Defining and deliveringcustomer value and Satisfactionand 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 ofCustomerDelivered Value
Customer satisfactionSatisfaction 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 customersatisfaction1. Complaint and suggestion systems2. Customer satisfaction surveys3. Ghost shopping4. Lost customer analysis.
4 methods to track/measure customersatisfaction1. 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 satisfaction2. 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 customersatisfaction3. 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 customersatisfaction4. 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
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Given the importance of customer value andsatisfaction, what does it take to produce anddeliver 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 companys 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. Service. Service 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.