Consumers are more educated and informed than ever, and they have the tools to verify companies claims and seek out superior alternatives.

Customers are value Maximizers. They estimate which offer will deliver the most perceived value and act on it. Buyers will buy from the firm that they perceive to offer the highest customer delivered value.

Whether that offer lives up to the expectations affects customer satisfaction and the probability that the customer will purchase the product again!

Few businesses understand (really understand) just how much a customer is worth. Add to this the additional profit you get from a delighted customer spreading the word–it can easily double or triple the lifetime value. Seth Godin

Losing profitable customers can dramatically affect a firms profits. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy. The key to retaining customers is relationship marketing.

Marketing managers must calculate customer lifetime values of their customer base to understand their profit implications. They must also determine ways to increase the value of the customer base. A buyers satisfaction is a function of the products perceived performance and the buyers expectations. Recognizing that high satisfaction leads to high customer loyalty, many companies today are aiming for TCS Total customer satisfaction. For such companies customer satisfaction is both a goal and a marketing tool.

What is CPV?

Customer perceived value is the difference between the prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives. CPV is thus based on the difference between what the customer gets and what he or she gives for different possible choices.

Customer Perceived Value

Without customers you dont have a business. So the perceived value should match with the actual values that seller will offer. The seller must identify the attributes and benefits that customer value, assess those different attributes and benefits and monitor customer values over time.

Delivering high customer value

The value proposition consists of the whole cluster of benefits the company promises to deliver. It is more than core positioning of the offering.

For e.g. Googles core positioning is Search. But the internet user is promised more than just a search tool. Thats clear with the Googles product offering and the value that each product gives us. The brand represents a promise about the total experience customers can expect.


Indias largest car maker Maruti Suzuki India has topped customer satisfaction with dealer service for a 14th consecutive year, rated by market research firm JD Power Asia Pacific. According to JD Power Asia Pacific study, in a 1,000-point scale MSI had a score of 876, while the mass market average was 834. The study measured satisfaction among vehicle owners who visit an authorized dealership service center for maintenance or repair work between the first 12 to 24 months of vehicle ownership. Service quality, vehicle pick-up, service adviser, service facility and service initiation were the five factors used for measuring overall customer satisfaction.

Customer Service Index 2013 AsiaPac

The studies of customer dissatisfaction shows that customers are dissatisfied with their purchases about 25% of the time but that only about 5% actually complain. So dont think that getting a tally of customer complaints will solve the problem of customer dissatisfaction!

Few days back I happened to see a customer complaint against Nissan India dealer at Thrissur, Kerala. The customer had a horrible experience with the Nissan dealer and he has raised a complaint against Nissan India. Such complaints will only bring bad image both to the dealer as well as the brand. This might not be one of an incident. There might be several such incidents. It will be good for Nissan India to look at those charts and evaluate yourself to know why you are at no:9!!!

Increase the customer lifetime value of your customers

Its not always the companys largest customers who yield the most profit. The largest customer can demand considerable service and receive the deepest discounts. The smallest customer pay full price and receive minimal service, but the costs of transacting with them can reduce their profitability. The mid size customers who receive good service and pay nearly full price are often the most profitable.

LTV = (Average Order Value) x (Number of Repeat Sales) x (Average Retention Time)

LTV can thus be a valuable tool in your marketing arsenal. You treat customers with high LTV (high expected future profits) differently from those with low LTV. You spend more to retain them. Some customers may even have negative LTV. Why spend a lot of money trying to retain these losers?

This infographic from kiss metrics shows the massive importance of measuring and optimizing for LTV. Have you ever wondered why there are so many Starbucks locations? Or why they have free Wi-Fi and comfy couches? It’s because the Starbucks marketers know that they’re not trying to sell a $5.90 cup of coffee — they’re trying to acquire and maintain a $15k customer. That simple math trick changes a lot about how you approach your marketing.

Your investment into your customers happiness will determine the success of your company. Quality is clearly the key to value creation and customer satisfaction. Provide your customers quality product and service. They will be your brand ambassadors and they bring more customers than your marketing department. Always remember customers are value maximizers and a great customer service will build a great company.

Courteous treatment will make a customer awalking advertisement. Remember Word of mouth marketing isnt about giving customers talking points, as if they were brand spokespeople. Its about delivering anexceptional customer experiencethat makes customers want to recommend you. (Courtesy Deborah Eastman)


References: KissMetricsand Marketing Management byPhilip Kotler.