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CHAPTER4
The Customer Experience and Value Creation
Apple has many prosumers―professional consumers who are eager to help
Apple design innovative products. For more information, just do an Internet
search for “Apple mockup products.” Shown here is a concept drawing of a
wrist phone.
You can use Apple’s experience with its prosumers to start a discussion on
the customer experience and the product benefits and features that consumers
often want but cannot obtain from manufacturers. This chapter talks about prosumers and how
businesses like Apple are tapping into the creativity of their customers.
Introductory Exercise
The flight information and faresoffered by Southwest Airlines and United Airlines for a
round-trip ticket from Chicago to Portland, Oregon, are reproduced below. United adds to the
ticket price a fee of $60 for checked baggage ($25 for the first bag and $35 for a second bag).
Use this information to discuss the economic value Southwest provides and the hidden costs that
many airlines include in their ticket prices. The discussion could extend to why would anyone fly
United Airlines?
Teaching Objectives
Demonstrate the necessity of understanding customer needs as part of the ongoing marketing process.
Present the concept of customer value and the different ways customer value is measured.
Discuss the importance of emotional benefits and how they can influence customer preferences and
perceptions of value.
Harvard Business School Case Materials
Apple Computer, 2006–2007.HBS Case 9-706-496 (32 pages). Apple has reaped many benefits from its
innovative music player, the iPod. However, Apple’s PC and server business continues to hold small market
share relative to the worldwide computer market. Will the iPod lure new users to the Mac? Can Apple
produce another cutting-edge device quickly?
Market-Based Management Copyright © 2012
Sixth Edition –11– Pearson Education, Inc.
Instructor’s Manual– Chapter 2 Publishing as Prentice Hall
Collabrys, Inc.HBS Case 9-603-064. Collabrys survived the dot-com bubble burst by partnering with large
brand-name companies and responding to market feedback. This case illustrates the importance of
customer focus, customer relations, and the role employees play in building a customer-focused
organization. 31 pages.
Customer Value Measurement at Nortel Networks–Optical Networks Division.HBS Case 9-501-050.
The case illustrates how Nortel incorporates customer satisfaction and loyalty measures into its business
practices to increase customer value. It also presents the importance of obtaining customer perceptions in
order to fully understand the factors that drive customer value. 25 pages.
Bush Boake Allen.HBS Case 9-601-061. Bush Boake Allen is a fragrance company that seeks customer
input for its product development. This case examines how customers who have very different needs can be
empowered to design their own products online.
Commercializing Technology: Imaginative Understanding of User Needs.HBS Case 9-694-102. The
case describes a study conducted by Hewlett-Packard to improve its product development process. It
illustrates the increasing focus companies are placing on understanding user needs. A framework of different
technology commercialization situations is proposed, and the concept of empathic design is introduced as a
potent mechanism for anticipating user needs, especially under conditions of moderate technical and market
uncertainty. Researchers often find traditional market research techniques incompatible with creatively
understanding user needs. In many situations, customers do not ask for a new product, or even a new
feature, because they do not know what is technologically possible. Teaching purpose: Intended to help
bridge the communications gap between research and marketing by clarifying the circumstances that would
make marketing tools especially appropriate and the circumstances that would make nontraditional ones
more effective.
Market-Based Strategic Thinking
1. What is the advantage to understanding the customer’s total experience for a brand such as
Kyocera?
The focus is too often product specific. What Kyocera really wants to know are the needs customers have,
the kinds of problems they encounter, how important those problems are, and what processes do
2. Why is it more valuable for the Lexus managers themselves, rather than a market research firm, to
interview customers in order to understand a customer’s total experience?
There is no substitute for direct contact with customers when seeking to understand a customer’s total
experience. The Lexus customer interview is an unscripted discussion that can go in many directions. A
3. How could Apple use empathic design to discover customer problems and new opportunities for
value creation for the iPhone?
Apple could make videos of employees using the iPhone to better understand the customer experience.
Watching iPhone users or making videos of Apple employees using the iPhone provides an insightful
Market-Based Management Copyright © 2012
Sixth Edition –12– Pearson Education, Inc.
Instructor’s Manual– Chapter 2 Publishing as Prentice Hall
4. What would be the purpose of a printer manufacturer spending a day in the life of a customer at a
company that has over 100 printers in its office building?
The printer manufacturer’s marketing team would have the opportunity to engage in a sequential dialogue
with the customer’s employees, learning how they acquire printers, process information, and use printers in
5. Why is understanding the total customer experience of a lead user of an iPad potentially more
valuable than spending the same amount of time with an average iPad customer?
The average customer will nothave the depth of experience in using an iPad that a lead user has. Lead
6. Why would understanding the customer experience of a lead user of an iPad result in better
product improvements than those that Apple engineers might design on their own?
Because lead users push the limits of a product, they know what they want more of, less of, and what they
would like to have if only it were available. Some lead users even adapt products beyond their intended
7. How could a bank improve the customer experience by managing customer touch points?
Every customer interaction is a customer touch point that offers an opportunity to enhance the customer
experience. Some touch points may are of lesser importance, such as opening the front door for patrons at
8. How could a business that manufactures and sells hardwood flooring through building supply
stores make the best use of mass collaboration to improve product performance and service
quality?
By encouraging customers to share their experiences with the hardwood flooring, and in particular ideas
9. Why should the two hypothetical videos of a day in the life of a customer using a digital camera go
beyond the product and focus on the customer’s use of the digital camera?
To discover a “complete customer solution,” the hypothetical videos need to include all aspects of product
10. How would you assess the economic value of two SUVs?
The economic value of an SUV is the dollar savings a customer would realize over the life of the product
Market-Based Management Copyright © 2012
Sixth Edition –13– Pearson Education, Inc.
Instructor’s Manual– Chapter 2 Publishing as Prentice Hall
11. How could a business selling firewood could create a more attractive economic value?
The company and its competitor both sell a cord for $200. The company encourages customers to pay $25
more for kindling to start their fires. The competitor does not offer this option, and buying the same amount
12. How would you explain to HP management the fair price line in Figure 4-18 and HP’s perceived
customer value for the HPPhotoSmart premium printer? How would you discuss with HP the fact
that its printer may be underpriced?
The fair price line represents the price a buyer would expect to pay for different levels of performance as
rated by Consumer Reports. The fair price line in Figure 4-18 wascreated by using regression analysis and
13. Why is it important for McDonald’s to measure all aspects of perceived performance and perceived
cost of purchase?
For McDonald’s, there is perceived customer value in the company’s products, service, and brand name.
The customer value goes beyond just the hamburger, fries, and other menu items, extending to the service
provided, the cleanliness and atmosphere of the restaurants, and McDonald’s reputation for a reliable
14. In what ways can HP improve the perceived value of its personal computers?
Referring to Figures 4-23, HP could improve its perceived value by addressing the weak areas of product
performance, service quality, and company reputation. If there are no weaknesses, HP could seek to
15. How should customer preference and purchase behavior change as perceived value increases or
decreases for vacation packages to Hawaii?
As perceived customer value of a Hawaiian vacation package (perceived benefits minus perceived costs)
increases relative to the perceived value offered by competing vacation packages, we would expect
Market-Based Management Copyright © 2012
Sixth Edition –14– Pearson Education, Inc.
Instructor’s Manual– Chapter 2 Publishing as Prentice Hall
16. Why are emotional benefits important to a brand like Nike or Rolex?
Emotional benefits are a function of psychological needs, personality, and personal values. For highly
17. How do psychological motives help shape emotional benefits and customer perceptions of value?
Psychological motives based on customers’ personalities and psychological make-ups influence how they
respond to the brand personality projected by a product (see Figure 4-27). The more a product’s brand
18. How does the personality of a spokesperson used in advertising help shape the emotional benefits
of a product?
Customers are attracted to products that project personalities similar to the personalities that they find most
19. Using Figure 4-27, discuss the brand personalities of Kodak, Mountain Dew, and Prudential
Insurance, and describe how these brand personalities were created.
Kodak– Projects sincerity and cheerfulness. The company’s ads have traditionally portrayed family
20. What is automobile trade-off analysis? How would it help Ford understand customer preferences,
price sensitivity, and value drivers?
A trade-off analysis for automobiles is a customer preference exercise in which customers are asked to
rank automobiles that vary in different areas of performance and in price. For example, three levels of fuel
A trade-off analysis would tell Ford which performance factors are more important to customers, as well as
which levels of performance have the most value. If the price curve is steep, customers are price sensitive.
21. How could a restaurant determine if its customers would prefer a proposed premium service that
would cost customers 10 percent more for their meals?
This is a perfect application for a conjoint analysis. Starting with Figure 4-28, the restaurant create two
Market-Based Management Copyright © 2012
Sixth Edition –15– Pearson Education, Inc.
Instructor’s Manual– Chapter 2 Publishing as Prentice Hall
Market-Based Management Copyright © 2012
Sixth Edition –16– Pearson Education, Inc.
Instructor’s Manual– Chapter 2 Publishing as Prentice Hall
