UNIT 2 CUSTOMER VALUE EXPECTATIONS
* TOPICS IN THIS CHAPTER :-
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2.1 Introduction
2.2 Customer Value Expectations
2.2.1 Customers’ Expectations and Customers’ Perception
2.3 Determinants of Customer Value
2.3.1 Social and Cultural Factors
2.3.2 Personal Factors
2.3.3 Physiological Factors
2.4 Factors Influencing Change in Expectations
2.5 How to Develop Right Value Expectations
2.6 Summary of this Chapter
2.7 Very Very Important Questions
2.1 INTRODUCTION:-
- When a customer purchases a product, he or she does not only buy the product but also buys bundles of hopes and expectations along.
- In the modern marketing concept, customer is the king and all the marketing activities revolve around the customers.
- Hence, customers’ satisfaction is the prime focus. Customers’ expectations from a product or service play a very important role in attaining customers satisfaction and they pose major challenge.
- Customers’ expectations are not constant.
- Their expectations may change from situation to situation.
- There are many reasons why customer expectations are likely to change over time.
- Process improvements, advent of new technology, changes in customer’s priorities, improved quality of service provided by competitors are just a few examples.
- Moreover, the customer is always right.
- Hence, the job of the businesses is to provide the customer what he wants, how he wants and when he wants.
- To find out whether customers are satisfied or not and if satisfied up to what extent, the businesses need to perform effectively to meet their expectations.
- Customers’ level of satisfaction is usually affected by changes in their expectations or changes in the business performance. Hence, it becomes imperative to understand customers’ expectations properly and pay attention to its performance.
- It might sound very simple to pay attention to the business performance and customers’ satisfaction but virtually, it is very tricky.
- Marketers might think that their performance is up to the mark but customers’ perception for businesse’s performance can be different.
- Even if marketers are working very hard to satisfy the customer, it is all in vain, if the business is not rated good by the customers.
- On the other hand, it can happen that even if the business is not doing very well but customers perceive that the business is delivering its best.
- Thus, customer satisfaction is customers’ perception that a supplier has met or exceeded his expectations.
- To put it simple, it can be stated that customers’ satisfaction is determined by their own perceptions and therefore it is important to understand both-customers’ expectations and customers’ perception to ensure customer retention.
- This unit aims at discussing the concept of customer expectations in the context of retail business.
- It also discusses the determinants of customer value, factors influencing change in expectations and the ways to develop right value expectations.
2.2 CUSTOMER VALUE EXPECTATIONS:-
- Without customers there is no business.
- Businesses perform effectively when they properly define their target customers, develop solid understanding of customers’ needs and expectations and meet those expectations.
- As long as the customers’ expectations are met, they are satisfied and when they receive over and above their expectations, they are delighted which is termed as “wow effect” in marketing.
- There are three basic questions that business needs to answer:
1. Who are the customers?
2. What do they desire and expect?
3. How well does the business perform in order to meet those expectations?
- “Value is the customer’s overall assessment of the utility of a product based on perception of what is received and given” (Zeinthaml 1988, p.14).
- Customer value expectations means, customer’s total expectations from a product which he or she is willing to buy.
- Total expectations can be defined as a combination of product and/or service benefits (performance, reliability, responsiveness and competency) at fair price.
- Generally , customers want to have product/ service of highest quality at the lowest price and as quickly and conveniently as possible.
- This whole understanding can be expressed in a form of equation:
Customer Value Expectation=Highest Quality+ Lowest Price+ Quick Service
- Thus we can say that if we put together the quality of the product or service and quick and convenient services at reasonable price of that particular product or service it becomes total expectation of the customer.
- Customer expectations can be of two types
(1) Expressed customer expectations and
(2) Implied customer expectations.
Expressed Customer Expectations :
- Wants that are either written down in the contract or expressed orally and agreed upon by both parties (buyer and seller), for example, product specifications and delivery requirements. Since these are clearly written, performances of the businesses can be easily and directly measured .
Implied Customer Expectations:
- These expectations (wants or desires) of the customers are neither written nor expressed in words.
- They are the wants that customer would ‘expect’ the business to understand and deliver.
- For example, a customer expects from the store attendant that he/she will come forward and help the customer in informing about the product and solve all his queries regarding the product.
- This in-turn helps the customer to make purchase decision.
- Exceeding customer expectations is achieved when retailers are able to anticipate customer needs or are able to deliver based on unstated needs.
- As an illustration, in a retail store, a lady along with a child and items for purchase may require help in atleast holding her belongings so that she can shop freely.
- However, she may not know whether she will get any help from the staff.
- A sharp observation by the staff and offering their help will surely exceed her expectations.
- Now let us first understand the concept of customer value expectations with few examples.
Example 1
- To understand the concept of customer expectations, let us imagine a typical scene in a readymade garment store.
- The store is a leading brand and the shelves are full of attractive clothes.
- A lady customer walks to the ladies garment section and is rummaging through the stock and picks out a particular Indian kurta.
- She tries the kurta and finds that it does not fit her to her liking, and requests for an alternate size.
- She requests the identical piece (colour, print, design and style) in her size.
- The lady attendant searches for the identical piece, but does not find it in her size.
- She offers many alternative choices of colours, prints and design, but not the identical one.
- The customer is unhappy and leaves the shop without making any purchases.
- Did the customer expect anything extraordinary? Or, was the merchandiser at the store at fault if the identical piece is not available in the alternate size?
- The scenario above is a common one in any Indian retail store, from a mall to a local baniya.
- At any given time, it is hard to predict customer’s need and satisfy his needs and wants.
Example 2
- A family purchases its first microwave oven, which offers various combination of cooking methods.
- The decision to buy a particular brand of microwave is guided by various factors, viz. brand, price, size, utility and features, etc.
- The lady in the family (she is a working professional) is not well versed with the operation of the microwave, and the store manager promises to send his person to demonstrate how to optimally use it.
- The store manager never sends his man because it is not possible for him to send him at the day and time convenient for the lady.
- Eventually the demonstration does not happen.
- The family is totally dissatisfied with the store and brand for poor after sales service.
- This situation is not just detrimental for the store, but also for the brand.
- Next time this family wants to buy another FMCG (Fast Moving Consumer Goods) product, they may base their purchase decision on the above experience.
- They either will not make their purchase from this store, or will select another brand. In the retail industry, the customer rules, and his expectations become the decisive factor in making or breaking a retail outlet.
- Each individual customer comes with different expectations and different levels of expectations.
- One dissatisfied customer can have two effects on a retail store;
(1) he/she may spread a negative word about the stocks and merchandise at the retail store
(2) dissuade other customers from visiting the store.
- Similarly one satisfied customer, may not necessarily speak on his or her positive experience in a store.
- In effect a negatively satisfied customer can be very harmful for a retail outlet.
- We can therefore summarise, customer value expectation is what a customer perceives of the product attributes along with what utility the product represents to the customer and what utility he derives from it.
- The above examples explain how customer expectation is important for businesses.
- Now let us understand how does a customer expectation is formed.
- It is based on various factors: like the needs and desires of a customers, image of the company, wordof-mouth communication or referrals or customers’ own past experience.
- For instance, If Mr. X is going to a retail store say big bazaar, he will be having certain expectations from that store and reasons can be many.
- One reason could be that his friend (Mr. Y) was very delighted to visit that place and during listening his experience Mr. X felt that this is the kind of store he was actually looking for.
- Likewise, there may be several reasons for his expectations.
- Figure 2.1 represents the reasons for development of customer expectations.
- The store personnel have to anticipate the needs and anxieties (expectations) of the customers even before the customers themselves realise it.
- This strengthens the relationship with the customers and gain customer loyalty.
- There are certain needs or anxieties of the customers (other than the product itself), meeting which ensures the higher level of customers’ satisfaction and increased sales.
- These are also termed as expectations.
- These are discussed below:
1) Customers expect product related information:
- They expect product related information which helps them in their decision making process to purchase a product.
- Giving them right and reliable information makes them feel that they are valued.
- This feeling ensures customer loyalty and customer retention.
- For instance, when a customer enters into a retail store and start scanning the merchandise (say, a travel cooker, priced at Rs. 1500/-), he gets confused whether it will be of optimum use or not.
- When the store attendant greets him and asks “may I help you sir?” the first comfort comes from that soft offer (question) and when he (store attendant) tells him various uses and convenience of that product, the customer’s perceived value of that product increases.
2) Customers expect various options of a purchase:
- When a customer visits a retail store, he expects that he will have various options to satisfy his need and wants to analyse all the options before reaching to a purchase decision as he wants maximum value for the money spent on the product.
- Customers tend to respond positively when they are given options.
- Options provide scope to create open dialogue and discussion which can lead to increased sales.
3) Customers expect convenient shopping:
- Customers want to enjoy shopping with no discomfort.
- They don’t want to wander into the store from one section to the other unnecessarily.
- If there is someone (store attendant) who can take care of the customers’ request, apprehensions, problems etc and ensure that their needs are met to derive satisfaction, it can be inferred that customers’ value expectations are taken care of.
4) Customers want polite and meaningful communication:
- All customers invariably expect that the sales force in the store is excellent communicators.
- Other than a peppy talk, many of them also expect a kind of consultation in making their purchase decision.
- On the contrary many customers don’t want to be consulted.
- To meet their expectations it becomes highly imperative to analyse their needs, likes and dislikes.
5) Customers expect a flawless relationship:
- Customers feel happy when they realise that people in the store know them.
- For example, when a store attendant greets customer and tell him that a new product of his choice is available in the store, the customer feels elated and motivated to buy that product, provided he is convinced that it has been told in good faith.
- Although it takes time and efforts to build this kind of relationship but the end result is in the form of customer retention which yields better profit to the business.
2.2.1 Customers’ Expectations and Customers’ Perception:-
- In business world, there is no free lunch.- Every activity taken has an expectation of certain positive returns.
- The ultimate goal of a business is to attain success.
- Business success depends heavily or rather merely on its customers having positive perception for the company and its products or/and services.
- As we have discussed earlier that it is more important how a customer perceives the business’s efforts rather than how effectively it actually delivers.
- Positive perception indicates that up to a considerable extent, customers’ expectations are met.
- Positive perception of the customer yields several benefits, like:
a) Develop and improve customer relationships
b) Increase new and repeat sales
c) Improve the market share
d) Positive company image
e) High quality customer referrals
- On the other hand unhappy or dissatisfied customers (with negative perception) can make the company suffer on various front for instance, lost sales, negative company image, and lost referrals etc .
- Hence, it is important to obtain customers’ positive perception, which is not an easy task.
- It involves several steps to be taken.
- Steps of obtaining customer’s positive perception:
1) Survey the customers to find their current level of satisfaction:
- First of all it is important to know the current level of satisfaction of the existing customers.
- In retail stores, quite often questionnaires in the form of short pamphlets are distributed while a customer is shopping which is usually termed as feedback.
- The basic aim is to bridge the gap, if any, between the delivery of services and customers expectations so that positive perception is ensured.
2) Assess the positive value of the benefits already delivered:
- The next step then is to assess the value of the delivery, that is, products and/or services.
3) Create a value proposition :
- Creating value proposition is very important to identify how products and/or services are different from the competition.
- Businesses need to define some unique feature or benefit of the product which makes all the difference.
- Customer perception has been explained in the next unit (Unit 3)
2.3 DETERMINANTS OF CUSTOMER VALUE:-
- We have already discussed the concepts of customer value in detail in the previous unit (unit 1).
- We had discussed that the trend now is not just to deliver a great product / service at a great price, but also to offer service (in the store and also after-sale) as an additional value to their customers, to a point of differentiation.
- There are various factors that determine the customer value expectations.
- They are termed as determinants of customer value expectations.
- It is very important for the marketer to understand the determinants that shape customers value expectations.
- These expectations are influenced by personal needs such as norms, values, learning ability, personality and life style.
- Factors such as reference groups and family influence will also help shape customers’ value expectations.
- In a study by Rong Liu Titled “Dynamic Impact Factors of Customer Lifetime Value: An Empirical Study of Mzone”, the factors are described as follows:
A Customers Related Factors
- Customer related factors are associated with customer’s own individual attitude and personality.
- These factors are the characteristics of the customer’s own separate decision, which the business cannot change.
- So business should understand and predict the factors that influence customer value, and make better use of the customer related factors in order to improve Customer Lifetime Value (CLV).
B Enterprise Related Factors
- Enterprise related factors are enterprise’s own factors.
- Such factors are closely related to the image of the business ability, and influence customer’s consumption behaviour.
- Business should perfect the enterprise related factors to improve customer satisfaction and customer loyalty, and then increase CLV.
C Customer-enterprise Relationship Related Factors
- Customer-enterprise relationship related factors are the relationship between customers and enterprises, and they are the interaction result between enterprise and customer.
- Relationship between the impact factors can be controlled and adjusted by enterprise.
D Social Environmental Related Factors
- Social environmental related factors are related to the community which has whole impact on environment-related factors.
- Enterprises are unable or difficult to take charge of these factors and they should be aware of the whole state of the environment, adapt and make use of them to enhance CLV.
- These social environmental factors can further be categorised in three categories.
- They are as follows:
* Social and Cultural factors
* Personal factors
* Physiological factors
2.3.1 Social and Cultural Factors:-
- Culture refers to set of values, ideas, artefacts and other meaningful symbols that help individual communicate, interpret and evaluate as member of society.
- Culture is described as blueprint of human activity, determining the coordinates of social action and productive activity (Grant Mc Cracken).
- Culture is the most fundamental determinants of person’s wants and expectations.
- The growing child acquires a set of values, perceptions, preferences and behaviour through his family and other key social institutions.
- As human beings are said to be a social animal, their expectations largely influenced by the environment in which they live.
- Social and cultural factors influence the buyers’ expectations in different ways.
- For some products the influence of these factors is quite evident and for some it may not.
- Elements of cultural factor include, who in the family is making the purchase decision (decision is male driven or female driven), whether an individual need or a collective want is being satisfied.
- Other factors also include nationality, religion, race, etc.
- Social factors include, family (economic stature, role of decision maker, his status in the family / group), status in the society, reference and social groups, profession, etc.
- Social and cultural factors include the following:
Reference groups:
- Every buyer is a member of several organisations and groups.
- He interacts in his group which leaves some imprint on him and influences him in his day to day life and consequently his expectations.
Family:
- There is a strong bond and close, continuous interaction amongst the family members and thus family members largely influence individual’s expectations.
Social Status:
- Every individual belongs to some social status and this strongly influence the individuals buying decisions.
- Customers’ expectations are often based on the attitude and belief of the social class they belong to.
2.3.2 Personal Factors
- Customers’ expectations are also influenced by personal or individual’s characteristics.
- It is the person and the personal choice which decides what he or she desires and what to buy.
- Age , marriage, personality, wealth, occupation, life style and family structure notably influence the purchase decision or shape customers expectations.
- For repeat purchases age is an important factor.
- Younger generation believes in change and they love experimenting on different kinds of products.
- Likewise gender, occupation etc also have impact on customers’ expectation.
Personal Factors can be:
Age and life cycle stage:
- Customers change the goods and services they buy over their life time.
- Needs and interest often varies with age and life cycle stage.
- For example, clothes that we wear and recreation choice are all age related.
Occupation:
- Occupation of the individual also affects his choice and expectations.
- For example, drivers and mechanics may earn as much as a young corporate executive or a teacher but the buying patterns are likely to be different for all of them.
Income and life style:
- Purchasing power off course has its impact on the customers’ expectations.
- Customers have to spend money to get the desired satisfaction.
- People belonging to same culture occupation and social class may exhibit different life styles.
- For each kind of lifestyle the needs and desires are different and this influence the individual expectations from the market.
2.3.3 Physiological Factors:-
- Physiological determinants also shape customers’ value expectations.
- The physical condition and structure of the purchaser also influence the expectations.
- For instance, Need of a pregnant woman for clothes, nourishment etc. are different from that of a non pregnant woman.
- Consumption pattern of adult is widely different from babies and school going children.
- Physiological needs are influenced by factors such as health, food, water, sleep, i.e. to do with the health and maintenance of our body.
- This is an important factor as the individual and family needs and health have to be taken care of.
- When a customer seeks value from product that satisfies his physiological needs, the quantum of customer value sought is huge.
- Some examples of products that satisfy the physiological needs are, medicines, bottled water, skin and hair care products, alternate medicines (such as branded ayurvedic products), health foods, organic foods, and so many more.
- Here a customer lays complete trust in the product he/she is using, and this trust is based on advertising, personal experiences or other’s experiences.
- Services such as pathological labs, renowned doctors and diagnostic services carry a huge burden of customer value satisfaction.
- This is because they diagnose and treat illness and they carry the huge responsibility of human life.
- Besides the factors discussed above, there are certain other factors that play significant role in shaping the customers’ buying decision and thus shaping their expectations.
1) Product (its utility and benefits).
2) Price (value derived for the consideration paid):
- A customer always wants to gain more benefit vis-a-vis the price paid for it.
- Value for money plays a very important role in purchase.
3) Life of the product compared to its price:
- How long will the product be used in order to optimise its cost.
4) Service (in the store as well as post-sale):
- Customers want quick and convenient services.
- Businesses which offer them quick and convenient services are liked and preferred by the contomers.
5) Status in the society after acquiring a product, which is guided by brand selection.
2.4 FACTORS INFLUENCING CHANGE IN EXPECTATIONS:-
- As we have already discussed in this unit, customers’ expectations is not a static phenomenon, rather it varies from situation to situation.
- While some of the situations are beyond the control of the businesses, some factors can be controlled and tamed.
- Customers’ expectations can be changed either by change in their own perception or change in the performance of the business.
- Some of those factors that causes change in customers’ expectations are as follows:
1) The most influential factor in change in customer expectations is availability of an alternative product (better quality and utility, at a better price, easily available, assuring after sales service, discount offers, etc).
2) The second factor affecting change is past experience of a product / service or a retail outlet.
3) Change in social status (rise in income, aspiration to rise in society and peer group).
4) Increased awareness about customer right.
2.5 HOW TO DEVELOP RIGHT VALUE EXPECTATIONS:-
- Retail businesses have to develop right expectations in the minds of their customers.
- These value expectations can be either or both regarding the store and products.
- The right value expectations can also be created through a very creative and effective advertising strategy and also during the customer’s visit to the store.
- There are a few ways to develop right value expectations which are as follows:
1) With the right advertising the retailer can create the right perception in the minds of the customer about the product, its features, price, benefits, benefits over other competitor products, discount, etc.
2) Along with setting right value expectations for the product (mentioned above), the retailer can also set expectations for the store by promoting the store as sole distributor, fresh and attractive stocks, special discounts for loyal customers, additional discount for certain bank debit/credit cards, location of the store, parking facility, convenient location, etc.
3) While the above are two ways of creating positive perception in the minds of the customer, the retailer also creates a positive perception in the store by having good salesmen who are very well knowledgeable about the products (features, price, contents, uses, etc), obtaining primary data through questionnaires about what the customers expect from the store and whether the store satisfied their expectations, attending to customer requirements, etc.
2.6 SUMMARY OF THIS CHAPTER:-
- The prime focus of the marketing now a days is customers’ satisfaction. Customers’ satisfaction depends upon customers’ expectations from the product or service and their perception about the efforts taken by the marketer to meet their expectation.
- Hence it becomes important to understand the customers’ value expectation properly.
- There are various factors that influence customer value expectation.
- They are social and cultural factors, personal factors and physiological factors.
- To understand what factors affect change in expectations, we need to know the factors that influence decision making process to purchase.
- For instance, price of the product, its length of use and benefits derived from the product determines the customer satisfaction.
- Retailers have to develop right expectations in the minds of their customers.
- These value expectations can be either or both regarding the store and products.
- The right value expectations can also be created through a very creative and effective advertising strategy and also during the customer’s visit to the store.
- The retailers need to create a positive perception in the store by having good sales people who are very well knowledgeable about the products (features, price, contents, uses, etc), They usually obtain primary data through questionnaires about what the customers expect from the store and whether the store satisfied their expectations, attending to customer requirements, etc.
- Meeting customer expectations will help the business to gain customer loyalty, which in turn helps the business to flourish.
- A firm without understanding customer value expectations can never deliver superior value to customers and can never relish the desired success.
- Therefore it is very important to understand customer value expectations to win and retain customers in the business.
2.7 VERY VERY IMPORTANT QUESTIONS:-
1. Comprehend the customer expectations from the purchases.
2. Describe the determinants of customer value.
3. Analyse the impact of social status on customer value expectations.
4. Discuss the role of cultural aspects on customer value expectations.
5. Comprehend the influence of personal and physiological factors on customer value expectations.
6. Analyse the changes in the customer expectations.
7. Recognize the factors which influence change in expectations.
8. Explain the ways to develop right value expectations.
9. Define customers’ value expectations with suitable example.
10. Satisfied customer is not the ultimate goal of a business, instead it is the delighted customers who are more meaningful to the businesses. Discuss.
11. Explain the process of the development of customers’ expectations.
12. Elaborate various determinants of the customer value expectations. Explain those determinants with examples from your personal experiences.
13. What are the factors that influence change in customers’ expectations? Explain with suitable example.
14. Explain the importance of customer expectations.
15. What is the difference between customers’ expectations and customers’ perception?
16. How does a retailer create the right value expectations in the minds of its customers?
