Determinants Of Customer Value

Determinants of Customer Value: A Comparative Study of Rural and Urban Customers Dr. Tejinder Sharma Department of Commerce Kurukshetra University, Kurukshetra [email protected] & Dr. Suresh Dhanda HAFED

Conceptualizing Customer Value • Exchange worth (Hicks, 1959) • Perceived worth in monetary terms of a set of economuc, technical,s ervice and social benefits received by a customer (Anderson, 1993). • Overall revenue to a firm (Dess and Miller, 1993) • Outcome of value gained through benefits and value lost due to each cost (Bijapurkar, 1997) • Market perceived quality, relative to price (Gale, 1995) • Set of attributes (Chakraborty, 2000)

Conceptualizing Customer Value • Overall assessment of utility of a product based on perception of what is received and what is given (Zeithaml, 1988)

Synthesized view of customer value • Value is inherent to the use of a product • It is customer perceived and not seller defined • It is multidimensional • Process of balancing give and get components

Research model of Customer Value • (Kotler, 2000) Total Customer Value

Product Value Service Value

Customer Delivered Value

Personnel Value Image Value Total Customer Cost

Monetary Cost Time Cost Energy Cost Psychic Cost

Objective of study To compare the customer perceptions of value of the rural and urban customers

Methodology • Identifying the reference product • Developing questionnaire • Data collection and analysis

Identifying reference product • Used reference product method over other methods (internal engineering assessment, field value in use were too technical, group value assessment, compositional approach, conjoint analysis entailed respondents’ limitations) • Pilot survey on 60 customers (30 rural, 30 urban) • Product rating of 20 selected consumer durables on the acquisition effort • TV emerged as common product on weighted average of preference

Developing questionnaire • Multiple components of each component of value were drafted on the basis of literature and expert opinion • 105 item statements drafted (product value – 12, service value – 20, personnel value – 14, image value – 22, monetary cosr 15, time & energy cost – 10, psychic cost – 12) • 5-point likert scale • Pilot survey on 50 respondents (25 rural/urban each) • 29 statements deleted, 8 added, 19 modified for language • Reliability check (Cronbach alpha – 0.6754)

Data Collection • 320 respondents (160 rural; 160 urban) • 100 males and 60 females from rural and urban segments • Represented north and south Haryana

Data analysis • Exploratory analysis • Factor analysis on each component of value an cost, done separately on the rural and urban customers

Perceptions of product value • Product performance and safety emerged as the most important determinant of customer value for both customer segments. • Rural customers associate performance with technology, while urban customers associate it with the latest features • Urban customers lay more stress on quality cerifications (ISO, etc.) than rural counterparts • Elegance of looks is important factor

Perceptions of product value • Assortment is viewed positively by urban customers, but negatively by the rural customers. • Durability (longivity of use) covaries with quality and innovation

Perceptions of Service Value • Rural customers lay more stress on human and pre-purchase service elements, urban customers consider transactional elements (installation, warranty, salesmen behaviour) as more important • Information availability is more important for rural customers, while urban customers value service support, promptness, consistency, etc.

Perceptions of Personnel Value

• Rural customers want high expression of self among the society by way of involvement, product customisation and are influenced by the country image, reputation of a firm. They tend to get carried away by courteous behaviour of salespersons. • Urban counterparts want manufacturer’s attention over image and reputation. They rationalize the intangible offerings.

Perceptions of Image Value • Rural customers give high importance to brand over the urban counterparts. • Rural customers exhibit group behaviour and peer endorsement, dealer’s endorsement are more important. They value familiarity, trust, reliability and ignore exclusivity, quality certification) • Urban customers do consider independent testimony more than peer/family testimony, but want exclusivity and differentiation.

Perceptions of monetary cost • Both segments exhibit almost similar behaviour with respect to monetary cost • Both have high propensity towards discounts and finance schemes. • Cost of usage and convenience of payment is more important for rural customers than their urban counterparts.

Perceptions of time & energy cost • Effort is more important for rural customers while time is more important for the urban customers (in line with the cultural traits of the two segments) • Rural customers do not see websites or online media

Perceptions of psychic cost

• Risk aversive-ness and cost saving are more important determinants of psychic cost for rural customers. • Information search is an important coping up mechanism for psychic cost for rural customers. • Urban customers prefer involvement in product design as a coping up mechanism for reducing the psychic cost

Conclusions • Despite higher convergence, rural and urban customers have certain differences. • Human/emotional aspect and group behaviour are more important for rural customers while the rationality of value offering is more important for the urban customers. • Among the intangible cues, rural customers are more sensitive to self esteem, peer endorsement, while the urban customers look for exclusivity and differentiation.

Further research • Refining/standardizing the scale for measuring multi-product, multiattribute determinants of customer value • Changing dynamics of rural society • New product penetration in rural markets