Page 149 - Marketing Management

126 PART 3 CONNECTING WITH CUSTOMERS

considerations in heavy industrial equipment.The firm also makes it easy
for customers to find the right product by providing a full line of con-
struction equipment and a wide range of financial terms. Caterpillar
maintains the largest number of independent construction-equipment
dealers in the industry. These dealers all carry a complete line of
Caterpillar products and are typically better trained and perform more
reliably than competitors’ dealers. Caterpillar has also built a worldwide
parts and service system second to none in the industry. Customers
recognize all the value Caterpillar creates in its offerings, allowing the
firm to command a premium price 10 percent to 20 percent higher than
competitors. Caterpillar’s biggest challenges are a reenergized Komatsu,
which has made a strong push in China, and some supply chain issues
Caterpillar’s market success is in introducing new products. 11
partly a result of how well the firm
creates customer value.
Very often, managers conduct a customer value analysis to reveal the company’s strengths and
weaknesses relative to those of various competitors. The steps in this analysis are:
1. Identify the major attributes and benefits customers value. Customers are asked what attributes,
benefits, and performance levels they look for in choosing a product and vendors. Attributes and
benefits should be defined broadly to encompass all the inputs to customers’ decisions.
2. Assess the quantitative importance of the different attributes and benefits. Customers are
asked to rate the importance of different attributes and benefits. If their ratings diverge too
much, the marketer should cluster them into different segments.
3. Assess the company’s and competitors’ performances on the different customer values
against their rated importance. Customers describe where they see the company’s and com-
petitors’ performances on each attribute and benefit.
4. Examine how customers in a specific segment rate the company’s performance against a specific
major competitor on an individual attribute or benefit basis. If the company’s offer exceeds the
competitor’s offer on all important attributes and benefits, the company can charge a higher price
(thereby earning higher profits), or it can charge the same price and gain more market share.
5. Monitor customer values over time. The company must periodically redo its studies of cus-
tomer values and competitors’ standings as the economy, technology, and features change.

CHOICE PROCESSES AND IMPLICATIONS Some marketers might argue the process we
have described is too rational. Suppose the customer chooses the Komatsu tractor. How can we
explain this choice? Here are three possibilities.
1. The buyer might be under orders to buy at the lowest price. The Caterpillar salesperson’s task
is then to convince the buyer’s manager that buying on price alone will result in lower long-
term profits and customer value.
2. The buyer will retire before the company realizes the Komatsu tractor is more expensive to
operate. The buyer will look good in the short run; he is maximizing personal benefit. The
Caterpillar salesperson’s task is to convince other people in the customer company that
Caterpillar delivers greater customer value.
3. The buyer enjoys a long-term friendship with the Komatsu salesperson. In this case,
Caterpillar’s salesperson needs to show the buyer that the Komatsu tractor will draw complaints
from the tractor operators when they discover its high fuel cost and need for frequent repairs.
The point is clear: Buyers operate under various constraints and occasionally make choices that
give more weight to their personal benefit than to the company’s benefit.
Customer-perceived value is a useful framework that applies to many situations and yields rich
insights. It suggests that the seller must assess the total customer benefit and total customer cost asso-
ciated with each competitor’s offer in order to know how his or her offer rates in the buyer’s mind. It
also implies that the seller at a disadvantage has two alternatives: increase total customer benefit or
decrease total customer cost. The former calls for strengthening or augmenting the economical, func-
tional, and psychological benefits of the offering’s product, services, personnel, and image. The latter
calls for reducing the buyer’s costs by reducing the price or cost of ownership and maintenance,
simplifying the ordering and delivery process, or absorbing some buyer risk by offering a warranty. 12