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INTRODUCTION TO CONSUMER PSYCHOLOGY:Customer Value, Perceived Value

<< INTRODUCTION TO CONSUMER PSYCHOLOGY:Marketing Mix, Product, Price
VALUE AND RETENTION FOCUSED MARKETING AND CONSUMER DECISION MAKING PROCESS >>
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Consumer Psychology (PSY - 514)
VU
Lesson 04
INTRODUCTION TO CONSUMER PSYCHOLOGY
(CUSTOMER VALUE, SATISFACTION AND RETENTION)
OBJECTIVES:
o  Understanding the three drivers of Marketing Concept
Customer Value
Customer Satisfaction
Customer Retention
1. Development of Marketing Approaches
Since its emergence in 1950's many companies have successfully adopted Marketing Concept. Result is extremely
competitive markets. There are more products in more shapes and sizes targeting many different consumer
segments.
Digital Revolution in 1990's enabled marketers to offer even more products and services and distribute them
widely while reducing the costs and barriers of entering into many industries. It has accelerated the rate at which
new competition enters market and has also speeded up the rate at which successful targeting, segmentation and
positioning approaches must be up-dated or changed. Savvy marketers know they must outperform competitors
and achieve full profit potential from each and every customer.
To do this they must make customer the core of company's organizational culture across all departments. Every
employee must view customer as part of customer relationship and not as part of customer transaction. So in the
traditional Marketing Concept there has been a development from transactional approach to marketing to
relationship perspective of marketing.
Transactional to Relationship Marketing
Transactional
Relationship
Relationship-building
One-off
Investment in customers
Investment in products
Customer analysis
Market Segmentation
Long-term profit
Short-term profit
2. Three Drivers of Successful Customer Relationship
Three drivers of successful relationship with customer are:
Customer Value
High level of Customer Satisfaction
Building a structure for Customer Retention
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Consumer Psychology (PSY - 514)
VU
1. Customer Value
Customer Value is long-existing concept that emerged from ancient trade practices.
Value: "satisfaction of customer requirements at the lowest total cost of ownership, acquisition and use "
Value has Relative worth or importance
Customer Value is the ratio between the customers's perceived benefits (economic, functional and psychological)
and the resources (monetary, time, effort, psychological) used to obtain those benefits
Value-Driven Marketing
Value-Driven Marketing Strategies Assist in 10 Areas:
1. Understanding customer choices (what kinds of products and features are important to customer? Are the
products designed keeping in view the choices of the customers)
2. Identifying customer segments (what are the specific needs of customers in a particular segment, which
means understanding the common needs of consumers in particular groups)
3. Increasing their competitive options (Means that we add features in the product that would give some
competitive advantage to consumers compared to the competitors)
4. Avoiding price wars (providing value in product and keeping the price low)
5. Improving services quality (add additional services that would not let the customers go to another brand )
6. Strengthening communications (maintaining a constant touch with consumers)
7. Focusing on what is meaningful to customers (concentrating on the perceived needs and associating the
product effectively with the satisfaction of a perceived need)
8. Building customer loyalty (concentrating on the relationship dimension and developing loyalty of the
customer with the product)
9. Improving brand success (using all the handles effectively to improve brand success)
10. Developing strong customer brand success and relationships
Value Proposition
Providing superior customer value requires the organization to do a better job of anticipating and reacting to the
customers needs than the competition does. It is important to understand customer value from the customer's
point of view. The term Unique Selling Proposition is now being widely replaced by the term Value Proposition.
For example notice the following value propositions:
Car manufacturing company:
Zero defects in manufacturing, and superior and personalized customer service
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Consumer Psychology (PSY - 514)
VU
PERSONAL COMPUTER MANUFACTURING COMPANY:
Customized PC systems assembled speedily and sold at uniform prices
INTERNATIONAL FAST FOOD CHAIN:
Core Uniform Standards world wide ­ quality, service, cleanliness and value
The Value Creating Organizations:
Organizations (along with individual employees) should be seen as value-creating entities. Value-creating
organizations solve individual customer problems. A strong competitive edge can be gained by consistently
providing superior customer value. In order to create and deliver superior customer value organizations must be
strong in both purpose and process.
2. Customer Satisfaction
Individual's perception of the performance of the product or service in relation to his/her expectations is defined
as Customer Satisfaction.
Customer whose experience falls below expectations will be dissatisfied
Customer whose experience matches the expectations will be satisfied
Customer whose experience exceeds expectations will be delighted
Perceived Value
Customers evaluate experiences as:
Dissatisfaction
- experience
Satisfaction
0 neutral experience
High satisfaction
+ positive experience
Such assessments impact future purchase decisions and ongoing relationships with organizations
Customer Types
Levels of customer satisfaction may be linked together with customer behavior to identify five customer types:
Loyalists: Completely satisfied customers who keep purchasing
Apostles: Customers whose experiences exceed their expectations and who provide very positive word of
mouth
Defectors: Customers who feel neutral or merely satisfied and are likely to stop business with the company
Terrorists: Customers who have negative experience with the company and who spread negative word of
mouth
Mercenaries: Customers who are very satisfied but who have no real loyalty to the company and may defect
because of low price elsewhere or on impulse
Researches propose that companies should strive to create apostles, raise the satisfaction level of defectors and
turn them into loyalists, avoid having terrorists or hostages and reduce the number of mercenaries.
3. Customer Retention
The overall objective of providing value to customers continuously and more effectively than the competition is to
have highly satisfied customers. Even more than that is to have highly delighted customers. So that it is in the best
interest of the customers to stay with the company rather than to switch to another company
The modern day sales environment is characterized by:
Very few transaction oriented sales groups
Sales territories are getting smaller
Customer replacement is expensive
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Consumer Psychology (PSY - 514)
VU
The above factors make it imperative for a company to retain their existing customers.
Customer retention makes it in the best interest of customers to stay with the company rather than switch to another company
Why Customer Retention:
Customer retention is important because it is always more expensive to win new customers than to retain the
existing ones.
Loyal customers:
o  Are less price sensitive
o  Buy more products
o  Pay less attention to competitors advertising
o  Spread positive word of mouth
Selective Relationships:
Marketers who designate increasing customer retention rates as strategic corporate goals must also recognize that
all customers are not equal. Sophisticated marketers build selective relationships with their customers based on
where their customers rank with reference to profitability rather than merely striving for customer retention.
Selective relationships are built with the customers based upon their respective profitability
Customer Profitability Focused Marketing
A consumer retention savvy company closely monitors its customers consumption volume and patterns and
establishes tiers of customers according to their profitability levels and develops distinct strategies towards each
group of customers
Customers who have received and purchased several of company's products must receive extensive and expedited
customer services.
Classifying Customers @ Profitability:
Classifying customers according to profitability level goes beyond traditional segmentation methods that subdivide
consumers on the basis of demographic, socio-cultural, or behavioral characteristics. Customer Profitability
Focused Marketing tracks costs and revenues of individual customers and then categorizes them into tiers based
upon consumption behaviors that are specific to the company's offerings.
A customer pyramid categorizes consumers into following tiers:
PLATINUM TIER
Heavy users who are not price sensitive and who are willing to try new offerings
GOLD TIER:
Heavy users but price sensitive and may buy from multiple providers
IRON TIER:
Low spending volume
LEAD TIER:
Customers who actually cost the company by asking for more attention, thus tying up the company's resources
and spreading negative word of mouth
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Table of Contents:
  1. INTRODUCTION TO CONSUMER PSYCHOLOGY:Consumer Behavior
  2. INTRODUCTION TO CONSUMER PSYCHOLOGY:Consumer research
  3. INTRODUCTION TO CONSUMER PSYCHOLOGY:Marketing Mix, Product, Price
  4. INTRODUCTION TO CONSUMER PSYCHOLOGY:Customer Value, Perceived Value
  5. VALUE AND RETENTION FOCUSED MARKETING AND CONSUMER DECISION MAKING PROCESS
  6. CONSUMER RESEARCH:Quantitative Research, Qualitative Research
  7. MAJOR STEPS IN CONSUMER RESEARCH PROCESS:Design of Primary research
  8. QUANTITATIVE RESEARCH DESIGNS & DATA COLLECTION METHODS
  9. QUANTITATIVE RESEARCH DATA COLLECTION TECHNIQUES:ATTITUDE SCALES
  10. QUALITATIVE RESEARCH DESIGNS & DATA COLLECTION METHODS
  11. CUSTOMER SATISFACTION MEASUREMENT, SAMPLING, AND DATA ANALYSIS AND REPORTING
  12. MARKET SEGMENTATION AND ITS BASES:Geographical Segmentation
  13. BASES FOR SEGMENTATION: DEMOGRAPHIC SEGMENTATION PSYCHOGRAPHIC SEGMENTATION
  14. BASES FOR SEGMENTATION: SOCIOCULTURAL SEGMENTATION USE RELATED SEGMENTATION USAGE SITUATION SEGMENTATION
  15. BASES FOR SEGMENTATION: BENEFIT SEGMENTATION:Intrinsic Cues
  16. BASES FOR SEGMENTATION: HYBRID SEGMENTATION STRATEGIES
  17. MARKET SEGMENTATION IMPLEMENTING SEGMENTATION STRATEGIES ENVIRONMENTAL INFLUENCES CULTURE
  18. HOW CULTURE IS LEARNT ENVIRONMENTAL INFLUENCES:Formal Learning
  19. CULTURE AND ITS MEASUREMENT ENVIRONMENTAL INFLUENCES
  20. MEASUREMENT OF CULTURE ENVIRONMENTAL INFLUENCES:Consumer Fieldwork
  21. SUBCULTURE CHAPTER 4: ENVIRONMENTAL INFLUENCES
  22. AGE AND GENDER SUBCULTURE CHAPTER 4: ENVIRONMENTAL INFLUENCES
  23. BASES FOR SEGMENTATION: BENEFIT SEGMENTATION:Market Segmentation
  24. SOCIAL CLASS CHAPTER 4: ENVIRONMENTAL INFLUENCES:Occupation
  25. CONSUMER SOCIAL CLASSES CHAPTER 4: ENVIRONMENTAL INFLUENCES:Affluent Consumer
  26. CONSUMER SOCIAL CLASSES CHAPTER 4: ENVIRONMENTAL INFLUENCES:Membership Group
  27. CONSUMER SOCIAL CLASSES CHAPTER 4: ENVIRONMENTAL INFLUENCES:Shopping Groups
  28. UNDERSTANDING PERSONALITY CHAPTER 5: INDIVIDUAL DETERMINANTS OF CONSUMER BEHAVIOR
  29. CONSUMER PERSONALITY, TRAIT THEORY AND SELF IMAGES
  30. CONSUMER MOTIVATION:Needs, Goals, Generic Goals
  31. UNDERSTANDING LEARNING:Intentional and Incidental Learning, Implications for Marketers
  32. INSTRUMENTAL CONDITIONING, INFORMATION PROCESSING AND MEMORY
  33. ATTITUDES:Characteristics of Attitudes, Attitudes have consistency
  34. ATTITUDE FORMATION AND CHANGE:How attitudes are learned?
  35. ATTITUDE CHANGE STRATEGIES:Resolving two conflicting attitudes
  36. INTRODUCTION TO CONSUMER DECISION MAKING:Decision Complexity
  37. Problem Recognition, Search and Evaluation and Decision and Purchase
  38. Decision and Purchase:Consumer Decision Rules, Output, Relationship Marketing
  39. Decisions Related to Post Purchase:Product Set up and Use
  40. Marketing Implications of Decisions Related to Post Purchase:Understanding
  41. Post Purchase Evaluation:Determinants of Satisfaction, Consumer Complaint Behavior
  42. Post Purchase Dissonance:Dissonance Reduction, Marketing Implications
  43. Consumerism:Roots of Consumerism, The Nature of Consumerism
  44. Consumerism Issues and Responses:Environmental Concerns, Consumer Privacy
  45. Review Consumer Psychology Course:Consumer Research, Consumerism