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Creating Costumer Value, EXHIBIT 2, EXHIBIT 3, EQUATION PAG 12, EXHIBITION…

- - - - The basic idea of economic value is to consider the total of ownership or life cycle cost. This is the cost of owning a product over its entire useful life.
        
        The concept of life cycle cost is even more powerful in industrial settings. It's important to consider the case of SKF, a leading global producer of premium bearings.
        
        In theory, a customer should be wiling to pay a price for the new product that is equal to the savings from using or operating the new product, plus the purchase price of the competing product.The maximum price that a customer is willing to pay for a product is its economic value to the customer.
        
        Example: The table generalizes this concept of EVC. It shows a business-to-business (B2B), in wich customer compares the total cost of ownership for a new machine with that of an existing machine. The current of reference Product Y has a purchase price of $300, a startup cost of setting up the machine of $200, and maintenance and operations cost of $500.
        
        In contrast, the new machine (Product X) reduces the setup cost to $100, reduces the maintenance and operations cost to $400 and also imporves the customer's productivitu by $100.
        
        Three points should be noted here:
        
        EVC is calculated as the total life cycle cost or cost of ownership over the entire life of a product. The life span of two products may be different, so it's critical to compare them on the same time frame.
        
        EVC for a product is estimated compared with an existing product used by the customer. In other words, EVC is relative, not absolute. Two different customers who use different products or have different usage patterns may derive different EVC form the same new product.
        
        EVC is the maximum price that a customer should be willing to pay for a product. In practice, a firm generally charges less than this to provide some incentive to the customer to switch.
        
        Example: The lightbulb comes in a few different types. Standard or incandescent lightbulbs have historically been the cheapest, but they are gradually being phased out in many countries ue the global energy concerns. Compact fluorescent lights (CFLs) can be screwed into standard lamp sockets and give warm light that is similar to that of incandescent bulbs, rather than the fluorescent lighting that we associate with facotries or garages.
        
        In 2013, a 60- watt incandescent lightbulb in the USA cost about $1,25, while the costo of an LED bulb that emitted equivalent light was almost $30,00. While we expect the cost of LED bulbs to go down over time, how did the industry encourage adoption of its expensive LED bulbs in 2013? Why would a consumer spend 28 times mor to buy an Led bulb?
        
        The table provides a comparison of the three bulbs to show that, even though the initial purchase price of an LED is much higher than that of an incandescent lightbulb, it saved significant money to consumers because of its energy efficiency.
      - Example: A light- emitting diode (LED) lightbulb is far more expensive to buy than an incandescent bulb, but it consumes less electricity and saves consumers more money every day.
    - - EVC is the total economic benefit to a consumer, this is the maximum pricethat a firm can charge for its products.
      - EVC is a powerful basis for segmenting and targeting customers. In adittion, EVC is useful for introducing new products and determining their positioning against existing products.
      - EVC estimates are based on sseveral underying assumptions about which consumers may be skeptical.
        
        Example: consumers may not believe that SuperOil can last two years, regardlessof hte number of miles driven. Consumers may also question the availability of SuperOil and the ability of expert mechanics to hcange this oil.
  - - - Example: A costumer looking for a cell phone will likely compare the various features or functional benefits of several brands. Such comparisons often involve difficult trade-offs for consumers because they cannot be easily translated in terms of economic benefits or price tag.
      - A multi-attribute model offers a simple framework to capture how consumers evaluate prodcuts with different features. Market research companies use this approach to understand consumers' preferences for various attributes and brands.
        
        Example: To illustrate how this approach works, consider an example of a consumer named Anton who is planning to buy a laptop for his personal use.
        
        After careful consdieration, Anton narrows down his chioces to models of four different brands. Based on his personal needs, Anton identified four key features or attributes that he is looking for in his laptop: hard disk storage space, random access memory, weight, and price.
        
        The table summarizes this information, the last column in this exhibit, prefrence is the weighted sum of attribute ratings and summarizes the overall value that Anton assigns ti a particular brand of laptop. The general equation for n attributes is:
    - - After accounting for all the differences in the features of various brands, the HP model emerges as Anton's most preferred and the Lenovo laptop as his least preferred model. What can an organization do to improve its value offering to consumers? In the example of the sample consumer Anton, what could Lenovo do to improve its prefrence and likelihood of purchase? The company has several options to consider.
        
        First, Lenovo would have to assess why its laptop rates so low, comparatively, on hard dirsk storage and RAM. The issue is a technical problem that may require redesign of the product to improve it.
        
        Alternatively, Lenovo could lauch a campaign that included comparative advertising is a common practice in business.
        
        Another option for Lenovo is to try to change consumers' minds about the importance of various attributes.
        
        Lenovo could attempt to make this favorable attribute more important to Anton.
        
        Finally, Lenovo could bring to customer' attention an entirely new attribute that may not be of mind great customer service, improved display quality, or security features such as a camera shutter or a privacy filter built into the laptop display.
    - - The multi-attribute model has some limitations of which managers should be aware.
        
        The second limitation: While it's easy for researchers to conduct such studies, they are typically hard for consumers to answer. Consumers implicitly make such trade-offs, but they often find it difficult to articulate them in the form of a multi-attribute matrix.
        
        When assessing the functional value of a product, it is critical to recognize the difference between features an benefits. Features are what a product offers and benefits are what a customer gest from those features.
        
        The first limitation is that this model is compensatory: That is a high rating on an attribute can compensate for a low rating on another attribute.
        
        Example: When buying a car, some consumers might no consider a car that costs more than $50,000, no matter how well it rates on other attributes.
        
        Example: When companies focus too much on features without regard to their benefits to customers, they ca ncreate a features war. The razor blade industry offers a good illustration.
        
        For a long time, men used a single-blade razor to shave until 1971, when Gillette introduced the TRAC II with two blades. Two decades later, Gillette improved its product even more and offered MACH3, a razor that sported three blades for an even closer shave.
        
        The competitor of Gilette didn't want to be left behinf and soon it topped MACH3 with a four-blade option called Quattro. While five blades may provide a finer shave than three or four blades can, this war of features isn't best war for cmopanies to compete and try to provide superior value to customers.
  - - - Example: Lexus vehicles use the same chassis and many of the same components as those used for Toyota Camry cars, but Lexus is perceived to be a luxury brand, with a far superioro image compared to Camry and thus commands a premium price.
    - - Example: The Ford Model was manufactured in black. As the competition in the automobile industry intensified, manufacturers realized the importance of color and design as determinants of consumer choice.
        
        Decades later, computer manufacturers somehow forgot the lesson than the car companies had learned, and they offered computers and laptops in black. Then came Apple's founder and Steve Jobs recognized the importance of design and color, and instilled that sensibility into "everything Apple".
    - - It can be sources of significant competitive advantage to organizations. In a survey of 362 organizations, the consulting firm Brain and Company found that 80% of organizational leadres believed their companies were providing superior customer service.
        
        How can organizations hope to close that gap etween their perception of good service and customers' actual experience of satisfaction? The answer may lie with employee satisfaction. That's why an influential Harvard study introduced the concept of the service-profit chain, which demostrated the link among employee satisfaction, customer satisfaction, customer loyalty, and customer profitability.
        
        Product Offering: When facing increased competition, firms iften respond by adding more and more features to their products and introducing a large number of items to fill ther product line.
        
        Example: The banks offer many complex products some even beyond the full understanding of senior managment, met alone front-line employees. It's hard to imagine that a ffront-line employee, who typically receives a lower wage and may have been hired for attitude instead of aptitude, would be prepared to deliver expert knowledge about a large array of complex products while providing friendly service.
        
        Customer Managment: The customer value that a customer perceives in a product or service is often closely tied ti the way the organization manages its customers. Technology allows organizations to reduces costs by offloading more and more tasks to customers.
        
        Example: Banks encourage customers to do online banking instead of coming to a branch, airlines ask travelers to print their boarding passes at home and retailers have self-checkout lines at stores.
        
        Front-Line Empployees: Who often receive the least compensation and the least amount of training in organizations, are the people most responsible for delivering superior customer experience.
        
        While most companies hire front-line employees based on their skills and aptitude instead of aptitude some business scholars argue that front-line employees are hired for attitude instead of aptitude.
        
        Example: Herb Kelleher, the legendary co-founder and former CEO of Southwest Airlines, believed that finding employees who have the right attitude is so important that Southwest's hiring process takes on a patina of spirituality.
    - - A crucial aspect of experimential value is the emotional benefit that customer perceive in the products and services they use. Therefore, the role of marketing and advertising isn't only to convey information about a product's or a services's features but also to build an emotional bond with customers to create long-term loyalty.
        
        Example: In 2012, Procter and Gamble created an advertising campaign called "Thank you, mom" to honor the mothers of Olympic athetes who were participating in the London Summer Olympics.
        
        Few business scholars would argue against the idea that superior customer service is critical for customer satisfaction and customer retention; several studies have shown the link between customer retention and both customer profitability and firm value.
  - - - Example:Sites such as Youtube become destination sites as more and more people visit them, encouraging other consumers to upload their videos, which provides even more positive feedback to viewers who visit Youtube.
    - - Example: A study documented this type of herding behavior on a social news aggregation esite, where users contribute news articles and other users vote on these contributions using a thumbs-up or tumbs-down icon.
        
        In this study , the researchers randomly assigned more than 100,000 submitted comments to three conditions: up, down, or the control group. The study foud that prior ratings created a sginificant bias in users' ratings behavior
    - - Example: Many online sites such as Yelp or Tripadvisor rely on user-generated content. Instagram and Facebook wouldn't exist if users didn't post pictures or comments in their newsfeeds.
    - - Economic theory would suggest that if demand surpasses supply, wages would rise to create an equilibrium.
        
        Example: Manny shopping mmalls are alredy shifting from serving as a location for transactions, with large deparment sotres as their main anchor pints, and moving to focus on entertainment and food establishiments that foster social activities and interactions.
  - - - There are four ways that customers derive value from a product or service. If customers save money by using a new product instead of another comparable product, then this new product provides them with economic value.
      - Experimental benefits are the third way that customers can derive value from a product. Branding, unique prodcut design, superior customer service, and-7or emotional bonds that a company may build with customers are some of the ways to create experiential value.
      - Finally, to maintain a competitive advantage, organizations need to understand the underlying types of value that customers derive from their products and services
- - - - Example: The graphic illustrates the service-quality model that highlights the gap between customer expectations and the actual delivery of a service. This model identifies five potential gaps that can result in failure to deliver excellent service.
        
        Gap 3: Even if the goal is specified and performance standards are unambiguous, the actual delivery of service may not be consistent with the goal and performance standards.
        
        Example: Generally, the biggest gap in most companies is typically a result of poor hiring, training and inventives for front-line employees.
        
        Gap 4: Sometimes external communication through advertising or public relations is at odds with the actual service quality that a firm delivers.
        
        Example: Typically, firms are eager to claim superior service, raising customer expectations that are later not met and that in turn cause significant disappointed and dissatisfaction.
        
        Gap 2: This gap is caused when a firm fails to translate its service-quality expectations into tangible results.
        
        Example: Managment may tell its restaurant managers to provide fast servicewithout specifying what fast means in terms of actual wait time.
        
        Gap 5: Customers' perception of service may not coincide with their expectations, and this causes dissatisfaction.
        
        Example: A flight attendant may check on a business passenger frequently to ensure that her needs are met, but the traveler may be annoyed by these frequent interrumptions.
        
        Gap 1: This gap may occur if managment's perception of what constitutes excellent service is at odds with customer expectations.
        
        Example: Courteous staff in a restaurant