BY: AGUNG UTAMA

BUILDING CUSTOMER SATISFACTION, VALUE, AND

RETENTION

Defining Customer Value and SatisfactionCustomer perceived value (CPV) : The difference

between the prospective customer‘s evaluation of all benefits and all the cost of an offering and the perceived alternatives.

Customer perceived value (CPV) = Total Customer Value ( TCV)-Total Customer Cost

(TCC)Total Customer Value : the perceived monetary

value of the bundle of economic, functional and psychological benefits customer expect from a given market offering.

Total Customer Cost : the bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the given market offering.

Determinants of Customer Value

Does the customer will always buy the product which delivering the greater customer

value? Not Necessarily.Why?Because the customer also examines his total

cost of transacting with the product and the alternative, which consists of more than the money before making the buying decision.

Based on this decision making theory, there are three (3) ways to making success in selling to the buyer :1. Increasing total customer value by improving

product, services, personel, and/or image benefits.

2. Reducing the buyer’s non monetary cost by reducing the time, energy, and psychic cost.

3. Reducing it’s product monetary cost to the buyer.

Total Customer SatisfactionThe customer satisfaction is depend on the offer’s performance in relation to the customer’s expectation.

Satisfaction : a person’s feelings of pleasure or dissappoinment resulting from comparing a product’s perceived performance (outcome) in relation to his or her expectations.

If P < E DissatisfiedIf P = E SatisfiedIf P > E Highly

Satisfied/Delighted

P=PerformanceE=Expectation

The important key to generating high customer loyalty is delivering high customer value.

A company must design a competitively superior value proposition aimed at a specific market segment (Michael Lanning).

The value proposition : consits of whole cluster of benefits the company promises to deliver ; it is more than the core positioning of the offering.

In a hypercompetitive economy a company can only win the competition by creating and delivering superior values.

This involves 5 capabilities :1. Understanding customer value2. Creating customer value3. Delivering customer value4. Capturing customer value5. Sustaining customer value

To succeed, a company needs to use the concepts of a value chain and a value delivery network.

Value ChainValue chain: a tool for identifying was to create more

customer value (Porter,M).Every firm is a synthesis of activities that are performed

to design, produce, market, delivery and support its products.

The value chains identifies nine strategically relevant activities that create value and cost in a specific business.

These nine value creating activities consists of five primary activities and four support activities.

The primary activities represent the sequence of bringing materials into the business (inbound logistics), converting them into final products (operations), shipping out final products (outbond lohistics), marketing , and servicing them.

The support activities: procurement, technology, human resource management, and firm infrastructure are handled in certain specialized departments, but not only there. For example: several departments may do some procurements and hiring of people.

The firm task is to examine its cost and performance in each value creating activity and to look for ways to improve it.

The firm should estimate its competitors cost and performance as benchmarks against which to compare its owns cost and performances.

The firm success depends not only on how well each departments performs its works, but also on how well the various departmental activities are coordinated. Too often, company departments act to maximize their interests. For example: a credit department may take a long time to check prospective customers’credit so as not to incur bad debts, mean while the customer waits and the sales person is frustrated.

Firm Infrastucture

Human Resources Management Technology Development Procurement

Primary Activities

In bound logistics

Operation

Out bound logistics

Marketing & Sales

Service

Mar

gin

Margin

SAV

To be succesful a firm also needs to look for competitive advantages beyond its own operations, into value chains of its supliers, distributors and customers.

Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network (supply chain)

For example: Levi Strauss & Company and connections with its suppliers and distributors. One of levi’s major retailers is Sears. Every nights levi’s learns the sizes and styles of its blue jeans sold through Sears and other major outlets. Levi’s then electronically orders more fabric for next day delivery from Miliken andCompany, its fabric suplier. Miliken, in turn , relays an order for more fiber to Dupont, its fibre supplier. In this way, the partners in the supply chain use the most current sales information to manufacture what is selling, rather than for a forecast that may not match current demand. In this system, the goods are pulled by demand rather than pushed by supply.

Competition is

Between networks,

not Companies.

the winner is the

company with

the better network

DuPont(Fibers)

Miliken(Fabric)

Levi’s(Apparel)

Sears(Retail)

Customer

Attracting and Retaining CustomersCustomer Relationship Management

The process of managing detailed information about individual customers and carefully managing all the customer “touch points” with the aim of maximizing customer loyalty.

The aim of CRM : is to produce high customer equity ( value equity, brand equity and relationship equity).

1. Get cross-departmental participation in planning and managing the customer satisfaction and retention process.

2. Integrate the voice of customers in all business decisions.

3. Organize and make accesible a database of information on individual customer needs, preferences, contacts, purchase frequency and satisfaction.

4. Make it easy for customers to reach approriate company personel and express their needs, perceptions, and complaints.

5. Run award programs recognizing outstanding employees.