Building customer satisfaction, value, and retention (1)
BUILDING CUSTOMER SATISFACTION,
VALUE, AND RETENTION
Defining Customer Value and
Customer 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.
Does the customer will always buy the product which delivering
the greater customer value? Not Necessarily.
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 Satisfaction
The customer satisfaction is depend on the
offer’s performance in relation to the
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 Dissatisfied
If P = E Satisfied
If P > E Highly Satisfied/Delighted
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
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 value
2. Creating customer value
3. Delivering customer value
4. Capturing customer value
5. Sustaining customer value
To succeed, a company needs to use the concepts of a
value chain and a value delivery network.
Value chain: a tool for identifying was to create more customer
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
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.
Human Resources Management
Operation Out bound
& Sales Service
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.
the winner is the
the better network
Attracting and Retaining Customers
Customer 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
5. Run award programs recognizing outstanding employees.