What Is Customer Value and Satisfaction

  Customer Value and Satisfaction 

       Customer value can be defined as the difference between the overall expected benefits of a product or service and the total expenses invested in order to achieve it. However, the term “customer satisfaction” describes the discrepancy between a customer’s expectations and the actual performance they received.

 1. Marketing and Customer value 

       The concept of customer value is important for the marketers because the primary goal of marketing is to deliver and enhance the customer value. The difference between the values a customer derives from possessing and utilising a product and the product’s acquisition expenses is known as customer value. It may also be defined as the sum of tangible and intangible benefits vis-à-vis cost to the customer. In an organisation all departments must “think consumer” and work together to provide superior customer value and satisfaction. 

        The concept of customer value helps marketers to achieve the basic goal of marketing, which is to deliver and enhance customer value. Marketing mix represents classification of marketing activities under four broad heads – Product, Price, Place and Promotion. The variables under each category can be influenced by a marketer to promote a product or service and these essentially are the marketing tools. Finally, the five marketing philosophies representing the focus of the organisations are – production concept, selling concept, product concept, marketing concept and holistic marketing concept. After understanding the basic marketing terminology it is important for us to determine the environmental variables that impact the performance of organisations. 

2. The Value Delivery Process

       Value delivery process builds upon the constraints of “supply chain.” It is made up of companies, distributors, suppliers and customers in the end who “partner” with one another to raise system performance. An organisation’s channel decisions have a direct impact on all other marketing decisions it makes and decisions influencing distribution networks also necessitate long-term relationships with other businesses.

      “Upstream” and “Downstream” partners, such as suppliers, middlemen and even intermediary customers, make up the supply chain. The group of companies who supply the raw materials, parts, software, funds and experience needed to make a good or service are called suppliers or service providers upstream. Marketers have typically concentrated on the downstream portion of the supply chain, or the distribution or marketing channels that face the consumer. 

      Each company’s supply chain is tailored specifically to its needs, which allows it to provide customers with the best possible value. Because it adopts a make and sell perspective of the firm, the term “supply chain” can be excessively restrictive. A demand chain would be a more appropriate name since it denotes a sense-and-respond understanding of the market. According to this perspective, planning starts with the target customer’s needs, to which the company reacts by allocating resources in a way that maximises value for the clients. Even so, though, might be too restrictive. A value distribution network is made up of manufacturers, distributors, clients and customers at the end who work together to improve system efficiency. 

3. The Value Chain 

       Delivering high customer value through the creation of a competitively better value offer targeted at a particular market segment and supported by an exceptional value-delivery system is the best approach to build strong client loyalty. The value proposition is essentially a statement about the experience that customers will have as a result of the business’s market offering and includes the entire range of benefits that the company guarantees to provide. The brand needs to make a promise that, depending on how well the company can run its value-delivery system, can only be fulfilled. 

        All of the experiences a consumer will have in getting and using the offering are included in the value-delivery system. The ability of a company to generate and provide exceptional value is critical to its success in today’s fiercely competitive market. To achieve this, the company needs to cultivate the following five competencies: 

        1. Recognising the worth of the customer 

        2. Adding value for customers 

        3. Providing value to customers

        4. Retaining value for customers 

        5. Preserving client worth Therefore, the business needs to use a value-                    delivery network and the notion of value in order to prosper. 

      Michael Porter created the value chain as a tool to help find ways to add value for customers. Among a firm’s many activities, the value chain takes into account nine strategically significant actions that add value and incur costs in a particular business. 

         Aside from support activities like procurement, technology development, human resource management and firm infrastructure that are necessary to support the primary activities, the primary value activities represent the sequence of bringing materials into the business, converting them into final products, shipping out the final products, marketing them and providing maintenance.

 Primary Value Activities 

● Inbound logistics: storage and handling of materials. 

 ● Operations: converting raw materials into finished goods.

 ● Outbound logistics: distribution and order processing.

 ● Sales and marketing: channel management, pricing and communication.

 ● Service: provision of parts, installation and repair. 

 Support Activities - Specific specialised departments conduct the support functions. 

 ● Information systems and procedures related to procurement. 

 ● Technology development: enhancing the system, method and/or product. 

 ● Managing human resources: recruiting, development and pay.

 ● Infrastructure of the company: finance, accounting, general management,            government relations and quality control. 

4. Core Competencies 

        Superior success does not come exclusively from capital since it can be imitated or exchanged. Superior success comes from the allocation of capital to build competences in the activities of the company. For example, an individual’s knowledge will not improve the performance of an organization unless they are allowed to work on specific tasks that leverage that knowledge. Although an organization will need to achieve a threshold level of competence in all of the activities and processes, only some will become core competences. 

        Core competence refers to that collection of distinctive skills that provide a business with a sustainable competitive advantage source. Over time, core competencies evolve and demonstrate the capacity of the company to apply various resources and skills to achieve and maintain competitive advantage in a number of contexts.

       Core competencies are activities or processes which an enterprise urgently requires in order to gain competitive advantage. They build and maintain the opportunity to achieve the essential success criteria of specific consumer groups in ways that are impossible to replicate, better than their competitors. It must be: 

1. An activity or process that provides customer value in the product or service          features. 

2. An activity or process that is significantly better than competitors.

3. An activity or process that is difficult for competitors to imitate.