MKTG 640
Customer Value
Customer Pyramid
It is a bit like going to an old-fashioned
College Mixer…..
Customer Pyramid
Who shops at: Nordstrom’s?
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.
Customer Pyramid
Isn’t this just segmentation?
Segmentation finds similar groups of
customers have similar wants.
Typically profitability is not measured.
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 – don’t lump customers all
together.
Customer Pyramid
Is an improvement over the two-tier
80/20 scheme
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
Real Estate Example
Platinum Tier – $500K or more – don’t
bargain for commission – great
referrals
Gold Tier – $250-600K - bargain
Iron Tier – $100-250K - differ
Lead Tier – <$100K – shoppers not
buyers, take a long time to buy – you
don’t wan their referrals
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
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.
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.
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
Using the Pyramid to build SCA
Reduce the customer’s cost of doing
business
..such as information search, time
savings, bundling products..
Exploit technology
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
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
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?
How to dump the Lead
customers
Raise prices
Raise minimum order quantities
Remove free service offerings