Understanding Customer Value (session 3) Flashcards
What is customer equity (Rust et al, 2001)?
The sum of discounted lifetime values of all firms customers
What is the purpose of the paper by Rust et al, 2001) (driving customer equity: linking customer lifetime value to strategic marketing decisions)?
To show how customer equity can be used to drive marketing strategy. They provide a framework that helps to improve budget allocation of marketing spending
What are different areas that influence customer decisions to purchase and repurchase product and services?
- aspects of firms product and service offering
- Aspects of frims brands
- Aspects of customer relationship with firm
What are the three primary drivers of customer equity?
- Value equity = customers objectve assessment of utility of a brand based on perceptions of what is given up and what is received (more important in B2B)
- Brand equity = involves behaviour change above and beyond that whcih would be observd if everything but the brand were held constant
- Relationship equity = The incremental tendency of customers to stick with the brand, above and beyond the customer objective and subjective assessment of the brand arising from relationship management. (more important in service industry, sairplane)
What are the two assumptions of customer retention?
- Lost for good assumeption
= probability that customer this period will be a customer in the next period and once a customer is gone, it’s gone - Always a share assumption
= customer does not give everything to one brand
What are the benefits of the framework (by rust et al, 2001) on the management?
- Identification and measurement of key drivers of customer equity
- identification of firm competitive strengths and weaknesses
- Projection of financial impact of marketing initiatives
- Key metric for top management
- Rapid implementation
- Easy implementation
Based On what elements do Leroi-Werelds compare the different methods with each other? (And also the most used ones)
- Psychometric properties (how well the value construct is measured by the indicator variables. dimensionality, reliability, validity etc.)
- Predictive ability (note: hypotheses only about this)
- The relative practicallity (ease of use)
- Actionability (can measurement results easily be translated into actionable guidelines)
What are examples of psychometric properties?
o Internal consistency reliability: refers to the degree to which the items intended to measure the same latent construct have similar scores
o Item validity: is the extent to which an individual item measures what it purports to measure
o Within method convergent validity: refers to the extent to which the different indicators of the same construct are in agreement
Tests having the same or similar constructs should be highly correlated
o Discriminant validity: whether concepts or measurements that are not supposed to be related are actually related
o Dimensionality: refers to the existence of single construct underlying a set of items
What is customer value as described in the article of leroi-werelds et al?
the consumers overall assessment of the utility of a product based on perceptions of what is received and what is given (Zethaml.
Customer value is personal
What are two main approaches to operationalization of customer value? (Leroi-wereld 2014)
- One dimensional approach
= customer value is a single overall concept that can be measured by self-reported items that ecaluate consumers perception of value - Multi-dimensional appraoch
= Customer value as too complex tocapture consisting of several interrelated components/dimensions
What is the Means-end theory (Leroi-Wereld, 2014)?
Provides the necesary theoretical background of how customers view products, states that the way products are related to customers can be represented by 3 levels;
1. Attributes - quality of product processes
2. Consequences - Quality of product delivers
3. Desired end states - core values, purpose/goals in life
Leroi-Wereld et al 2014, make a decision between 4 different product types, where are these product types based on?
High and low involvement
Think and feel offerings
- Think products are rational products just for use
- Feel products are for enjoyment and fun
What are the key insights from leroi-Wereld et al?
- There is NO significant difference between time and effort experienced of the four questionnaires
- There s less/no attention to value of co-creation even tough it is becoming increasingly important
- Authors checked with measurement scale if its high or low involvement product
- Value in use was found to be more importnt than attributes
What are the different measurement methods used in the article of Leroi-Werelds et al?
Dodds -> Five items meauring overall value
Gale -> Difference between a weighted quality score and a weighted price score
Woodruff and Gardial -> Product attributes lead to consequences (benefits and sacrifices)
Holbrook -> Value consists of dimensions, where 5 are relevant in the conxt of this study/
What are four different operationalizatipms for behavorial loyalty?
- share of purchase in the category
- Share of wallet; % of groceries customer does with brand - Repurchase intention
- Over states but consistet, so we can still compare it and tell us which is more popular etc. - Primary behavioural measures
- looking at actual behaviour
- RFM (recency, Frequency, Monetary), retention longevity - Secondary behavioural measures
- Referrals, word of mouth (WOM), Net Promoter Score
