Chapter 2

Question 1

define customer value assessment

Answer 1

how to determine the value customers associate with the products or offering that firm might provide

Question 2

define customer valuation

Answer 2

assessments of the value of specific customers, prospects, and customer segments to a firm

Question 3

what is a product or offering in a marketer’s persespective

Answer 3

a set of designed attributes that satisfy the specific needs or specific customers

Question 4

what are the 3 components of a product’s attributes

Answer 4

physical, service and perceptual

Question 5

how can physical products be classified as

Answer 5

durables and consumables (personal + business consumption

Question 6

are there pure services

Answer 6

yes e.g airline seat, but we mostly deal with physical products (with service component) and services (with physical components)

Question 7

demand perspective vs supply perspective of market

Answer 7

demand: needs of customers and the benefits and solution to customer problems that the product or service provides

service the way firms manage their transaction data bases - focuses on any competitors who supply physically similar products or services - considers manufacturing processes, cost structures, technology development and utilization, marketing and distribution strategies, entry and exit costs, etc

Question 8

what’s a marketer’s broad view of customers

Answer 8

customer who are seeking products and services to satisfy their own personal need or customer is a person buying a gift, buying items for a household or participating in a purchase decision for an organization

Question 9

what are the 5 customer roles in a consumer buying center

Answer 9

initiator: person who suggests the idea of buying an offering
influencer: a person whose advice influences the purchase
decider: the person decides what, when, where, or how to buy
buyer: the person who makes the actual purchase
user: the person who uses the product or service

Question 10

what are the categories of people in an organizational buying center

Answer 10

influencers: those who influence the buying decision by providing information or advice or defining the specifications for the product or service.
approvers: people who authorize the purchase, either financially or technically
deciders: often rederred to as the buying center, the people who make a group purchase decision
buyer: the person who actually places the order
gatekeepers: the people who have the power to sanction or block a supplier or prevent the flow of information among buying center members
users: the people who actually use the product or service

Question 11

how can value be measured

Answer 11

by what a customer exchanges for various options that can satisfy a want or a need.

or through customer intentions (what a customer intends to exchange)

or what the customer should be willing to exchange

Question 12

what’s the function of value based on benefits and price to a customer

Answer 12

value = benefits - price

benefits: functional, psychological, economic,

price: monetary, perceived risk, inconvenience

Question 13

what are the 3 general behavioural possibilities when a customer perceives a need

Answer 13

ignore the need, postpone it, or engage in a purchase process to identify options to satisfy it

Question 14

why might market measurements and analyses based on actual behavior may provide different results than those based on perception of needs

Answer 14

actual purchase are subject to various contraints - availabilities, the customers’ budget, + other factors that might redirect the customer from a preferred option to a secondary one

Question 15

how can a customer’s needs be characterized

Answer 15

by its subject and importance, its temporal aspects and its information requirements

Question 16

what’s the subject and importance of need

Answer 16

primary bases of a person’s perception of that needs - needs can vary in their importance to the individual’s survival (physiological, security, social, status, and self-actualization) - needs higher up in the hierarchy are more crucial than those further down

Question 17

how is a customer’s motivation to fulfill various needs made

Answer 17

by a customer’s processing of internal and external stimuli that generates the motivation

Question 18

what’s the importance of motivational connection to a customer?

Answer 18

motivational connection can influence customer perceptions of value, reveals the importance of external communication in helping position a brand or offering in their minds

Question 19

what are the temporal dimensions of a need

Answer 19

the urgency, frequency, and duration

urgency - refers to the perceived amount of time within which the consumer believes the need must be resolved

frequency - pertains to how often the same need occurs

duration = refers to how long the state of tension associated with that need lasts

Question 20

what are the information requirements associated with a need satisfaction

Answer 20

newness, complexity, and clarity

newness - requires more learning to make a purchase decision

complex - require more learning, involves buying processes, incite consultation with others and requires consumer consideration of more alternatives

with unclear needs - customers engage in a significant amount of info search to better define the need and how well alternative offerings to satisfy it, more susceptible to marketing information they receive

Question 21

what does the subject/saliency, temporal and information characteristics of a need help determine

Answer 21

both the process the customer uses to satisfy the need and value of various options available to satisfy it

Question 22

what are the approaches to measuring customer value

Answer 22

objective (functionality and economic), perceptions (psychology) and behaviours

Question 23

how to measure value in a objective customer value

Answer 23

should-do measures

objective value measure attempt to estimate or true customer value of a product or service offering - objective worth of the product in terms of satisfying the consumer’s set of needs

Question 24

what are the 3 types of objective customer value measures

Answer 24

internal engineering assessments, indirect survey questions and field value-in-use assessments

these methods rely on a careful study of consumers’ needs, entire purchase and usage process of available offerings

Question 25

tell me more about the internal engineering assessment

Answer 25

some estimates of customer value rely on evaluations by the selling firm’s own managers and engineers based on laboratory tests, use of product by firm’s own employees (alpha tests) or computer simulations

success is dependent on how well a firm really understands its customers; buying behaviour and usage patterns + how well the firm translates this understanding into economic estimates of customer value

Question 26

tell me more about the indirect survey questions

Answer 26

firms query customers about the value they place on satisfying a need or resolving a problem to overcome the limitations of little or no customer input in internal engineering assessments

salespeople can ask company personnel about the effect of 1 or more changes in existing offerings on certain aspects of their needs or problems - indirect technique that focuses on changes rather than worth of the entire product offering

Question 27

tell me more about field value-in-use assessment

Answer 27

requires customer and supplier to conduct a joint value assessment

for a current product, value-in use = price that would make a customer indifferent between continuing to use the current product versus switching to another option

for a new product, VIU = maximum amount the customer would be willing to pay for the new product, given the extra benefits that it offers

success of VIU depends on identifying cost elements (+ assumption the firm uses to estimate costs) and in a B2B setting, its ability to understand the impact of these cost elements on customers’ ability to create value for their own end-customers

Question 28

how can marketers arrive at the VIU price

Answer 28

marketers must develop a complete list of cost elements associated with the use of incumbent product compare with the new product - calculate the values or costs associated with each elements to arrive at a complete VIU estimate of the product offering for that application usually on a cost per unit basis

Question 29

why might determining the VIU of an offering the measure that’s closest to “true” customer value

Answer 29

bc it represents what a consumer should be willing to pay

VIU requires the closest cooperation with the customer to determine how the product will be used

joint value assessments by the supplier and the customer reveals surprising and unanticipated cost savings.

Question 30

which measure of customer value offers the opportunity to train the customer

Answer 30

VIU analysis as it gives the opportunity to train the customer to understand the value that may be realized from smart purchase decisions

Question 31

what are some costs to consider in a VIU analysis

Answer 31

purchase/fabrication/finishing/inventory/maintenance/service/scrap adjustment/level-of-requirement adjustment/changeover costs

multi-year VIU must include the user’s cost of capital

Question 32

what are the basic steps to follow in a VIU analysis

Answer 32

1. specify the product application under consideration and the incumbent product (or comparative alternative)
   2, identify all relevant cost/benefit components of the incumbent (including product, supplier, and switching costs - equipment rental + labour costs)
2. define the criterion to compare equivalent functional benefits
3. obtain the data necessary to estimate the various cost/benefit elements
4. calculate the value-in-use price as the point at which the customer breaks event while receiving equivalent long-run functional benefits compared wit the incumbent product

Question 33

how to measure perceptual customer value

Answer 33

use plan to do measures - uses psychological considerations (risk perceptions + particular information a customer has about the different offerings)

assessments employee a series of customer measure that question customers about their perception of and preferences for various offerings + attributes + benefits of these offerings

uses both constrained and unconstrained measure of customer value

Question 34

constrained vs unconstrained measure of customer value

Answer 34

unconstrained measure place few boundaries on customer value assessments

constrained measure establish parameters for customer values assessments which means respondents have to give up benefits along some dimensions to obtain gains on others

Question 35

what’s the goal of a focus group

Answer 35

to obtain better understanding of the common or share perception of a well-defined target group of customers

Question 36

what’s a caveat of a focus group

Answer 36

limited for assessing customer value - potential for groupthink can often lead to homogenous results

thus focus group results should be viewed as exploratory

Question 37

what are examples of unconstrained measure of customer value

Answer 37

focus groups, direct survey questions, importance ratings,

Question 38

what’s the caveat of importance ratings

Answer 38

respondent might not be able to discriminate effectively among the various benefits - respondents can give top scores to all the benefits listed, approach doesn’t provide an easy means to determine wiliness to pay for these importance options bc there’s no indication of trade off or relative value in the level of performance of 1 benefits to another. survey offers no direct link to behaviour

Question 39

what are the types of constrained question measures

Answer 39

conjoint analysis, benchmarking,

Question 40

what’s conjoint analysis

Answer 40

conjoint analysis is widely used survey to ask respondent to provide their overall ratings for each set of potential offerings - statistical analysis decompose the results ratings into the value (partworth) these partworth values can be recombined to describe new product offerings + estimate the total customer value of many possible offerings

Question 41

what is benchmarking in measuring customer value

Answer 41

respondent indicate how much more they would be willing to pay for added product attributes/features to this benchmark offering - attempts to determine consumers’ willingness to pay for each attribute/feature

lacks rigor for systematically examining tradeoffs among attributes

Question 42

how to measure behavioural customer values? and why use behavioural customer value

Answer 42

use have done measures

measures of behavioural customer use observation of actual past consumer behaviour as a basis for estimating value vs objective and perceived customer value measures that represent estimates based on info obtained made before a purchase

Question 43

what’s are behavioural customer value measure

Answer 43

choice models : choice models use past behaviour to infer the value of product characteristics that might best explain/predict actual behaviour

data mining: keeping extensive records of customer purchase in a form that lends itself to statistical analysis

Question 44

how to find the purchase probability using a choice model

Answer 44

purchase probability (A) = utility of A/ sum of utilities of all alternatives

Question 45

pros + cons of choice model

Answer 45

pros: reveals importance weights of attributes - interpreted as regression coefficients

con: difficulty in estimating a model separately for each person

Question 46

what are pros and cons of data mining

Answer 46

pros: organization can analyze the info to produce segments according to customer profitability, etc

con analyzing current customers provides only partial picture of market structure - ignores non-customers who may differ systematically from customers but represent a significant source of potential growth

Question 47

what are pros and cons of objective/perceived/behavioral value measures

Answer 47

pros: objective value measure need fewer customers for analysis where behavioral need more respondents, valuable in dynamic market to put firm in direct contact with critical customers and provide current measures of value in use.
perceived value measures can be useful in dynamic marktes if the measurement approach prompt customers to respond that corresponds with their actual future behaviours

con; measures vary according to their appropriateness for lead user. measures based on VIU + constrained approaches are most appropriate for lead user while behavioural measures are not particularly useful + unconstrained measure fail to reveal the important trade-offs necessary for good value estimates

Question 48

what does the lifetime value of a customer mean to a firm

Answer 48

the total profit a firm can expect to earn form that customer during the time the firm continues to maintain an ongoing relationship with the customer

profit = transactions between customers + firm and referrals and other indirect sources of profit that can be attributed to a specific customer

Question 49

define customer lifetime value assessment (CLV)

Answer 49

aims to assess the net profit or loss of a specific customer over that customer’s lifetime - assess cash flows based on what the customer buys less costs of acquiring, selling to, and servicing the customer

Question 50

what can a firm do after a CLV analysis

Answer 50

may develop guidelines for determining
1. whihc customers to fire because they are generally unprofitable over time
2. how to reward customers
3. which win-back campaigns to run to regain customers who are not irretrievably lost and whether the firm is better off targeting new prospects or attempting to win back prior customers
4. how to induce up or cross-selling by encouraging a customer to purchase more of the focal product or buy other related/complementary products