Definition of Customer Value

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CHAPTER II LITERATURE REVIEW

A. CUSTOMER VALUE

1. Definition of Customer Value

In the marketing, elementary element which make successful company in maintaining its customer is innovation assess customer superior. Zeithaml et al., 2006:187 stated that from a customer‘s perspective, customer value is what they ―get‖ benefits relative to what they have to ―give up‖ costs or sacrifices. According to Gale 1994 in Alida 2007 customer value is the consumer perception to value to the quality of which offered on the market that higher relative from competitor will influence the loyalty customer story level, value perception excelsior felt by customer, hence is ever greater of possibility the happening of transaction or relation. The term customer value has many meanings Woodall, 2003, but two dominate value for the customer customer perceived value or customer received value and value for the firm value of the customer, now more commonly referred to as customer lifetime value. Woodruff 1997 in Minna Pihlstrom 2008:32 defines customer value as a customer perceived preference for and evaluation of those product attributes, attribute performance, and consequences arising from use that facilitate or block achi eving the customer‘s goals and purposes in use situations. Holbrook 2005:46 defines customer value as an 10 11 ―interactive, relativistic preference and experience‖, which is also a bit difficult to understand and apply, but is seemingly intended to capture some of the key characteristics of customer value. These include, it is perceived uniquely by individual customers; it is conditional or contextual depending on the individual, situation, or product; it is relative in comparison to known or imagined alternatives; and it is dynamic changing within individuals over time. Kotler 2000:37 stated that marketing, as a purpose, is to deliver more value to satisfy customers as well as to build a long-term and mutually profitability relationship with a customer. Lemon, Rust and Zeithaml 2001:22 define value is the keystone of the custom er‘s relationship with the firm. According to Kotler and Keller 2009:161 customer value is the difference between total customer benefit and total customer cost. Total customer benefit is the perceived monetary value of the bundle of economic, functional and psychological benefits customers expect from a given market offering because of the products, services, personnel and image involved. Total customer cost is the perceived bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the given market offering, including monetary, time, energy and psychological cost. From the definition, can be concluded that customer value represent everything which is wanted by consumer in service or product by maximizing the quality of which is accepted by consumer from cost which is released. 12 Figure 2.1 The Determinant of Customer-Perceived Value Source: Kotler and Keller 2009 According to Lemon, Rust and Zeithaml 2001:22 value is delivered from three key factors: quality, price and convenience. Quality is viewed as goods and services quality. Price is the monetary sacrifice. Convenience non-monetary sacrifice relates to all the benefits customers received, such as time saved and effort to do business with the firm. Keegan 2002 stated that the task of marketing is to create customer value that is greater than the value was created by competitors. Value for the customer can be Customer-Perceived Value Total customer benefit Image benefit Personnel benefit Service benefit Product benefit Psychological cost Energy cost Timing cost Monetary cost Total customer cost 13 increased by expanding or improving product andor service benefits, by reducing the price, or by combination of these elements. Companies with cost advantage can use price as a competitive weapon. Knowledge of the customer combined with innovation and creativity can lead to a total offering that offers superior customer value. If the benefits and value are strong enough by customer, a company does not need to be the low-price competitor to win customer.

2. Customer Value Measurement