MBA 671MBA 671Dr. S. BornaDr. S. Borna

ObjectivesObjectives

Define value & satisfaction - understand Define value & satisfaction - understand how to deliver themhow to deliver them

The nature of high-performance The nature of high-performance businessesbusinesses

How to attract & retain customersHow to attract & retain customers Improving customer profitabilityImproving customer profitability Total quality managementTotal quality management

Determinants of Customer Delivered Value

Determinants of Customer Delivered Value

Image valueImage value

Personnel valuePersonnel value

Services valueServices value

Product valueProduct value

Totalcustomer

value

Totalcustomer

value

Monetary costMonetary cost

Time costTime cost

Energy costEnergy cost

Psychic costPsychic cost

Totalcustomer

cost

Totalcustomer

cost

Customerdelivered

value

Customerdelivered

value

Resources Organizationand

aligning...

High Performance BusinessHigh Performance Business

ProcessesBy improving critical business...

Stake-holders

Set strategies to satisfy key...

Mar

gin

Margin

The Generic Value ChainThe Generic Value Chain

Primary Activities

Su

pp

ort

Act

ivit

ies

Procurement

Serv-ice

Technology Development

Human resource management

Firm infrastructure

InboundLogistics

Opera-tions

Out-bound

Logistics

Market-ingand

sales

Levi Strauss’ Value-Delivery Network

Levi Strauss’ Value-Delivery Network

Competition is between Competition is between networksnetworks, 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)Levi’s

(Apparel)Levi’s

(Apparel)

Order

Delivery

Order

CustomerCustomer

Delivery

Du Pont(Fibers)Du Pont(Fibers)

Order

Delivery

Order

Milliken(Fabric)Milliken(Fabric)

Satisfied Customers:Satisfied Customers:

Are loyal longerAre loyal longer Buy more (new products & upgrades)Buy more (new products & upgrades) Spread favorable word-of-mouthSpread favorable word-of-mouth Are more brand loyal (less price Are more brand loyal (less price

sensitive)sensitive) Offer feedbackOffer feedback Reduce transaction costsReduce transaction costs

One of the prerequisites ofOne of the prerequisites ofExchange: Each party has Exchange: Each party has something that might be of value something that might be of value to the other party.to the other party.

intrinsic value/ extrinsic valueintrinsic value/ extrinsic value

The Concept of ValueThe Concept of Value

According to Lancaster (1966)According to Lancaster (1966)

A product is a bundle ofA product is a bundle of attributes.attributes.

• tangible objectstangible objects• servicesservices• ideas/conceptsideas/concepts• personalitiespersonalities• placesplaces• organizationsorganizations

The bundle of attributes can The bundle of attributes can be made up:be made up:

total value total costtotal value total cost

totaltotalproductproductofferingoffering

totaltotalcost:cost:tangibletangibleintangibleintangible

Net Net valuevalue

Net ValueNet Value

CONSUMER SATISFACTIONCONSUMER SATISFACTIONDISSATISFACTIONDISSATISFACTION

Satisfaction/Satisfaction/dissatisfactiondissatisfaction is a person’s feelings of a pleasureis a person’s feelings of a pleasureor disappointment resulting fromor disappointment resulting fromcomparing a product’s perceivedcomparing a product’s perceivedperformance (or outcome) in performance (or outcome) in relation to his or her expectations.relation to his or her expectations.

PrepurchasePrepurchase PostpurchasePostpurchase

Expectation ofExpectation ofProductProductPerformancePerformance

Actual ProductActual ProductPerformancePerformance

ComparisonComparison

SatisfactionSatisfaction

dissatisfactiondissatisfaction

How to measure consumer s/ds?How to measure consumer s/ds?

1.1. Complaint and suggestionComplaint and suggestion systems:systems: (hot lines, 800 numbers, etc.(hot lines, 800 numbers, etc.2. Customer Satisfaction 2. Customer Satisfaction surveyssurveys3. Ghost Shopping3. Ghost Shopping4. Lost customer Analysis4. Lost customer Analysis Note: Measurement ProblemsNote: Measurement Problems

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

1.The Concept of Quality1.The Concept of Quality2.Marketer’s Role in 2.Marketer’s Role in Defining and Delivering Defining and Delivering Quality Quality

Product QualityProduct Quality

QualityQuality

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

#1

PRODUCT QUALITYPRODUCT QUALITY

THE CONCEPT OF QUALITY:THE CONCEPT OF QUALITY:

HOW TO “OPERATIONALIZE”HOW TO “OPERATIONALIZE”

IT?IT?

(P.W. Bridgeman, (P.W. Bridgeman, The Logic ofThe Logic of Modern PhysicsModern Physics))

In general, we mean by any In general, we mean by any concept nothing more than a setconcept nothing more than a setof operations; the concept isof operations; the concept issynonymous synonymous with the with the corresponding set of operations.corresponding set of operations.

(H. Marcuse, One Dimensional Man)(H. Marcuse, One Dimensional Man)

Product QualityProduct Quality (S. Schnaars)(S. Schnaars)

Why product quality is moreWhy product quality is moreimportant?important?1. Competitive pressures to1. Competitive pressures to increase qualityincrease quality2. Quality advantage of imports2. Quality advantage of imports

overover

3. Quality is more important to 3. Quality is more important to consumersconsumers

4. Quality is sustainable4. Quality is sustainable

Product QualityProduct Quality Cont.Cont.

Different views of product qualityDifferent views of product quality

Views Views

Products that Products that workwork

Reliability Reliability DurabilityDurabilityConformance toConformance toSpecificationSpecification

88 Dimension ofDimension ofProduct QualityProduct Quality

Design ExcellenceDesign ExcellencePerformance Performance Product featuresProduct featuresServiceability,Serviceability,AestheticsAesthetics

Superior Superior SatisfactionSatisfactionof Needsof Needs

Perceived Perceived QualityQuality

Different views of product qualityDifferent views of product quality

What Is Quality?What Is Quality?

According to Kotler:According to Kotler:

Quality is the totality of featuresQuality is the totality of features

and characteristics of a product orand characteristics of a product or

service that bear on its ability to service that bear on its ability to

satisfy stated or implied satisfy stated or implied

(consumer’s) need.(consumer’s) need.

Quality mix: The need forQuality mix: The need formultiple perspectivemultiple perspective

QUALITY MIX ISSUESQUALITY MIX ISSUES

a. ABSOLUTE QUALITYa. ABSOLUTE QUALITY b. RELATIVE QUALITYb. RELATIVE QUALITY

CONFORMANCE Q.CONFORMANCE Q.PERFORMANCE Q.PERFORMANCE Q.

1

ISSUE NO. 2ISSUE NO. 2OBJECTIVE VS.OBJECTIVE VS.SUBJECTIVE MEASURESSUBJECTIVE MEASURES

ISSUE NO. 3ISSUE NO. 3DIFFERENCES AMONG PRODUCTDIFFERENCES AMONG PRODUCTCATEGORIESCATEGORIES

ISSUE NO. 4ISSUE NO. 4CHANGES IN VALUED ELEMENTSCHANGES IN VALUED ELEMENTS

Quality Mix StrategiesQuality Mix Strategies

INCREASING OVERALL INCREASING OVERALL LEVEL OF QUALITYLEVEL OF QUALITY

ELEMENTS OF QUALITYELEMENTS OF QUALITY

FOCUSING ON A FOCUSING ON A QUALITY SEGMENTQUALITY SEGMENT

Quality improvementQuality improvement

ELEMENTS OF QUALITYELEMENTS OF QUALITY

TRADING PRICE AND QUALITYTRADING PRICE AND QUALITY

HIGHHIGH

LOWLOW

LOWLOW HIGHHIGH

PRICE

QUALITYQUALITY

BB

X

A

C

E

D

REQUIREMENTS FOR REQUIREMENTS FOR QUALITY IMPROVEMENTSQUALITY IMPROVEMENTS

1. LONG-TERM COMMITMENT1. LONG-TERM COMMITMENT2. EMPLOYEE INVOLVEMENT2. EMPLOYEE INVOLVEMENT3. WORKER TRAINING3. WORKER TRAINING4. PRODUCT DESIGN4. PRODUCT DESIGN5. MARKETING-R&D INTERFACE5. MARKETING-R&D INTERFACE6. LONG-TERM CONSUMER6. LONG-TERM CONSUMER

SATISFACTION SATISFACTION

ReviewReview

Define value & satisfaction - Define value & satisfaction - understand how to deliver themunderstand how to deliver them

The nature of high-performance The nature of high-performance businessesbusinesses

How to attract & retain customersHow to attract & retain customers Improving customer profitabilityImproving customer profitability Total quality managementTotal quality management