Customer perceived value:

Our premise is that customers will buy from the firm that they see as offering the highest
perceived value.
Customer perceived value is the difference between the prospective customers
evaluation of all the benefits and all the costs of an offering and the perceived
alternatives.
Total customer value is the perceived monetary value of bundle of economic, functional
and psychological benefits customers expect from a given market offering.
Total customer cost is the bundle of costs customers expect to incur in evaluating,
obtaining, using and disposing of the given market offering.
Customer perceived value

Total customer value

Total customer cost

Product value

Monetary value

Service value

Time cost

Personnel value

Energy cost

Image value

Psychic cost

A particular company can improve its offer in three ways;

i)
it can increase total customer value by improving product, services, personnel
and image benefits.
ii)
It can reduce the buyers non-monetary costs by reducing the time, energy and
psychic costs.
iii)
It can reduce its products monetary cost to the buyers.

Customer satisfaction:
Customer satisfaction occurs when the products perceived performances matches the
expectations of the customers.
In general, satisfaction is a persons feelings of pleasure or disappointment resulting from
comparing a products perceived performance in relation to his or her expectations.
If the performance falls short of expectations, the customer is dissatisfied, the
performance matches the expectations, the customer is satisfied, if the performance
exceeds the expectations, the customer is highly satisfied or delighted.

Customer expectation:
How do buyers form their expectations?
From past buying experiences, friends and associates advice and marketers and
competitors information and promises.
If the marketers raise the expectation too high, the buyer is likely to be disappointed,
however, if the company sets expectations too low, it will not attract enough buyers.
Some of todays most successful companies are raising expectations and delivering
performances to match.
Value propositions:
The key to generating high customer loyalty is to deliver high customer value. According
to Michael lanning, in his delivering profitable value, a company must design a
competitively superior value proposition aimed at a specific market segment backed by a
superior value delivery system.
The value proposition consists of the whole cluster of benefits the company promises to
deliver; it is more than the core positioning of the offering.
For example, Volvos core positioning is safety, but the buyer is promised more than just
a safe car other benefits include a long-lasting car, good service and a long warranty
period.

Measuring the satisfaction:

There are four method that are used to measure the customer satisfaction.
1) Complaint and suggestions systems: a customer-centered organization makes it easy
for customers to register suggestions and complaints. Some customer-centered companies
such as 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.
2) Customer satisfaction survey:
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 the brand to others.
3) Ghost shopping: companies can hire people to pose as potential buyers to report on
strong and weak points experienced in buying the companys and competitors products.
These mystery shoppers can even test how the companys sales personnel handle various
situations. Managers themselves should leave their offices from time to time, enter
company and competitor sales situations where they are unknown, and experience
firsthand the treatment they receive.
A variant of this is for managers to phone their own company with questions and
complaints to see how the calls are handled.
4) Lost customer analysis:
Companies should contact customers who have stopped buying or who have switched to
another supplier to learn why this happened. Not only is it important to conduct exit
interviews when customers first stop buying; it is also necessary to monitor the customer
loss rate.

The nature of the high performance businesses.

Arthur D. Little proposed a model of the high performance business. It pointed to the four
factors.
i)
Stakeholder
ii)
Processes
iii)
Resources
iv)
Organization and organizational culture
Stakeholders:
As its first stop on the road to high performance, the business must define its stakeholders
and their needs and wants. Unless they nurture other stakeholders, the business may
never earn sufficient profits for stockholders.
A company can aim to deliver satisfaction levels for different stakeholders.
Because there is a dynamic relationship among the stakeholder groups. A smart company
creates a high level of employee satisfaction, which leads to higher effort, which leads to
higher-quality products and services, which creates higher customer satisfaction, which
leads to more repeat business, which leads to higher growth and profits, which leads to
high stockholder satisfaction, which leads to more investment, and so on. This is the
virtuous circle that spells profits and growth.
Process:- a company can accomplish its stakeholder goals by managing and linking
work processes. High performance companies are increasingly focusing on the need to
manage core business processes such as
New product development
Customer attraction and retention
Order fulfillment
They are reengineering the work flows and building cross-functional teams responsible
for each processes.

Resources: To carry out its business processes, a company needs labor power, land,
capital, materials, machines, information and energy.
Some resources under their control are not performing as well as those that they could
obtain from outside. Many companies today outsource less critical resources if they can
be obtained at better quality or low cost.
The key is to own and nurture the core resources and competencies that make up the
essence of the business.
There are three characteristics of the core competencies such as are given to below:
It makes a significant contribution to perceived customer benefits
It has a breadth of applications to a wide variety of markets
It is difficult for competitors to imitate
Organization and organizational culture: a companys organization consists of
its structures, policies and corporate culture, all of which can become dysfunctional in a
rapidly changing business environment.
Whereas structures and policies can be changed with difficulty, the companys culture is
very hard to change. Yet changing a corporate culture is often the key to successfully
implementing a new strategy.
Sometimes corporate culture develops organically and is transmitted directly from the
CEOs personality and habits to the company employees.
Value chain:
In a hypercompetitive economy with rational buyers, a company can only win by
creating and delivering superior value. This involves the following five capabilities such
as
i)
Understanding customer value
ii)
Creating customer value
iii)
Delivering customer value
iv)
Capturing customer value
v)
Sustaining customer value
Value chain is the series of departments that carry out value creating activities to design,
produce, market, deliver and support a firms products.
Mr. Michael Porter of Harvard University proposed the value chain as a tool for
identifying ways to create more customer value. Every firms is a synthesis of activities
that are performed to design, produce, market, deliver and support its product.
The value chain identifies nine strategically relevant activities that create value and cost
in a specific business.
These activities are divided into two groups such as
i)
primary activities
ii)
support activities
Primary activities represent the sequence of bringing raw materials to reach the final
consumers.
It includes a) inbound logistics that is to bring raw materials into the business.
b) Operations that is to convert the raw materials into the final products.
c) Outbound logistics that is ship out final product to the market.
d) Marketing and sales that is to market the product to the consumer

e) Service that is to serve after the purchase the products such as repair and
maintenance
The support activities: the support activities include the activities that help the primary
activities to manage smoothly and efficiently.
It includes procurement, technology development, human resource management and firm
infrastructure that are handled in specialized department.
The firms task is to examine its costs and performance in each value-creating activity
and to look for ways to improve it.
The customer development process:
Suspects
Prospects

Disqualified
prospects

First time customers

Repeat customers

Clients

Inactive or excustomers

Members

Advocates

Partners
This figure shows the main steps in the process of attracting and keeping the customers.
The starting point is the suspect; here every one in this point might conceivably buy the
products or services.
From these, the company determines the most likely prospect, which may be customers
for the first time.

Then the first times customers may buy again then become repeat customers. When
customers buy again and again one time he/she will become a client to whom the
company treats very specially and knowledgeably.
The next challenge is turn the clients into members. Members to whom the company
offers the special benefits.
Then the members become advocates, customers who enthusiastically recommend the
company and its products and services to others.
The ultimate challenge is to turn advocates into partners
Some customers inevitably become inactive or drop out. The challenge is to reactive
dissatisfied customers through win-back strategies. It is often easier to re-attract excustomers than to find new ones.

Level of Relationship marketing:

Relationship marketing is very important for todays competitive market. How much
should a company invest in building loyalty so that the costs do not exceed the gains?
There are five different levels of investment in customer relationship building.
High margin
Medium margin
low margin
Many customers/
Accountable
Reactive
Basic or reactive
distributors
Medium number of
Proactive
Accountable
Reactive
customers/
distributors
Few customers/
Partnership
Proactive
Accountable
distributors
Basic marketing: the salesperson simply sells the product.
Reactive marketing: the sales person sells the product and encourage the customer to call
if he or she has questions, comments or complaints.
Accountable marketing: the salesperson phones the customer to check whether the
product is meeting expectations. The salesperson also asks the customer for any product
or service improvement suggestions and any specific disappointments
Proactive marketing: the salesperson contacts the customer from time to time with
suggestions about improved product uses or new products.
Partnership marketing:
The company works continuously with its large customers to help improve their
performance. (General electric, for example, has stationed engineers at large utilities to
help them produce some power)
Total Quality Management (TQM)
It is an organizational cultural commitment to satisfying customers through the use of an
integrated system of tools, techniques and training. TQM involves the continuous
improvement of organizational processes, resulting in high quality products and services.

All managers should be thinking about how every organizational process can be
conducted to provide products and services that are responsible to tougher and tougher
customer and competitive standards.
Total quality management is an organizaitonwide approach to continuously improving the
quality of all the organizations processes, products and services.
Marketing managers have two responsibilities in a quality centered company.
i)
They must participate in formulating strategies and policies to help the
company win through total quality excellence.
ii)
They must deliver marketing quality alongside production quality. Each
marketing activity- marketing research, sales training, advertising, customer
service, must be performed to high standard.
Marketers play the several roles in helping their companies define and deliver high
quality goods and services to target customers.
a) They bear the major responsibility for correctly identifying the customers
needs and requirements.
b) They must communicate customer expectations properly to product
designers.
c) They must make sure that customers orders are filled correctly and on
time.
d) They must check that customers have received proper instructions,
training, and technical assistance in the use of the product.
e) They must stay in touch with customers after the sales to ensure that they
are satisfied and remain satisfied.
f) They must gather customer ideas for product and service improvements
and convey them to the appropriate departments.