Defining and delivering customer value and Satisfaction and value chain

Defining customer Value and Satisfaction It is no longer enough to satisfy customers. You

must delight them. today’s co’s are facing the toughest competition

ever Can outperform competitors only when they move

from product and sales concept to marketing concept

Customer value-delivery system Mc Donald’s- 38million people/day- 23,500

restaurants in 109 countries because of its QSCV( Quality, Service, Cleanliness and Value)

Customer Value

Co’s task is to create customers But today’s customers have array of products, brand

products, prices and suppliers Customer delivered value- it is the difference between

the total customer value and total customer cost Total customer Value- it is the bundle of benefits

customers expect from a given product or service Total customer cost- it is a bundle of costs customers

expect to incur in evaluating, obtaining, using, and disposing of the product or service

Determinants of Customer Delivered Value

Customer satisfaction

Satisfaction is defined as . . . “a person’s feelings of pleasure or

disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.”

Customer satisfaction Total Customer Satisfaction( TCS)

Satisfaction Customer Expectations

Performance matches Expectations- satisfied Performance falls short of Expectations- Dissatisfied Performance exceeds Expectations- highly satisfied or delighted

Delivering High Customer Value (customer loyalty) Value proposition- it is about the resulting experience

customers will have from the offering and their relationship with the supplier

Value-delivery system- all the communications and channel experiences the customer will have on the way to obtaining the offering.

Measuring Satisfaction

4 methods to track/measure customer satisfaction 1. Complaint and suggestion systems2. Customer satisfaction surveys3. Ghost shopping4. Lost customer analysis.

4 methods to track/measure customer satisfaction1. Complaint and suggestion systems

A customer-centered organization makes it easy for customers to register suggestions and complaints.

Some customer-centered companies-P&G, General Electric, Whirlpool—establish hot lines with toll-free numbers. Companies are also using Web sites and e-mail for quick, two-way communication.

4 methods to track/measure customer satisfaction

2. Customer satisfaction surveys

Studies show that although customers are dissatisfied with one out of every four purchases, less than 5 percent will complain.

Most customers will buy less or switch suppliers. Responsive companies measure customer satisfaction directly by conducting

periodic surveys. While collecting customer satisfaction data, it is also useful to ask additional

questions to measure repurchase intention and to measure the likelihood or willingness to recommend the company and brand to others.

Positive word of Mouth

4 methods to track/measure customer satisfaction3. Ghost shopping

Companies can hire persons to pose as potential buyers to report on strong and weak points experienced in buying the company’s and competitors products

They are called mystery shoppers Can test by how the sales people handle complain Managers can phone their own company with

complaints and questions to see how the calls are handled

4 methods to track/measure customer satisfaction4. Lost customer Analysis

Companies should contact customers who have stopped buying or switched to another supplier to learn why this happened

Conduct exit interviews Monitor customer loss rate

Premier Dell.com is a special business-oriented part of the Premier Dell.com is a special business-oriented part of the Dell Web site that allows customers to interact with Dell and Dell Web site that allows customers to interact with Dell and

customize all phases of doing business with Dell.customize all phases of doing business with Dell.

Given the importance of customer value and satisfaction, what does it take to produce and deliver them?

Value chain and Value- Delivery Systems

VALUE CHAIN Michael Porter of Harvard proposed the value

chain It is a tool for identifying ways to create more

customer value. A high-level model of how businesses

receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers.

VALUE CHAIN Every firm is a collection of activities that are

performed to design, produce, market, deliver, and support its product.

The value chain identifies 9 strategically relevant activities that create value and cost in a specific business.

The 9 value-creating activities consist of 5 primary activities and 4 support activities.

The Generic Value Chain

Value Chain- Primary Activities1. Inbound Logistics.

Here goods are received from a company's suppliers. They are stored until they are needed on the production/ assembly line. Goods are moved around the organization.

2. Operations. Operations are the value-creating activities that transform the

inputs into the final product .3. Outbound Logistics.

The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer.

4. Marketing and Sales. These activities are associated with getting buyers to purchase the

product, including channel selection, advertising, pricing, etc. 5.5. ServiceService.

This includes all areas of service such as installation, after-sales service, complaints handling, training and so on.

Value Chain- Support Activities1. Procurement.

This function is responsible for all purchasing of goods, services and materials.

secure the lowest possible price for purchases of the highest possible quality.

responsible for outsourcing (components or operations that would normally be done in-house are done by other organisations),

ePurchasing (using IT and web-based technologies to achieve procurement aims).

2. Technology Development. source of competitive advantage. Companies need to innovate to reduce costs and to protect and

sustain competitive advantage. This could include production technology, Internet marketing

activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments.

Value Chain- Support Activities3. Human Resource Management (HRM).

Employees are an expensive and vital resource. An organisation would manage recruitment and selection,

training and development, and rewards and remuneration. The mission and objectives of the organisation would be driving

force behind the HRM strategy.

4. Firm Infrastructure. This activity includes and is driven by corporate or strategic

planning. It includes the Management Information System (MIS), and

other mechanisms for planning and control such as the accounting department.

Value Delivery Network To be successful the firm also needs to look for

competitive advantages beyond its own operations, in to value chain of its suppliers, distributors and customers.

Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network also called a supply chain.

Levi Strauss’s Value-Delivery Network