CUSTOMER VALUE AND

SATISFACTION

INTRODUCTION
The customer does not always buy the product which delivers the greater customer value
because he also examines his total cost of transacting with the product, which consists of
more than just the money, before making the buying decision.
Based on this decision making theory, there are three ways to making success in selling to
the buyer :
1. Increasing total customer value by improving product, services, personal and image
benefits.
2. Reducing the buyers non-monetary cost by reducing the time, energy, and psychic
cost.
3. Reducing the products monetary cost to the buyer.

CUSTOMER VALUE
Total Customer Value: The perceived monetary value of the bundle of economic,
functional and psychological benefits customer expect from a given market offering.
Total Customer Cost: The bundle of costs customers expect to incur in evaluating,
obtaining, using and disposing of the given market offering.
Customer Perceived Value (CPV): The difference between the prospective customers
evaluation of all benefits and all the cost of an offering and the perceived alternatives.
Customer Perceived Value (CPV) = Total Customer Value ( TCV) - Total Customer Cost (TCC)
Total Customer Value = Benefit / Cost
Benefit = Functional Benefit + Emotional Benefit
Cost = Monetary Cost + Time Cost + Energy Cost + Psychic Cost

DETERMINANTS OF CUSTOMER VALUE

Customer Perceived
Value
Total Customer
Value

Total Customer Cost

Product Value

Monetary Cost

Service Value

Time Cost

Personal Value

Energy Cost

Image Value

Psychic Cost

CUSTOMER SATISFACTION
Customer satisfaction refers to how well the products, service, support and engagement
of a particular product (brand) are able to meet the expectations of the customers.
Breaking down this definition: Customer satisfaction is a measure of how well .
PRODUCTS: Products include physical products and services.
SERVICE: It refers to the customer service after sale. This includes responding to
customer queries and issues.
SUPPORT: It includes repair, maintenance and the upkeep of the products post
sales.
ENGAGEMENT: This involves engaging with the customer apart from the above
mentioned contexts. It includes offering new products, schemes, up-sell, cross-sell,
process engineering and enhancement.

CUSTOMER SATISFACTION
. are able to meet the customer .
EXPECTATIONS: It basically refers to what the customers are expecting from our
products.
Thus, customer satisfaction is a measure of how the customer interprets the delivery of
our products in comparison to his expectations. It is driven by how well we manage the
expectations of the customer.
A Satisfied Customer would be open to the next better opportunity.
A Loyal Customer will return to the brand despite stiff competition.

CUSTOMER SATISFACTION FORMULA

Performance < Expectation

DISSATISFIED

Performance = Expectation

SATISFIED

Performance > Expectation

DELIGHTED

DISSATISFIED CUSTOMER

A FEW DEFINITIONS
Customer Satisfaction: It is the customers perception of the degree to which his
expectations have been fulfilled.
Customer Loyalty: It refers to the feelings or attitudes that incline a customer either to
return to a company, shop or outlet to purchase there again or else to re-purchase a
particular product, service, or brand.
Customer Churn: It refers to the loss of customers. It is also called Customer Attrition.
Customer Retention: It is a strategy whose objective is to keep a companys customers
and to retain their revenue contribution. It primarily aims at preventing customers from
going to the competitors.
Complaint: It is an expression of dissatisfaction made to an organization related to its
products, where a response or resolution is implicitly or explicitly expected.

HOW TO WIN THE COMPETITION?

By creating and delivering superior customer values which involves five capabilities:
1.

Understanding customer value

2.

Creating customer value

3.

Delivering customer value

4.

Capturing customer value

5.

Sustaining customer value

To succeed in this field, a company needs to use the concepts of a value chain and a value
delivery network.

VALUE CHAIN & VALUE DELIVERY NETWORK

It is a tool for identifying ways to create more customer value.
The value chains identifies nine strategically relevant activities that create value and cost
in a specific business. These nine value creating activities consists of five primary
activities and four support activities.
The primary activities represent the sequence of bringing materials into the business
(inbound logistics), converting them into final products (operations), shipping out the
final products (outbound logistics), marketing, and servicing.
The support activities include procurement, technology, human resource management,
and firm infrastructure and are generally handled in certain specialized departments.
The value delivery network is responsible for ensuring that these activities are carried
out successfully by the respective departments.