person's name, address, phone number, and e-mail address. The database may also include
past purchases and future needs. Ex – HubSpot, Zendesk, Freshworks

Demographic characteristics – Age, gender, marital status, household composition

Profession-related characteristics: job position, mutual contacts
Buying behavior: shopping preferences, past purchases, the average sum of bill or invoice, previous cancellations
Firmographics (for B2B clients): industry, number of employees, ownership, etc.

Uses Of Customer data base

What drives customers’ choices?
What are the key factors that influence decision-making?
What reasoning pays off the most?
What can distract customers from closing the deal? etc.
CREATION OF CUSTOMER DATABASE

1. Plan for the future

2. Don’t overload the database with irrelevant information
3. Foresee or launch the autocomplete of data fields
4. Write the policy for interacting with the database
5. Appoint the owner and editors
BUYING DECISION PROCESS
The buying decision process is the decision-making process used by consumers regarding the market transactions
before, during, and after the purchase of a good or service.
Buying decision process, helps markets identify how consumers complete the journey from knowing about a product
to making the purchase decision. Understanding the buyer buying process is essential for marketing and sales. The
consumer or buyer decision process will enable them to set a marketing plan that convinces them to purchase the
product or service for fulfilling the buyer’s or consumer’s problem.
1. Need or problem recognition - The consumer recognizes a problem or need satisfied by a product or service in
the market. The buyer feels a difference between his or her actual state and some desired state. Internal stimuli can
trigger the need. This occurs when one person’s normal needs, such as hunger, thirst, sex, rise to a level high enough
to become a driver. External stimuli can also trigger a need.

2. Information search stage - The consumer may have heightened attention or may undertake an active search for
information. The amount of searching a consumer will depend on the strength of his drive, the amount of information
he starts with, the ease of obtaining more information, the value he places on additional information, and the
satisfaction he gets from searching.

3. Evaluation of alternatives - It is the third stage of the buying process. Various points of information collected
from different sources are used in evaluating different alternatives and their attractiveness. While evaluating goods
and services, different consumers use different bases.

4. Purchase Decision - At this stage of the buyer decision process, the consumer buys the product. After the
4. Purchase Decision - At this stage of the buyer decision process, the consumer buys the product. After the
alternatives have been evaluated, consumers decide to purchase products and services. They decide to buy the best
brand. But their decision is influenced by others’ attitudes and situational factors.
Usually, the consumer will buy the most preferred brand.

5. Post-purchase behavior - The consumer takes action based on satisfaction or dissatisfaction. In this stage, the
consumer determines if they are satisfied or dissatisfied with the purchasing outcome. Here is where cognitive
dissonance occurs, “Did I make the right decision.”
At this stage of the buyer decision process, consumers take further action after purchase based on their satisfaction or
dissatisfaction.
FACTORS INFLUENCING CONSUMER BEHAVIOR
Psychological Factors
Social Factors
Cultural Factors
Personal Factors
Economic Factors
1. Psychological Factors - Human psychology is a major determinant of consumer behavior. These factors are
difficult to measure but are powerful enough to influence a buying decision.
 Motivation - When a person is motivated enough, it influences the buying behaviour of the person. A person has
many needs such as the social needs, basic needs, security needs, esteem needs and self-actualization needs
Perception - Customer perception is a process where a customer collects information about a product and interprets
the information to make a meaningful image about a particular product.
Learning - When a person buys a product, he/she gets to learn something more about the product. Learning comes
over a period of time through experience. A consumer’s learning depends on skills and knowledge.
Attitudes and Beliefs - Based on this attitude, the consumer behaves in a particular way towards a product. This
attitude plays a significant role in defining the brand image of a product.
2. Social Factors - Humans are social beings and they live around many people who influence their buying behavior.

Family - Family plays a significant role in shaping the buying behavior of a person. A person develops preferences
from his childhood by watching family buy products and continues to buy the same products even when they grow up.
Reference Groups - It is a group of people with whom a person associates himself. Generally, all the people in the
reference group have common buying behavior and influence each other.
 Roles and status - A person is influenced by the role that he holds in the society. If a person is in a high position, his
buying behavior will be influenced largely by his status. A person who is a Chief Executive Officer in a company will
buy according to his status while a staff or an employee of the same company will have different buying pattern.
3. Cultural factors - A group of people are associated with a set of values and ideologies that belong to a particular
community.
Cultural Factors - It include the basic values, needs, wants, preferences, perceptions, and behaviors that are
observed and learned by a consumer from their near family members and other important people around them.
Subcultural groups – It share the same set of beliefs and values. Subcultures can consist of people from different
religion, caste, geographies and nationalities.
Social class – It is not just determined by the income, but also other factors such as the occupation, family
background, education and residence location.
4. Personal Factors - These personal factors differ from person to person, thereby producing different perceptions and
consumer behavior.
Age - The buying choices of youth differ from that of middle-aged people. Elderly people have a totally different
buying behavior.
Income - Higher income gives higher purchasing power to consumers
Occupation - Occupation of a consumer influences the buying behavior. A person tends to buy things that are
appropriate to this/her profession.
Lifestyle - The buying behavior is highly influenced by the lifestyle of a consumer. For example when a consumer
leads a healthy lifestyle, then the products he buys will relate to healthy alternatives to junk food.
5. Economic Factors - When a nation is prosperous, the economy is strong, which leads to the greater money supply in
the market and higher purchasing power for consumers.
Personal Income - When a person has a higher disposable income, the purchasing power increases simultaneously.
Disposable income refers to the money that is left after spending towards the basic needs of a person.
Family Income - Family income is the total income from all the members of a family. When more people are earning
in the family, there is more income available for shopping basic needs and luxuries.
Consumer Credit - When a consumer is offered easy credit to purchase goods, it promotes higher spending. Sellers are
making it easy for the consumers to avail credit in the form of credit cards, easy installments, bank loans, hire purchase,
and many such other credit options.
Liquid Assets - Consumers who have liquid assets tend to spend more on comfort and luxuries. Liquid assets are those
assets, which can be converted into cash very easily. Cash in hand, bank savings and securities are some examples of
liquid assets.
 Savings - A consumer is highly influenced by the amount of savings he/she wishes to set aside from his income. If a
consumer decided to save more, then his expenditure on buying reduces. Whereas if a consumer is interested in saving
more, then most of his income will go towards buying products.
Market segmentation - It is basically an approach that companies follow to divide the market into well defined small
groups or segments on the basis of some common characteristics.
Four ways in which the market may be segmented.
1. Demographically: Companies segment customers on the basis of their age, race, gender, nationality, religion, income,
occupation, social class and family status. This is the easiest form of segmentation that is adopted by companies.
2. Geographically: The locality or place of residence often affect the interests and purchasing behavior of
people. Companies perform geographic segmentation by grouping customers on the basis of population density, location
or size of a locality or climatic conditions etc.
3. Behavioral: In this type of segmentation, the behavior of individuals towards products or services is comprehended.
Customer behavior is affected by the benefits they are seeking in a product, their loyalty towards a brand, the frequency
with which they use the products and their readiness to purchase those products.
4. Psychographic: Markets are also segmented based on the lifestyle chosen and adopted by the people. A company can
segment its customers on the basis of their interests, attitudes, opinions and beliefs.
Target marketing
After a company has segmented its market, it identifies and choses a segment to serve by offering its products
and services. This is the process of target marketing. Companies try to adopt their best marketing tactics and
plans according to the needs, wants, tastes and preferences of potential customers belonging to the selected
group or segment.
 MARKET SEGMENTATION TARGET MARKETING

• Dividing the overall market into separate • Targeting a particular group or segment of
groups with homogeneous characteristics customers to market and sell products/services

• Occurs first • Takes place after market has been segmented

• Determines the relevant group of customers to • Create suitable marketing strategies in

target their products/services accordance with the preferences of the market
segments

• The whole market to be divided into groups

• Specific group of customers
PRODUCT LIFE CYCLE
The product life cycle is the course of the life of a product. It begins when the product is in development and ends after
the product has been removed from the market.
1. Introduction - Once a product has been developed, it begins the introduction stage of the PLC. In this stage, the
product is released into the market for the first time.

2. Growth - During the growth stage, consumers start taking to the product and buying it. The product concept is
proven as it becomes more popular, and sales increase.

3. Maturity - When a product reaches maturity, its sales tend to slow, signaling a largely saturated market. At this
point, sales may start to drop.

4. Decline - Although companies generally attempt to keep their product alive in the maturity stage as long as
possible, eventual decline is inevitable for virtually every product. Product sales drop significantly, and consumer
behavior changes, as there is less demand for the product.
Brand positioning
Defined as the space a company owns in the mind of a customer and how it differentiates itself from competitors, brand
positioning is a marketing strategy that helps business set themselves apart.

Importance of brand positioning

Market differentiation: Showing the uniqueness of your product in any industry creates a major advantage. When
you use your brand positioning to celebrate how your product solves a particular problem or need differently than your
competitors, customers will take notice.
Easy purchase decisions: By clearly defining your product and how it can benefit your customer, you take the
guesswork out of the purchase process. When you give customers the answers to questions they are looking for, they
will be quicker to trust and buy.
 Value confirmation: A strong brand doesn’t have to rely on pricing wars with competitors. Instead, great brand
positions establish the high value of their product, making customers want to buy it no matter what (even if it
isn’t the cheapest on the market),
 Magnified messaging: A clear brand positioning statement gives you a springboard for compelling creative
storytelling. By having a concrete vision, you can elevate each additional piece of marketing to further solidify
your place among the competition.
BRAND EQUITY
In marketing, is the worth of a brand in and of itself — i.e., the social value of a well-known brand name.

Brand equity comprises the following elements:

Awareness
Brand associations
Perceived quality
Brand loyalty
Other proprietary brand assets
 Brand loyalty - Brand loyalty dictates that a consumer who truly believes in the value of a brand’s offerings will
often make frequent and repeat purchases from it instead of switching between brands.
 Brand Awareness - Brand awareness concerns the extent to which a brand is known or recognizable to a consumer.
 Perceived Quality - This element centers on the brand’s reputation for high-quality products and customer
experience.
 Brand Association - Brand association involves anything related to the brand, which evokes positive or negative
sentiments, for example, a product’s functional, social or emotional benefits.
 Other Proprietary Assets - Proprietary assets include patents, trademarks, and channel or trading partner
relationships.
Questions
1.Define customer value. Explain its characteristics.
2.Explain the ways to create customer value
3.Defined customer perceived value.
4.Explain customer life time value.
5.Define customer loyalty and mention its importance.
6.Explain CRM.
7.Define customer bases and explain its importance.
8.Bring out the significance of customer retention.
9.What is customer satisfaction? Explain its importance.
10.What is consumer buying behavior. Explain the stages of it.
11.Describe the market segmentation. Explain the ways to it
12.Define PLC and describe its stages.
13.What is brand equity? Mention its elements.
14.Define Brand positioning. Explain its importance