Customer value

Question 1

Name two elements that seem to affect the value of an offering

Answer 1

1. Features (functions, quality, ingredients, amount, etc.)

2. Price (sacrifice)

Question 2

State the definition of (economic) value

Answer 2

”Value is the worth in monetary terms of the economic, technical, service and social benefits a customer receives in exchange for the price paid for a market offering.

Question 3

How does the course differentiate between value and values?

Answer 3

• Value (singular) is the outcome of an individual performance assessment conducted by an economic agent.
• Values (plural) are the standards according to which such assessments are made

Question 4

State the basic value definition

Answer 4

Customer perceived value

Perceived benefits - Perceived sacrifice

Question 5

State six lifecycle costs of a purchase

Answer 5

+Price paid (directly influences affordability)

+Acquisition costs (costs related to purchasing process)

+ Usage costs (installation, consumables, ‘captive pricing’)

+Maintenance costs (ease of repair, service intervals)

+ Ownership costs (e.g. financial solutions)

+ Disposal costs (e.g. for recycling)

Question 6

Where can customer benefits be derived from?

Answer 6

• Features (relative to customer use and preferences)
• Perceived product benefits relative to other offerings
• Service (e.g. when products are undifferentiated)
• Company or brand benefits (status, approval, etc)

Question 7

Which are the prerequisites for rapid-skimming being a good strategy?

Answer 7

• The market is unaware of the product or service.
• The market is able to pay the price.
• The establishment of brand preference is desirable.

Question 8

Which are the prerequisites for slow-skimming being a good strategy?

Answer 8

• The market is of a limited size.
• The market is aware of the product.
• The market is able to pay the price.
• There is no likely competition.

Question 9

Which are the prerequisites for rapid penetration being a good strategy?

Answer 9

• The market is not aware of the product’s existence.
• The market is price sensitive.
• A large market is anticipated.
• Strong competition is likely.

Question 10

Which are the prerequisites for slow penetration being a good strategy?

Answer 10

• There is a threat of competition.
• The market favours lower prices.
• Customers are aware of the product.
• The market is large

Question 11

Which are the two ways to manage costs in B2B marketing?

Answer 11

1. Reduce direct costs

2. Reduce indirect costs

Question 12

Name five ways to reduce direct costs

Answer 12

• exploiting competition between suppliers
• concentrating purchases to fewer suppliers
• coordinating purchases internally
• buying at the right point in the value-chain
• exploiting negotiation techniques

Question 13

Name five ways to reduce indirect costs

Answer 13

• specification work (educating suppliers)
• quality control before, during and after delivery
• inspection and control
• transport and goods handling (damages, on-time, etc)
• operative costs for purchasing

Question 14

Name four ways to improve asset utilization

Answer 14

• reduce stand-still costs in production;
• reduce damage effects, costs of renewal/recovery
• reduce machine-time, service-time, etc. by adapting to supplier processes
• reduce own development/improvement costs by involving suppliers and utilizing their capabilities

Question 15

Name four ways to achieve revenue growth and development

Answer 15

1. Ensure that the suppliers’ technical capabilities are utilized in internal R&D
2. Stimulate suppliers to develop in the ”right” areas
3. Push joint development projects with other functions
4. Create a resource structure among external suppliers

Question 16

Name seven types of economic value calculation

Answer 16

• Internal (engineering) assessment
• Field-in-use assessment (interviews at customer firms)
• Indirect and direct survey questions
• Focus-group assessments
• Trade-off analysis (conjoint analysis)
• Benchmarking
• Importance ratings

Question 17

Which are the two ways of assessing customer value created?

Answer 17

• EVC analysis (economic value calculation)

* Experimentation

Question 18

Which are the three types of value propositions?

Answer 18

• All benefits
The full list, based on knowledge of the offering, risk of value assertion (bringing up features that are irrelevant for a customer)

• Favorable points of difference
Recognizes that there is an alternative, requires knowledge of competing offering, brings out relative merits, risk of value presumption (that all points of difference are valuable to customers).

• Resonating focus
The one or two points (of difference and parity) that will deliver value to the customer, ”what is it you need from our offering”, requires customer value research

Question 19

Which are the four building blocks of a value statement?

Answer 19

• How do our value elements compare with those of the next best alternative?
• Points of parity - elements with the same performance
• Points of difference - elements that make our offering superior or inferior to the next best alternative
• Points of contention – elements on which there is disagreement with the customer

Question 20

Which are the eight steps in the value analysis?

Answer 20

1. Identify all value elements
2. Calculate the magnitude (amounts, numbers)
3. Translate value elements into money
4. Consider various ways of exploiting the value elements. Clarify circumstances / assumptions!
5. Build the value model(s)
6. Evaluate the various options
7. Forge value propositions
8. Create the capabilities necessary and have the job done!

Question 21

State the value equation

Answer 21

(Value[f] - Price[f]) > (Value[a] - Price[a])

where Value[f] = Benefits[f] - Costs[f]

Question 22

What should be considered when talking about value?

Answer 22

• Exchange vs. in-use
• Value vs. values
• Lifecycle costs
• Sources of customer benefit
• Pricing strategy
• EVC analysis steps
• Value propositions

Question 23

What should be considered when talking about B2B marketing?

Answer 23

• Consider benefits beyond the product itself

* Methods for Cost reduction, Asset utilization and Revenue growth