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Chapter 2 -- Building CustomerSatisfaction Through Quality,

Service, & Value

Chapter 2 -- Building CustomerSatisfaction Through Quality,Service, & Value

Otterbein CollegeOtterbein CollegeWinter 2000Winter 2000

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Chapter ContentChapter Content

Define value & satisfactionDefine value & satisfaction -- understandunderstandhow to deliver themhow to deliver them

The nature of highThe nature of high --performanceperformancebusinessesbusinesses

How to attract & retain customersHow to attract & retain customers Improving customer profitabilityImproving customer profitability

Total quality managementTotal quality management

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Image value

Image value

Personnel value

Personnel value

Services value

Services value

Product value

Product value

Totalcustomer

value

Totalcustomer

value

Monetary cost

Monetary cost

Time cost

Time cost

Energy cost

Energy costPsychic cost

Psychic cost

Totalcustomer

cost

Totalcustomer

cost

Customerdelivered

value

Customerdelivered

value

Determinants of Customer DeliveredValue

Determinants of Customer DeliveredValue

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...a persons feelings of pleasure ordisappointment resulting fromcomparing a products perceivedperformance (or outcome) inrelation to his or her expectations.

Satisfaction is...Satisfaction is...

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Resources Organizationand

aligning...

ProcessesBy improvingcritical business...

Stake-holders

Set strategies to satisfykey...

High Performance BusinessHigh Performance Business

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M a r g i n

M a r g i n

Primary Activities

S u p p o r t

A c t i v

i t i e s

Serv-ice

InboundLogistics

Opera-tions

Out-bound

Logistics

Market-ingand

sales

Procurement

Technology Development

Human resource management

Firm infrastructure

The Generic Value ChainThe Generic Value Chain

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Competition is betweenCompetition is between networks networks , not companies., not companies.The winner is the company with the better network.The winner is the company with the better network.

Delivery

Sears

(Retail)

Sears(Retail)

Levis

(Apparel)

Levis(Apparel)

Order

Delivery

Order

Customer

Customer

Delivery

Du Pont

(Fibers)

Du Pont(Fibers)

Order

Delivery

Order

Milliken

(Fabric)

Milliken(Fabric)

Levi StraussValue-Delivery Network

Levi StraussValue-Delivery Network

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Satisfied Customers:Satisfied Customers:

Are loyal longerAre loyal longer Buy more (new products & upgrades)Buy more (new products & upgrades) Spread favorable wordSpread favorable word --ofof--mouthmouth Are more brand loyal (less priceAre more brand loyal (less price

sensitive)sensitive) Offer feedbackOffer feedback

Reduce transaction costsReduce transaction costs

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Manycustomers/distributors

Mediumnumber ofcustomers/distributors

Fewcustomers/distributors

AccountableProactivePartnership

Proactive Accountable Reactive

Accountable Reactive Basic orreactive

Highmargin

Mediummargin

Lowmargin

Levels of Relationship MarketingLevels of Relationship Marketing

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Inactive or

ex-customers

PartnersAdvocatesClientsRepeatcustomersFirst-timecustomers

Suspects

Prospects

Disqualifiedprospects

Customer DevelopmentCustomer Development

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P 1Highly

profitableproduct

P 2Profitableproduct

P 3Losingproduct

P4

Mixed-bag

product

P

roduct

s

++

+High profitcustomer

+

MixedMixed --bagbagcustomercustomer

+

Losingcustomer

C1 C2 C3

Customers

Customer/Product ProfitabilityAnalysis

Customer/Product ProfitabilityAnalysis

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V a l u e c r e

a t i o n

Competitive advantage

I n t e r n a l o p e r a t i o n s

ProfitProfitProfit

The Profit TriangleThe Profit Triangle

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QualityQuality

Quality is the totalityQuality is the totalityof features andof features andcharacteristics of acharacteristics of aproduct or serviceproduct or servicethat bear on itsthat bear on itsability to satisfyability to satisfystated or impliedstated or impliedneeds.needs.

#1

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Next...Next...

Chapter 3Chapter 3Winning Markets:Winning Markets:

MarketMarket --Oriented Strategic PlanningOriented Strategic Planning

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