MKTG 640

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MKTG 640

• Customer Value

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Customer Pyramid

• It is a bit like going to an old-fashioned
  College Mixer..

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Customer Pyramid

• Who shops at Nordstroms?

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Customer Pyramid

• Evaluates customers in terms of their
  profitability to the firm.
• Ranks customers in terms of their profitability
  to the firm.
• Service investments across the firm yield
  different returns
• Shows who to serve and who to dump.

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Customer Pyramid

• Isnt this just segmentation?
• Segmentation finds similar groups of customers
  have similar wants.
• Typically profitability is not measured.

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Customer Pyramid

• Is an improvement over segmentation.
• The pyramid ranks similar profitability tiers of
  customers.
• Then firms can match product quality levels with
  profitability levels.
• Important dont lump customers all together.

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Customer Pyramid

• Is an improvement over the two-tier 80/20 scheme

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Customer Pyramid

• Platinum Tier most profitable customers
• Gold Tier profits not as high
• Iron Tier provide volume but deserve no special
  treatment
• Lead Tier cost the company money

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Real Estate Example

• Platinum Tier 500K or more dont bargain for
  commission great referrals
• Gold Tier 250-600K - bargain
• Iron Tier 100-250K - differ
• Lead Tier long time to buy you dont wan their referrals

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When to use a Pyramid?

• When service resources, including employee time,
  are limited.
• When customers want different services or service
  levels
• When customers are willing to pay for different
  levels of service.
• When customers define value in different ways

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When to use a Pyramid?

• When customers can be separated from each other.
• When service differentials can lead to upgrading
  customers to another level
• When they can be accessed either as a group or
  individually.

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Fundamentals of a Pyramid?

• Intimate knowledge of the customer
• (building information profiles of customers)
• may involve collecting and consolidating
  existing information about the customer's history
  with the firm, including usage and customer
  satisfaction information.

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Using the Pyramid to build SCA

• Home Depot full service provider with Expo
• Outsource some functions (like payroll, IT,
  security)
• Use line extensions (Toyota Lexus)
• Create learning relationships

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Using the Pyramid to build SCA

• Reduce the customers cost of doing business
• ..such as information search, time savings,
  bundling products..
• Exploit technology

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Example

• Bank of America
• Premier Banking
• Who? Those looking for a one-on-one relationship
  with a client manager
• Qualified? 100,000 in combined deposits,
  investments, lines of credit and loans

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Extra goodies

• No annual fee for Money Manager Account.
• No monthly maintenance fee for checking
• Discounted commissions for equity trades
• Annual maintenance fee waived for IRAs opened
  through BofA
• Online Banking with bill pay via the internet
  with no monthly fee.
• Overdraft protection from a line of credit,
  credit card or savings account

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More extra goodies

• Several no fee credit cards
• Free rental of a safety deposit box
• Free premier banking checks
• One-time closing and one set of closing costs for
  construction costs and permanent loan financing
  when you build a new home
• How can BofA afford these?

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How to dump the Lead customers

• Raise prices
• Raise minimum order quantities
• Remove free service offerings