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Marketing Strategy – Summary Week 3 Author: HuisinghMS Summary Article 3.1 Woodruff (1997)
Customer Value: The next source for competitive advantage
Abstract
Introduction
From quality based (2 decades ago) competitive advantages to customer-orientation:
- Quality based use of quality management (shortcoming: often only internal orientation).
- Customer orientation getting competitive advantage through creating/delivering
customer value. Turn attention outward to market and customers.
Capabilities to improve customer value delivery:
1. Shared understanding of the concept.
2. What and how organizations should learn about their markets and target customers.
3. Translation process: from learning to strategy (customer learning into superior performance).
The concept of Customer Value
Defining customer value
There are different definitions for the concept of customer value. Woodruff suggests that we need to
go towards a customer-driven concept of customer value and proposes the following definition:
Customer value is a customer’s perceived preference for and evaluation of those products
attributes, attribute performances, and consequences arising from use that facilitate (or block)
achieving the customer’s goals and purposes in use situations.
This definition adopts a customer perspective on value, derived from empirical research into how
consumers think about value.
Customer value is:
- Linked to a product or service (vs value in general)
- Perceived by consumers (vs objective)
- Specific to a use situation
- A trade-off between benefits and costs or sacrifices.
1
,Figure 1 Customer value concept differ as to the circumstances within which customers think
about value. Columns: customers may consider value at different times, such as when making a
purchase or, during or after use. Rows: what the customer’s perception of value is about. During the
choice task customers may predict received value, but during use they actuallt experience received
value.
Although the above classification reveals important distinctions among types of customer value, the
concept appears to take a much narrower perspective when applied in customer research.
Toward a customer-driven concept of customer value
Figure 2 Customer Value Hierarchy Model
The customer value hierarchy model suggests that customers perceive of value in a means-end way:
starting at the bottom, customers think about products as bundles of attributes and attribute
performance. These attributes will help facilitate desired consequences and eventually desired goals
and purposes.
2
, Customer Value and Customer Satisfaction
Strong relationship between customer value and customer satisfaction, see figure 3 Customers
evaluate a product/ use experiences on the same attributes, attribute performances, and
consequences as they constructed in their desired value hierarchy.
The hierarchy suggests that different kinds of overall satisfaction feelings may arise, a customer can
be more or less satisfied on all levels of the hierarchy.
The figure suggests how desired and received value fit into a disconfirmation-type satisfaction model.
Customer learning by Organizations
There are differences in what managers think their customers value, and what customers say they
value. Customer-learning processes should be aimed at reducing such gaps. 2 categories of ways
managers learn about customers:
- Informal learning such sources as trial-and-error experiences with past decisions directed
toward customers, feedback from seller contacts with individual customers, and managers’
personal observations of customers.
- Formal research learning contains all the various market and customer research methods
available to organizations, such as experiments, surveys, and qualitative research.
Processes for learning about customer value
1. Customer Satisfaction Measurement (CSM) process used with quality management
(vroeger).
- Start with targeting certain customers for learning.
- Determine what they want and require (look at buying criteria, desired attributes, etc.)
Managers learn about customers’ expectations. Organizations learn most about their
customers at the lowest level of the customer value hierarchy (attribute level). They may be
missing an in-depth understanding of the specific use consequences and nuances of
customers’ various use situations where these consequences are happening.
- Products and services are provided to customers: customers experiences a certain level of
satisfaction.
- The final step determines customers’ evaluations of attribute value dimensions currently
being delivered by the seller (and sometimes by its key competitors). Quantitative surveys
are used.
3
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