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Customer Value 1

Nov 16, 2014




RDM Week 16

What is Value? There is no such thing as absolute value in this world. You can only estimate what a thing is worth to you. (Charles Dudley Warner) The relationship between the satisfaction of a need and the resources used in achieving that satisfaction. (BS EN 12973: 2000)

Value x satisfaction of needs Use of resources Need is what is necessary or desired be the user.


Value from different Viewpoints?

The business operations itself profit earned, increase in capital value of the firm. For customers value is the benefits they expect from the products they buy; in relation to the price they must pay. The value employees seek includes fair remuneration and security of employment in return for effort and commitment. The value that an organization can provide for society at large might include improving quality of life, acting ethically and using resources wisely.

(Walters, 1999; Lowe and Markham, 2001; Payne and Holt, 2001; Payne et al., 2001; and Plank and Ferrin, 2002)


Transformation Model

(Bettley, 2002; Slack and Lewis, 2002) Stakeholder


Operations Strategy is the strategic reconciliation of market requirements with operations resources.

Slack and Lewis, 2002)


The Augmented Product Model

(Levitt, 1980) There is no such thing as a commodity. All goods and services are differentiable 4 Elements the generic product basic item bought by the customer (e.g. a loan) the expected product the attributes the customers expects the product to possess (e.g. competitive rate of interest) the augmented product attributes the customer might not expect (e.g. repayment protection insurance) the potential product everything that might be done to attract and hold customers (e.g. include other special priced banking offers)5

Conceptual Model of Service Quality

Gap between customers perceptions and their expectations. (Zeithmal et al, 1990)6

5 Dimensions1.

Reliability dependability and accuracy of service provision. (TECHNICAL quality) Responsiveness helpfulness, promptness in service delivery. (FUNCTIONAL quality) Assurance ability to convey trust, confidence and knowledgeability (FUNCTIONAL) Empathy individualized attention to the customer (FUNCTIONAL) Tangibles appearance of physical facilities, equipment and communication materials. (FUNCTIONAL)






The Kano Model

(Tan & Shen, 2000) Product Attributes:

One dimensional attributes the more present that more satisfied the customer is (low mileage of a used car) Attractive attributes are not expected and their absence doesnt cause dissatisfaction, but their presence will delight (e.g. free car insurance). Must-be attributes represents the level of expectations that they product must meet at a bare minimum. Absence of any of these causes dissatisfaction, although their presence does not


enhance satisfaction because they are expected (e.g. absence of bodywork damage). Relationship Framework

(Gronroos, 2000) Relationship quality defined by Gronroos (2000) as the dynamics of long term quality formation in ongoing customer relationships Acts are individual service encounters. (e.g. pre-dinner drink in a hotel bar) Episode a serious of acts. (e.g. an entire meal in a hotel restaurant)


Sequence inter-related episodes. (e.g. a three night stay at the hotel) Relationship the continuing interaction between customer and hotel (e.g. all stays past, present and future) A dynamic model of expectations

(Ojasolo, 1999 in Gronroos, 2000) Fuzzy expectations where the customer expects the service provider to solve the problem does not know how it can or will be done. Explicit expectations This is clear in the customers mind in advance of service delivery, but may be realistic or unrealistic. Implicit expectations which customers take for granted because they are so obvious (to the customer) and not articulated because they expect the provider to see them as10

equally obvious. (remember Kano Model implicit expectation) Beyond Customer- Led

(Hamel & Prahalad, 1994)


The relationship between product and process innovation over time. (OU, 1995) 3 Stages:

Incremental Process Innovation - for efficiency improvement, (e.g.. first use of IT to speed up manual processes) Radical Process Innovation to enhance quality (e.g. ATMs) Radical Product Innovation entirely new services (e.g. Internet bookings)


References:BS EN 12973: 2000 Value Management, British Standards Institution. Bettley A. (2005) Business Operations: delivering value, Operations, technology and Stakeholder Value Book 1, OU Milton Keynes. Gronroos, C. (2000) Service Management and Marketing A Customer Relationship Management Approach, Wiley. Hamel, G and Prahalad, C,K. (1994) Competing for the Future, Harvard Business School Press. Levitt, T. (1980) Marketing success through differientation of anything. Harvard Business Review, Jan-Feb, pp. 83-91. Lowe P.G. and Markham, W.J. (2001) Perspectives on operations excellence, Supply Chain Management Review, Nov-Dec, pp. 97-111. Ojasolo, J. (1999) Quality Dynamics in Professional Services, Swedish School of Economics/CERS, Helsinki, Finland. Open University (1995) T840 Technology Management: an integrative approach, Block 2, Patterns of innovation and improvement, The Open University. Payne, A. and Holt, S. (2001) Diagnosing customer value: integrating the value process and relationship marketing, British Journal of Management, Vol 12, pp. 159-82. Plank, R.E. and Ferrin, B.G. (2002) How manufacturers value purchase offerings an exploratory study, Industrial Marketing Management, Vol 17, pp 457-65. Slack, N. and Lewis M.A. (2002) Operations Strategy, FT Prentise Hall.


Tan, K. C. and Shen, X.X. (2000) Integrating Kanos model in the planning matrix of quality function deployment, Total Quality Management, Vol 11, No. 8, pp 1141-51. Walters, D. (1999) Marketing and Operations Management: an integrated approach to new ways of delivering value, Management Decisions, Vol 37, No. 3 pp.248-58. Zeithmal, V, Parasuraman, A and Berry, L.L (1990) Delivering Quality Service, Free Press. _____________________________________________________________