Customer Value Flashcards
Types of customer value
- Economic value
- Functional value
- Experiential value
- Social value
when the product provides
tangible monetary savings either
1) at time of purchase or
2) over long-term use
Economic Value
Economic Value considers the___ ___ ___ ___, not just the purchase price
total cost of ownership (life cycle cost)
Economic value can also be realized if consumers get the ___ ___ for a lower price
same item (or same
quality item)
Perceived utility provided by the product / service’s capacity for functional, utilitarian, or physical performance
1) product features (attributes)
2) benefits of the product or service
Functional Value
How can a brand increase its perceived functional value offering?
- Launch a campaign
- Try to change consumers’ minds about the importance of various attributes
- Add an entirely new attribute
As more features are added to a product, consumers perceive the product as being more ___, but less ___
Capable
Usable
products or services in various ways, for example:
1. Branding
2. Design
3. Customer Experience
Create experiential value
provide hedonic or experiential value
– sense of personal enjoyment
– good feeling
– providing happiness
– feeling playful or cheerful
– fulfilling a goal / ambition
– allowing self-expression
– satisfying the analytical mind or make one think logically
Provide excellent service
Customer Experience
Brands signal:
* quality
* status, image
* who you are (identity)
* what you value
= psychological value
Branding
- Beauty
- Colors
- Ambience
→ Brings pleasure, happiness, peace, joy, comfort, to customers
Design
Our memory of experience..
- NOT moment by moment
- A few select snapshots receive larger weights
- Evaluation = average of the most extreme point (good or bad peak) and the end
Peak-end rule
People chose more total pain over less pain in these situations
→ preferring – and choosing to repeat – a condition with objectively more pain – as long as the episode
ends on a relatively less painful note
Counterintuitivity of peak end effect
We tend not to remember how long an
experience was
– “memory does not make films, it makes photographs” – Milan Kundera
– And we ignore lots of the event
Duration neglect
- Spend time / money on enhancing peak
- Minimize unpleasant experiences
- Make the end really good
- Apply several tactics
Managing the customer experience
Many of the benefits we derive are based on our social interactions with family and friends and other people
1. Network effects
2. Preference formation
3. Social capital
4. Social relationships
Social value
the value of a product or service for a
customer often increases as more and more customers adopt it
Network effects
Research shows that preferences are
often constructed rather than
pre-formed, and are heavily
influenced by peers
Preference formation
- Impressing others
- distinguishing oneself from others
- outdoing others
- commanding respect
- Many sites rely on user-generated content:Yelp, Instagram, TripAdvisor…
- Consumers like to give back to sites they benefit from
- Consumers derive social capital by generating this
- Badges
- Likes, comments
- Being featured on websites/social
media
Social Capital
- can be strengthened when you connect people
- Example: reaching out to former friends on Facebook
- Facebook Groups
- Brand community
Social relationships
