Unit 38 LO2 Evaluate the different segments in a customer base and the appropriate opportunities for customer value creation-BTEC-HND-Level 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

Different segments of customer bases have different opportunities for value creation. Understanding which customers are most valuable to a company( their behavior, attitudes, and preferences) enables companies to create opportunities to grow sales by offering products tailored specifically for their needs.

Below is a visual representation of some areas that can provide an opportunity for creating a better customer experience; offer on-demand items based on the customer’s location or time of day, customize an item into what they want with more options than are currently available, use video chat rather than requiring phone service… Each area has its advantages and disadvantages in terms of ROI (return on investment).

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Also Read: Analyse appropriate techniques and methods in order to increase the customer lifetime value

Marketing segmentation:

The role of segmentation, targeting, and positioning (STP) to identify lifetime value opportunities

It’s important that manufacturers and marketers take a long-term perspective when developing marketing campaigns. This is because consumers are in evaluation mode at all times, so you need to keep the customer in mind by thinking about their needs and wants for the long haul. It’s important to remember that people make decisions with different time frames or timelines, so they may not see your product as an essential purchase this week but might see it as a necessity next month or for instance only after six months have passed. So forecasting is vital – be aware of all potential consumer segments and address them specifically through segmentation, targeting, positioning (STP).

Identification and diagnosis of value creation opportunities:

Customer perceptions: section, nature of stimulus, expectations, motives, and selective perception

Section refers to what the customer is perceiving. The nature of the stimulus can depend on what the customer’s motives are for purchasing. Customer expectations will always affect what the customer perceives. Studies show that customers perceive a product cheaper than its price to be of poor quality but if it is too expensive they see it as having high quality, and people tend to perceive things more positively when they earn more or when there is competition with other products from different companies

A study found that customers often receive information selectively based on their predispositions which affects how they are influenced by cues in advertisements. People who buy expensive brands generally have expectations through education and personal experience, while consumers of less expensive brands lack those same references points.

Consumer imagery: product and service positioning, price/quality relationships, company’s image

Consumer imagery refers to the overall impression that consumers have of a product or service.

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Product and service positioning reflects how marketers choose to position their products in relation to other products in the same industry.

Price-quality relationships respond to concerns on the part of customers about what they will get for the money they spend on their purchases.

A company’s image is a major concern of business and marketing executives but it is not always clear how this relates to consumer imagery, which could be considered separate issues from a branding perspective.

Nevertheless, there are some points where these two concepts meet. This may be done through advertising as well as through corporate social responsibility campaigns which can contribute towards a more positive perception of a brand among consumers and ultimately lead them to have more confidence in the brand. The perception of a brand is extremely important to customers and thus has implications for how best to manage and maintain their customer relationships.

How consumers store, retain, and retrieve information

Consumers store information primarily through their senses. They retain the information if it is either useful or enjoyable, fun, humorous, inspirational, rewarding – basically any meaning-rich experience that creates a connection between themselves and the event. Retrieving information depends on how connected a person is with the memory in question at any given moment.

Dopamine provides an incentive for us to expend effort in order to retrieve memories of past events great and small. The uncertainty inherent in retrieved memories can make them more exciting than waiting passively for something new to happen or until we get tested on a subject matter later on down the line: This uncertainty has its downside too because as people age they might find they don’t have access to some particular memory anymore and this might be a sign that they’re experiencing some form of dementia.

Involvement theory and consumer relevance

Involvement theory postulates that there are three types of consumers: low, moderate, and high.

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Low-involvement buyers are independent and have little need of a relationship with the buying distributor or product. Moderate-involvement buyers are willing to cultivate a relationship with both the distributor and product at hand. High-involvement buyers perceive themselves as integral to the business’s success or failure and will take proactive steps in doing so by monitoring it closely and interfacing often with staff before making purchases.

Consumer relevance is the ability of a consumer to justify their relevance to a product or service. A consumer who is not relevant to a product or service will be disinterested in that product, classifying it as irrelevant and unlikely to purchase it.

Measures of consumer learning: recognition and recall, responses to media, brand loyalty

One term for this is “consumer learning” which refers to the process by which consumers process information about brands and products, and form attitudes or beliefs that influence future behavior.

Brands can use different measures of consumer learning, though there are often advantages and disadvantages to each. Including a measure of loyalty would be helpful. One common type of measure of consumer learning is recall (or memorability) where respondents are asked to remember brands in a survey when prompted with an initial word or scene cues like those found in TV commercials or advertising campaigns. In contrast, recognition measures ask respondents if they recognize names when given only the first letter as a prompt such as might happen when shopping at grocery stores that offer many similar items on shelves with no brand names. While recall measures are useful in assessing consumer learning, they also tend to be prone to overestimating learning that may not reflect actual brand usage. Recognition measures provide more realistic estimates of the extent to which consumers are exposed and hence learn brands.

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Perceived risk: How customers handle risk

Perception of risk is an individualized matter dependent on many subjective factors.

Perception of risk refers to the subjective opinion that a person has as to how dangerous or risky a particular activity is and this perception affects their willingness to take part in such activities.

The degree of risk perceived by individual changes based on a number of factors, including past experiences with similar risks, whether other people approve or disapprove, the consequences involved in case the risky action turn out poorly (i.e., risks that are either objectively high in magnitude but with positive outcomes more likely than negative outcomes), etc. It is not uncommon for people to overestimate what they perceive as being dangerous because it creates excitement towards them personally and gets them feeling empowered knowing they took a risk.

Acquisition costs in relation to CLVs

Acquisition costs in relation to customer lifetime value is the idea that a firm may charge advertisers more to retarget customers who are predicted to convert soon and less for those who are predicted to convert later.

The principle behind this practice is fairly simple; firms would like their advertising spend to be on positive ROI projects, so they should attempt to direct advertising resources to customers who pay the most money. There is definite disagreement as far as whether or not this will increase net company profits, but it does allow companies with better data analytics capabilities to improve profitability through cost-cutting.

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Basic B2C and B2B decision-making models

B2C Decision-Making Model

When a consumer encounters one’s brand, they go through 8 different “purchase decision stages”: leniency, intrigue, interest in requiring justification of the product before buying it, experimentation and an intention to buy the product right away, testing the competitor’s products with intent to buy from the original company later if they perform better at some point during this period of their trying out new stuff on a constant basis for three months or less. If not sold by that point, then it is likely that they will simply stop coming back for more. Indifference is where somebody sees your brand but has nothing else worth saying about them – these people may have seen it somewhere but are not really fazed enough to do something about it and so are essentially indifferent to you. The last step is the customer – this is where people have already seen your product, liked it, or heard good things about it and as a result, decide that they want to purchase from you.

B2B Decision-Making Model

Some models include the Firm Close or Customer Locate/Exhibit Decision Model, Client Influences in Seek-Seek-Solve Patterns, and Hierarchy of Service Needs. Within these models, it’s advised to use external factors such as environmental forces like competition when making decisions.

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