Marketing - Lesson 2

January 01, 2011

Customer Value

Customer Value or Customer Delivered Value is the difference between Total Customer Value and Total Customer Cost.

Customer Value = Product Value + Service Value + Personnel Value + Image Value

Total Customer Value is the bundle of benefits that the customers expect from a given product or service.

Total Customer Cost is the bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the product or service.

Total Customer Cost = Monetary Cost + Time Cost + Energy Cost + Psychic Cost

Customers make their purchases based on Customer Delivered Value or on the basis of value-price ratio.

Value – price ratio = Total Customer Value / Total Customer Cost

Seller who is at a delivered value disadvantage has two alternatives:

· Increase Total Customer Value: strengthen product, service, personnel and image benefits

· Decrease Total Customer Cost: reduce price, simplify ordering and processing process, absorb buyers risk by offering warranty etc.

Customer Satisfaction

Customer Satisfaction is a function of experience and expectation of the customer.

EXPERIENCE = EXPECTATIONS -> OK / SATISFIED

EXPERIENCE < EXPECTATIONS -> DISSATISFIED/ UNHAPPY

EXPERIENCE > EXPECTATIONS -> DELIGHTED

Four methods of tracking customer satisfaction:

· Feedback and Suggestion Forms

· Customer Surveys

· Ghost shopping

· Analyze lost customers

Value Chain

Primary activities:

· inbound logistics: materials handling, warehousing, inventory control, transportation

· operations: machine operating, assembly, packaging, testing and maintenance

· outbound logistics: order processing, warehousing, transportation and distribution

· marketing and sales: advertising, promotion, selling, pricing, channel management

· service: installation, servicing, spare part management

Support activities:

· firm infrastructure: general management, planning, finance, legal, investor relations

· human resource management: recruitment, education, promotion, reward systems

· technology development: research & development, IT, product and process development

· procurement: purchasing raw materials, lease properties, supplier contract negotiations

Core Business Processes:-

· Market-sensing process

· New-offering realization process

· Customer acquisition process

· Customer relationship management process

· Fulfilment management process

Core Competency

Core competence has 3 characteristics:-

· Difficult for competitors to imitate

· Source of competitive advantage if it makes significant contribution to perceived

· customer benefits

· Potential breadth of application to a wide variety of markets

MARKET-ORIENTED STRATEGIC PLANNING

It is the managerial process of developing and maintaining a viable fit between the organizaiton’s objectives, skills, and resources and its changing market opportunities. The aim of strategic planning is to shape and reshape the company’s business and products so that they yield target profits and growth.

Thus strategic planning is concerned with

Treating business as an investment portfolio.
Building game plan for each business – based on industry position opportunity, resources, mission, objectives.
Future potential and not just current potential.

Assigning Resources to each SBU –

The BCG Approach (Growth-share matrix) –

After plotting the matrix, the company can judge the health of its portfolio and can take one of the following 4 actions to determine the budget to assign to each SBU–

· Build – to increase market share, at the expense of short-term earnings, if necessary. Done on dogs

· Hold – to preserve market share. Done on cash cows

· Harvest – to increase short term flow, regardless of long-term effect. This generally diminishes the value of the SBU. Done so that the costs are reduced at a faster rate than the fall in sales. Done on losing cash cows, dogs and question marks

· Divest – to liquidate the business. Done on question marks and dogs

Ansoff Model :