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1081_CDPS_G1CO] Chapter 5 – Added Values ([4] Imitation (Healthy…

- - - - Underbuild a little, and each customer has little added value/ Overbuild a little, and every customer is as powerful you are.
        
        :warning:small changes could affect
      - :warning:be aware of oversupply but also undersupply(both could cause unhappy customer)
    - - DeBeers ''Diamonds are forever''
        
        hold back supply
        
        perception of scarcity
        
        create ''tradition'' of engagement ring
  - - - :red_flag:Cheap hardware+ Profitable games= Positive feedback loop
      - :red_flag: shortage to create more demands
        
        make their product more desirable
        
        2.free commercial-"Tonight's top story''
        
        help retailers move slow-selling games, which could be a substitute while shortage=>Band-Aid effect
      - :red_flag:Security Chip in hardware+ Licensing program of software= Complete control on everything.
      - :red_flag:Nintendo power, cheap but high circulation of all US children's magazine=>ideal complement to games
- - - - increase the willing of paying added cost
        
        Comfort Class higher-quality service
      - decrease cost but matain the paying willing
        
        fewer seats and empty but increase the service
  - - - Lower costs to make better product
        
        hire customers as staffs
    - - have better product to help lower costs
        
        higher prison quality, lower escapes
- - - - AAdvantage frequent-flyer program
        
        accumulate mileage credits to redeem these for free flight
        
        provide an incentive to stick with customer for next trip
        
        more profitable customers—frequent business travelers
        
        create loyalty by rewarding it
        
        pay attention on two things
        
        free travelers didn't displace other passengers
        
        avoid reselling rewards to others
        
        reduce the cost of rewarding
    - - other competitors start to imitate this incentive program
      - even when free frequent-flyer programs are copied, they still create an incentive for loyalty.
      - make flight fares stable
        
        because of loyalty effect, price cuts are less effective and price rises less risky.
      - How to avoid lowering loyalty effect ?
        
        set up VIP privileges
        
        when customers achieve high standard, they can enjoy different rewards continuously
    - - Who wins?
        
        American airline
        
        other airlines
        
        increase the total market pie and create loyal customers
        
        passengers
        
        get free flight
        
        tourism
        
        Airlines activate tourism
        
        other business
        
        they have formed affinity programs with airlines
        
        other companies also give same mileage credits when customers buy their merchandise
      - Who loses ?
        
        In the '' triple miles'' case
        
        due to intense competition
        
        excessive reward makes airlines had a potentially huge hidden liability.
        
        How to cut the liability down to a manageable size ?
        
        restrict usage
        
        change program terms
        
        set expiration date
        
        rise standard to give the rewards
        
        avoid intense competition and lead to price war
  - - - way to compete
        
        provide deep discounts
        
        others do the same, customers may leave
        
        lost loyalty
        
        expensive cost
        
        create attractive loyalty program
        
        more loyalty
    - - eg:health clubs give guest pass
        
        bring people to come
      - eg: long-distance phone companies provide discounts or free call
        
        bring people to use
    - - :red_cross: too quick
        
        no enough time to build relationship
      - :red_cross: too slow
        
        Meaningless
    - - Let them have their burden, so they won't do crazy moves
    - - surprise
        
        customers don't know
        
        don't show up
      - tell in advance
        
        customers stick around
    - - The best timing for developing customer's loyalty is when you have a monopoly
      - eg: Cable TV companies
    - - best customers :check:
        
        most valuable
        
        example
        
        buy flowers :wilted_flower:for your wife
        
        cellular carriers give them good time slot to call
      - new customers :green_cross:
        
        don't know how profitable
        
        unknown quantity
        
        eg: some cellular carriers give discounts to new customers for buying new phones
    - - rewards customers
        
        kind-not-cash
        
        understand
        
        eg: airline promised 500 savings bond as reward for long miles of flying :airplane:
        
        not cost-effective :green_cross:
        
        eg: give travelers free trip by using empty seats
        
        cost-effective :check:
        
        forget
        
        ex:insurance companies compensate product rather than money
        
        cost-effective to company :smiley:
        
        customer not satisfied :frowning_face:
      - build B2B relationships
        
        help customer get better price
    - - You are your suppliers' customer
      - you want your suppliers to be loyal as you want want your customers and employees to be
        
        Give your suppliers benefits that you gave your employees