Customer Value

Cigarettes have always been a controversial product. What starts out as an experiment invariably leads to an addiction that is very hard to get rid of. It has been described as a "small cylinder of finely cut tobacco leaves rolled in thin paper". Nowadays, considering the awareness about tobacco products, cigarettes are looked down upon as agents of death. However, despite the prices of cigarettes having gone from Rs. 5 in 2008 to Rs. 12 in 2014 (that's an average CAGR of 12.25% over 6 years), the consumption of cigarettes have not come down. Quoting available data, Minister of State for Commerce and Industry D Purandeswari said in a written reply to the Lok Sabha that domestic consumption of cigarettes during the year 2011-12 was 1,16,166 million sticks, showing an increase of 4.19 per cent as compared to the previous year.

Customer delivered value is a sum total of the total customer value and the total customer cost 

Total Customer value = Product value + services value + personnel value + image value

Total customer cost = Monetary cost + time cost + physic cost + energy cost

Customer Delivered value = Total Customer value – Total customer cost

Here we try to identify and categorize the value derived from a cigarette by a customer:

• Image value: Image benefit is most common in the younger sections who aim to "look cool" and gain the approval of others. Smoking is often seen as a rebellious activity and may help the younger consumers help get a feeling of freedom. It is often seen as a rite of passage in many engineering schools of India. Smoking is also seen as a method of networking and bonding with colleagues in the corporate world.
• Personnel value: Cigarettes offer no personnel benefit.
• Services value: Cigarettes offer no services benefit
• Product value: Cigarettes offer a psychosomatic stimulus (also knows as a "high") which is very addictive to the consumer. Addiction is the sole reason why people continue to smoke despite all the negatives of smoking.

Let's also try to identify and categorize the costs pertaining to a cigarette:

• Psychological cost: Psychological costs are huge when it comes to smoking cigarettes. Majority youngsters who smoke do so without the knowledge or approval of their parents/guardians. Thus the fear of getting caught is huge for them. On the other hand, the psychological cost for matured adults is also great since they have been bombarded with anti-smoking advice and thus the fear of dying due to it always at the back of their minds.
• Energy Cost: Energy cost related to a cigarette is negligible. Cigarettes are available everywhere.
• Time Cost: Time cost related to a cigarette is negligible. It hardly takes any time to buy and consume a cigarette.
• Monetary Cost: Monetary cost associated with a cigarette is not much in India in comparison to the West. Government efforts to increase the price of cigarettes also seems to be yielding no results.

Customer Decision Making

How do consumers decide which particular brand of goods or services to
purchase? This is an eternal question that companies think about a lot. The
consumer buying behavior is an important research area with direct impact on the
marketing process of a firm. A firm’s ability to establish and maintain satisfying
exchange relationships requires an understanding of buying behavior. Today we shall look at the decision making process of a customer.

Buying cigarettes is generally associated with brand loyalty. Whenever someone smokes, the first question that is asked is "What brand do you smoke?". Even though there is little evidence to suggest that smokers are able to differentiate between brands based solely upon smoking cigarettes, brand loyalty is the key driver for cigarette sales for any brand.

Let's look at the decision making process of buying a cigarette:

1. Problem recognition: The decision making process starts with recognizing the problem. The problem at hand would be the urge to smoke, perhaps after a satisfying meal. This urge is due to the addictive properties of smoking. Many people develop a habit of smoking after every meal.

2.  Information search: Once the problem of wanting to smoke has been identified, the search for information starts. This usually includes trying to locate a shop that sells cigarettes. India has a lot of small shops that sell tobacco products apart from an Indian delicacy known as 'Pan'. Such shops are usually run by a shopkeeper who is colloquially known as a 'Pandwaadi'. Thus, the search for a 'Panwaadi ki dukaan' (literally, "Shop that sells Pan") begins.

3. Evaluation of alternatives: Once one of the above mentioned shops has been located, the customer usually asks for his or her brand of cigarettes. However, if his or her brand of cigarettes is not available, he is presented with alternatives to his brand. Cigarettes usually carry a strong brand loyalty. Therefore the evaluation of alternatives really happens if the usual brand is not available. The customer is generally in a fix if his or her brand is not available and has to settle for something else.

4. Purchase decision: Once a conscious purchase decision has been made, the customer perform the actually purchase. This decision of purchase is satisfactory if he or she gets his preferred brand  and less than satisfactory otherwise. At this point, the customer is most eager to have a smoke.

5. Postpurchase behavior: Interestingly, customers who buy and consume cigarettes have a mixed postpurchase behavior. While at one end the customer is happy at the satisfaction of the urge to smoke, there is also a guilt associated with the consumption of a potentially lethal substance. However, as is with any addiction, the psychological benefit of having satisfied an addiction is much more than the dangers associated with it.