Types of Customers and Customer

Value

Customer Segmentation Reexamined

Customer Segmentation Re-examined

Pareto principle bears testimony to the
fact that not all customers are equal and
therefore not all of them should be treated
equal.
Two strong keywords with the concept of
CRM relate to selectivity and
partnership.

/3

Customer Segmentation Re-examined

Selectivity types of customers typically hinge on
the loyalty attribute and their link to profitability is
through their length of relationship or their
purchase intent or whether they recommend to
others. Customer segmentation of this type is
behavioral and is most critical in CRM. The
usual geographic, demographic or
psychographic segmentation come useful at the
second or third level of sub-segmentation.

Customer Segmentation Re- examined

Behavioral segmentation is usually in
terms of loyalty, frequency of use etc.
Another important segmentation in the
context of CRM is the number and
choice of communication channels.
A related segmentation is nature and
frequency of communication expected by
the customer.

Types of Customers and Their

Relationship Styles

Types of Customers and Their

Relationship Styles
According to Jones and Sasser,
customers behave in four different ways:
1. Apostles (= one sent to preach the gospel)
2.Terrorists/Defectors (defector = one who leaves a
country or organisation for another one)
3.Mercenaries (= hired for money; actuated by the
hope of reward; too strongly influenced by the desire
of gain; one who is hired)

4.Hostages (= one kept in the hand of enemy as a

pledge)

Types of Customers and Their

Relationship Styles
High

Low

Mercenaries:

Apostles:

Happy and contended customers

who are not loyal To the
company and tend to shop
around and compare. On a
lookout for better opportunity.

Highly contended, loyal

customers whose contact with
potential customers is more
valuable than any salesman.

Terrorists/Defectors:

Hostages:

Customers who are disappointed

in their business relation
with the company and tell
everybody about their bad
experience. Leave the services
without informing, virtually lost.

Disgruntled customers. Due to

certain exit barriers, unable to
change their service provider
though dissatisfied

Low

Loyalty

High

Types of Relationships With Mercenaries,

Apostles, Defectors and Hostages (1/2)
Price-centred relationships hinge on the
delivery of the best deal in the marketplace.
Mercenaries fall in this type of relationship
Need-centred relationships offer
personalisation of channels, interfaces and
service processes. Need-centred relationship is
expected by an Apostle in favourable
circumstances and by a Defector in case of a
service failure.

Types of Relationships With Mercenaries,

Apostles, Defectors and Hostages
Value-centred relationships depend on
intensive and extensive collaboration. A
collaborative value-centred relationship is a
series of dialogue and interaction between an
enterprise and a customer over an extended
period of time. Value-centred relationship is
reserved for Apostles.
Product-centred relationships focus on
delivery of customised products, services and
solutions. Product-centred relationships are
usually appropriate either for Apostles with a
strong value proposition or for Hostages.

Loyalty as a Basis for

Segmentation

4 types of Loyal Customers

Customer Value: Concept and

Characteristics

Customer Value: Concept and

Characteristics
An effective CRM strategy starts with
segmentation based on what different
customer groups value and what will
make them loyal.
Customer value is the customers
perception of what outcome he expects in
a specific situation with the help of a
product or service offering in order to
achieve a desired purpose or goal.

Customer Value: Concept and

Characteristics
Five new approaches to customer value
have been identified. These are:
The total value of their relationship with your
company
The potential value of their relationship
The profitability of their relationship
The insights they can provide to your
company
The influence they can wield over other
customers

Customer Value: Concept and

Characteristics (3/5)
There are a few fundamental lessons
that must be remembered in connection
with customer value:
Value is customer-defined
Customers differ in who they are, what
outcomes (value-in-use) they seek, and
therefore, what value they place on different
benefits of an offering.
Value is opaque

Customer Value: Concept and

Characteristics (4/5)
Value is contextual. Context has three
dimensions:
The end user
The end-use situation, and
the environment.

Value is multidimensional
Value is a trade-off at the hand of a
customer: Trade-off between total benefits he
gets and the cost he incurs
20/30

Customer Value: Concept and

Characteristics (5/5)
Value is relative - customers evaluate value
relative to available alternatives, particularly
the next-best alternative. (BASE best
available substitute or equivalent)
Value is a mindset the organisation should
have a mindset that everything it does should
revolve around its customers, not its
products.

19/30

Types of Customer Value (1/2)

Jagdish Sheth and Banwari Mittal have
suggested three roles of a customer, viz.:
user, payer and buyer.
Customers as users seek performance, social
and emotional value.
Customers as payers want price value, credit
and financing values.
Customers as buyers desire service value,
convenience and personalisation value.

Types of Customer Value (2/2)

Customers derive value from three
sources:
Economic
Functional and
Psychological

The relative importance of these three

types of values varies across products
as well as the life cycle of the same
product.

Economic Value (1/2)

Economic value is generally the focus in B2B markets. A
fundamental source of value is the economic benefit a
customer derives from using the product over its lifetime.
There are four noteworthy points:
First, the company is communicating a tangible measure of benefit
in terms of savings.
Second, economic benefit, in general, is evaluated by comparing the
total life cycle costs of the products, not just the initial purchase price
Third, the most convenient time frame on which to compare the
these benefits is the life of the new product.
Fourth, economic benefit is always comparative.

Economic Value (2/2)

However, economic value is not the only
benefit on which products are
purchased. Other factors are:
Compatibility
Complexity
Observability
Risk (financial, social and so on)
Divisibility (can customers try a small
portion?)

Functional Value
It is defined by those aspects of a product
that provide measurable functional or
utilitarian benefits to customers. That is
value is provided by performance feature
of a product.
Rupee value of a feature is usually
difficult to show, but researchers using
conjoint analysis techniques can learn
preferences of customers for various
features.

Psychological Value
Psychological value focuses on intangible
benefits of a product as against the tangible
benefits of the other two. For example, brand
names, associations, images etc.
As markets mature and tangible differences
among competing brands become negligible,
psychological benefits become the chief
differentiator. Even technology intensive
companies have come to know the importance
of psychological value their customers desire.

Other Various Value Definitions (1/3)

Customers definition of value:

Low price
Whatever I want in a product or service
The quality I get for the price I pay
What I get for what I give.

Philip Kotler has defined value as:

Product value
Service value
Personnel value
Image value

Other Various Value Definitions (2/3)

Barnes has given the following values:
(1/9) Choice based value: that is, available
choices to customers in terms of:

How they deal with the company

How they pay
How they want them to be shipped
How they receive information

(2/9) Employee based value

(3/9) Information value

Other Various Value Definitions (3/3)

Barnes has given the following
values:
(4/9) Association value
(5/9) Relationship value (as a supplier)
(6/9) Customer unique value
(7/9) Experience value
(8/9) Product-for-price value
(9/9) Access or convenience value #