Transcript Marketing Principles MKTG 101

Module 3
Early Means-End Chain
Value Models
Module 3 Objectives
Know what a means-end chain is.
Gain a practical understanding of classic means-end chain
and other value models:
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Grey Benefit Chain
Zeithaml
Woodruff’s Customer Value Hierarchy
Christensen’s Exploration Space
Know the differences between these models and the
strong points of each relative to each other and relative to
the basic value equation (value=benefits/costs).
Be able to apply the components of these models to
practical examples.
Means-End Chains
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A theoretical model defined by a series of
antecedent factors (the means) that lead to or
cause consequent factor (the end).
The end factor is, therefore, a function of all
“means” factors.
Part I
The Grey Benefit Chain
Making the Link
Product
Feature
or Claim
Emotional
or Psychological
Benefit
Product
A good, service, or idea consisting
of a bundle of tangible and
intangible attributes that satisfies
consumers.
Why Important?
The combination of features/attributes define
a product offering.
Features/attributes are the lowest, most
concrete level of a product’s value hierarchy.
Points of differentiation are generally defined
by certain features/attributes.
Emotional benefit important because it is
viewed as the “highest level”, can be the most
powerful. It is the “outcome” that customers
experience.
Grey Benefit Chain
Product
Feature
Functional
Benefit
Practical
Benefit
Emotional
Payoff
Value
=
Benefits
___________
Costs
Grey Benefit Chain
Product
Feature
Functional
Benefit
Practical
Benefit
Emotional
Payoff
Part II
Price, Quality, and Value: The
Zeithaml Means-End Value
Model
Figure 1 - Zeithaml’s Means-End Model
Extrinsic
Attributes
Intrinsic
Attributes
Objective
Price
Perceived
Quality
Perceived
Monetary
Price
Perceived
Non-Monetary
Price
Intrinsic
Attributes
Perceived
Value
Perceived
Sacrifice
Purchase
Definitions
Intrinsic attributes – comprise the actual
composition of the product such as flavor, color,
texture, etc.
Extrinsic attributes – exist outside the product
offering itself such as price, brand name, level of
advertising, reputation (brand image), etc.
Objective price – actual price, an extrinsic cue.
Figure 1 - Zeithaml’s Means-End Model
Extrinsic
Attributes
Intrinsic
Attributes
Objective
Price
Perceived
Quality
Perceived
Monetary
Price
Perceived
Non-Monetary
Price
Intrinsic
Attributes
Perceived
Value
Perceived
Sacrifice
Purchase
Objective Quality
Measurable and verifiable superiority on
some predetermined ideal standard or
standards.
Category Specific
Higher-level Quality Indicators
Performance
Features
Reliability
Conformance
Durability
Serviceability
Aesthetics
Image
Purity
Flavor
Freshness
Appearance
Reliability
Empathy
Assurance
Responsiveness
Tangibles
Cross-Category
Higher-level Quality Indicators
Brand name
Level of Advertising
Reputation
Product Warranties
Seals of Approval
Price
Subjective/Perceived Quality
Consumer’s judgment about the
superiority or excellence of a product.
“There are no best products. All that
exists in the world of marketing are
perceptions in the minds of the
customer or prospect. The
perception is reality. Everything else
is an illusion.”
Quality Hypotheses that Emerge
from the Zeithaml Model
Consumers use lower level attribute cues
to infer quality.
Consumers depend on intrinsic attributes a)
at the point of consumption, b) in prepurchase situations when intrinsic attributes
are search attributes, and c) when the
intrinsic attributes have a high predictive
value.
Quality Hypotheses that Emerge
from the Zeithaml Model
Consumers depend on extrinsic attributes
more than intrinsic attributes a) in initial
purchase situations when intrinsic attributes
are not available, b) when evaluation of
intrinsic cues requires more effort and time
than the consumer perceives is worthwhile,
and c) when quality is difficult to evaluate.
Price Hypotheses that Emerge
from the Zeithaml Model
Monetary price is not the only perceived
sacrifice.
A general price-perceived quality
relationship does not exist.
Price as an indicator of quality depends on
a) availability of other cues, b) price
variation within a class of products, c) level
of price awareness of consumers and d)
product quality variation within a class of
products.
Value Hypotheses that Emerge
from the Zeithaml Model
The benefit components of value include
intrinsic attributes, extrinsic attributes, and
perceived quality.
The sacrifice components of perceived
value include monetary prices and nonmonetary prices.
Perceived value affects the relationship
between quality and purchase.
Figure 1 - Zeithaml’s Means-End Model
Extrinsic
Attributes
Intrinsic
Attributes
Objective
Price
Perceived
Quality
Perceived
Monetary
Price
Perceived
Non-Monetary
Price
Intrinsic
Attributes
Perceived
Value
Perceived
Sacrifice
Purchase
Four Definitions of VALUE
Value is low price.
Value is whatever I want in a product.
Value is the quality I get for the price I pay.
Value is what I get for what I give.
Management Implications From the
Zeithaml Model
Closes the quality perception gap
IDs key intrinsic and extrinsic attribute
signals
Acknowledges the dynamic nature of
quality
Understands how consumers encode
monetary and nonmonetary prices
Recognizes multiple ways to “add value”
Figure 1 - Zeithaml’s Means-End Model
Extrinsic
Attributes
Intrinsic
Attributes
Objective
Price
Perceived
Quality
Perceived
Monetary
Price
Perceived
Non-Monetary
Price
Intrinsic
Attributes
Perceived
Value
Perceived
Sacrifice
Purchase
Part III
Woodruff’s Customer Value
Hierarchy
Quality Management
Principal business strategy of the 70s and
80s.
Objectives: improve quality of products and
internal operations processes.
Result: internal orientation.
Customer satisfaction management (CSM)
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Purpose: to bring the “voice of the customer”
into quality management efforts.
Shortcomings of the Customer
Satisfaction Management Movement
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Many organizations set customer
satisfaction management (CSM) goals,
but failed to measure customer
satisfaction (CS).
Those that did measure CS may didn’t
necessarily act on the results.
Many found that CS is not related to
organization performance.
Woodruff’s Value Definition
“Customer value is a customer’s perceived
preference for and evaluation of those product
attributes, attribute performances, and
consequences arising from use that facilitate
(or block) achieving the customer’s goals and
purposes in use situations.”
Woodruff’s Value Definition
Definition adopts a customer perspective
Incorporates both desired and received
value.
Emphasizes that value stems from
customers’ learned perceptions,
preferences, evaluations.
Links together products with use situations
and related consequences by goal oriented
customers.
Woodruff Customer Value
Hierarchy
Desired Customer Value
Customers’ goals
and purposes
Customer Satisfaction with
Received Value
Goal-based
satisfaction
Desired consequences
in use situations
Consequencebased satisfaction
Desired product
attributes and attribute
performances
Attribute-based
satisfaction
Grey’s Benefit Chain
Product
Functional
Benefit
Practical
Benefit
Emotional
Payoff
Figure 1 - Zeithaml’s Means-End Model
Extrinsic
Attributes
Intrinsic
Attributes
Objective
Price
Perceived
Quality
Perceived
Monetary
Price
Perceived
Non-Monetary
Price
Higher-level
Abstractions
Perceived
Value
Perceived
Sacrifice
Intrinsic
Attributes
Purchase
Satisfaction
A person’s feelings of pleasure or
disappointment resulting from
comparing a product’s perceived
performance (or outcome) in relation
to his or her pre-purchase
expectations.
Expectancy-Disconfirmation Model
Confirmation
•product matches expectations
•satisfaction
Negative disconfirmation
•product delivers less than expected
•dissatisfaction
Positive disconfirmation
•product delivers more than expected
•Satisfaction/delight
A Simplified ExpectancyDisconfirmation Framework
Customer Value Hierarchy Model
Desired Customer Value
Customers’ goals
and purposes
Customer Satisfaction with
Received Value
Goal-based
satisfaction
Desired consequences
in use situations
Consequencebased satisfaction
Desired product
attributes and attribute
performances
Attribute-based
satisfaction
Customer Value and
Customer Satisfaction
 Both describe evaluative judgments about
product offerings.
 Both place special importance on the use
situation.
 Satisfaction is the customer’s feelings in
response evaluations of one or more use
experiences.
 But what do customers evaluate?
Part IV
Discovering What Has Already
Been Discovered: Why Did Your
Customers Hire Your Product?
Clayton Christensen
The Classic Approach to
Adding Value
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Identify the target market for a specific brand.
Gather data (focus groups, surveys, interviews,
observation) from a sample of this segment.
Data is gathered (state-of-the-art methods) as
consumers consider the brand and the product
category that it comes from.
Features and attributes that will provide “more
value” are identified.
Product designers integrate this information into
the next generation of products.
Result: unexciting, me-too, and flop products.
The Classic Approach – Why
Doesn’t it Work?
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Companies conduct their research in terms of product
categories and technological competencies.
They set out to truly understand what the customer’s
needs and wants are, but they do so from their own
perspective.
They compare their own brand to other brands within
the same product category while customers scan across
product categories.
They seek to be truly market driven, but are doing so as
driven by the product category.
In most cases of jumping to the next level of customer
value, the customers themselves do not know what it is.
Examples of Marketing Myopia
Failures
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Railroad industry
Passenger buses
Margarine
Accounting
software for small
businesses
Successes
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Baking soda
Quicken
Milkshakes
Inventor’s Dilemma
Entice customers to change their
behavior in order to use the “better”
product that they have come up with.
Other “Great” Inventions
Automatic Seatbelts
 Motorola’s Iridium Satellite Phone
 Chevy Avalanche
 DVD Audio
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Let the Customers Do The Work
Customers are ingenious and
inventive.
 Companies should simply seek to
discover what has already been
discovered.
 How are customers accomplishing
the job-to-be-done?
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Focus on Goals vs. Solutions
Customers should not be trusted to
come up with new-product solutions.
 They are not expert or informed
enough.
 They have a limited frame-ofreference.
 Customers should be asked for their
desired goals/outcomes.
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Customer Value Hierarchy Model
Desired Customer Value
Customers’ goals
and purposes
Customer Satisfaction with
Received Value
Goal-based
satisfaction
Desired consequences
in use situations
Consequencebased satisfaction
Desired product
attributes and attribute
performances
Attribute-based
satisfaction
The Exploration Space
Customer
motivations that are
product-independent
Expression
of Customer
Benefits
Consumption of
Specific Products
Specific
Attributes
Total Customer
Experience
Expression of Product Requirements
Developing and Using The
Exploration Space
Customer
Motivations that are
Product-Independent
Step 2
The
Innovation
Specification
Step 1
Expression
of Customer
Benefits
Step 3
Consumption of
Specific Products
Definition &
development of
specific product
Specific
Attributes
Total Customer
Experience
Expression of Product Requirements