MBA 671 Dr. S. Borna

Objectives ä Define value & satisfaction - understand how to deliver them ä The nature of high-performance businesses ä How to attract & retain customers ä Improving customer profitability ä Total quality management

Determinants of Customer Delivered Value Image value Personnel value Services value Product value Total customer value Total customer value Monetary cost Time cost Energy cost Psychic cost Total customer cost Total customer cost Customer delivered value Customer delivered value

Resources Organization and aligning... High Performance Business Processes By improving critical business... Stake- holders Set strategies to satisfy key...

Margin The Generic Value Chain Primary Activities Support Activities Procurement Serv- ice Technology Development Human resource management Firm infrastructure Inbound Logistics Opera- tions Out- bound Logistics Market- ing and sales

Levi Strauss’ Value-Delivery Network Competition is between networks, not companies. The winner is the company with the better network. Delivery Sears (Retail) Sears (Retail) Levi’s (Apparel) Levi’s (Apparel) Order Delivery Order Customer Delivery Du Pont (Fibers) Du Pont (Fibers) Order Delivery Order Milliken (Fabric) Milliken (Fabric)

Satisfied Customers: ä Are loyal longer ä Buy more (new products & upgrades) ä Spread favorable word-of-mouth ä Are more brand loyal (less price sensitive) ä Offer feedback ä Reduce transaction costs

One of the prerequisites of Exchange: Each party has something that might be of value to the other party. intrinsic value/ extrinsic value The Concept of Value The Concept of Value

According to Lancaster (1966) A product is a bundle of attributes. attributes.

tangible objectstangible objects services services ideas/concepts ideas/concepts personalities personalities places places organizations organizations The bundle of attributes can be made up:

total value total cost total value total cost totalproductoffering totalcost:tangibleintangible Netvalue Net Value

CONSUMER SATISFACTION DISSATISFACTION Satisfaction/dissatisfaction is a person’s feelings of a pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations.

Prepurchase Postpurchase Prepurchase Postpurchase Expectation of ProductPerformance Actual Product Performance Comparison Satisfaction dissatisfaction

How to measure consumer s/ds? 1. Complaint and suggestion systems: systems: (hot lines, 800 numbers, etc. (hot lines, 800 numbers, etc. 2. Customer Satisfaction surveys surveys 3. Ghost Shopping 4. Lost customer Analysis Note: Measurement Problems Note: Measurement Problems

How to handle customers’ complaints? Need for a complaint management process. The need for customer retention, Customer Lifetime value Measurement problems related related to customer life time value

1.The Concept of Quality 2.Marketer’s Role in Defining and Delivering Quality Product Quality

Quality ä Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. #1

PRODUCT QUALITY THE CONCEPT OF QUALITY: HOW TO “OPERATIONALIZE” IT?

(P.W. Bridgeman, The Logic of Modern Physics) Modern Physics) In general, we mean by any concept nothing more than a set of operations; the concept is synonymous with the corresponding set of operations. (H. Marcuse, One Dimensional Man) (H. Marcuse, One Dimensional Man)

Product Quality (S. Schnaars) (S. Schnaars) Why product quality is more important? 1. Competitive pressures to increase quality increase quality 2. Quality advantage of imports over

3. Quality is more important to consumers 4. Quality is sustainable Product Quality Cont. Cont.

Different views of product quality Views Products that work Reliability Durability Conformance to Specification 8 Dimension of Product Quality

Design Excellence Performance Product features Serviceability,Aesthetics Superior Satisfaction of Needs Perceived Quality Different views of product quality

What Is Quality? According to Kotler: Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied (consumer’s) need.

Quality mix: The need for multiple perspective QUALITY MIX ISSUES a. ABSOLUTE QUALITY a. ABSOLUTE QUALITY b. RELATIVE QUALITY b. RELATIVE QUALITY CONFORMANCE Q. PERFORMANCE Q. 1

ISSUE NO. 2 OBJECTIVE VS. SUBJECTIVE MEASURES ISSUE NO. 3 DIFFERENCES AMONG PRODUCT CATEGORIES ISSUE NO. 4 CHANGES IN VALUED ELEMENTS

Quality Mix Strategies

INCREASING OVERALL LEVEL OF QUALITY ELEMENTS OF QUALITY

FOCUSING ON A QUALITY SEGMENT Quality improvement ELEMENTS OF QUALITY

TRADING PRICE AND QUALITY HIGH LOW LOWHIGH PRICE QUALITY B B X A C E D

REQUIREMENTS FOR QUALITY IMPROVEMENTS 1. LONG-TERM COMMITMENT 2. EMPLOYEE INVOLVEMENT 3. WORKER TRAINING 4. PRODUCT DESIGN 5. MARKETING-R&D INTERFACE 6. LONG-TERM CONSUMER SATISFACTION

Review ä Define value & satisfaction - understand how to deliver them ä The nature of high-performance businesses ä How to attract & retain customers ä Improving customer profitability ä Total quality management