CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
It's difficult to over-stress the importance of customer satisfaction. Sustained profitability is only possible through building customer value and satisfaction. Profit comes as a consequence of building customer value.
As Henry Ford said:
"Business must be run at a profit... else it will die. But when anyone tries to run a business solely for profit, then also the business must die, for it no longer has a reason for existence."
Value Defined
Something that satisfies a consumer's need or want has value in the eyes of the consumer. Whether or not a consumer will buy a product offering depends on whether what it costs them is greater or less than the product's perceived value. Furthermore, when choosing between similar offers, a consumer will choose the product that offers the biggest difference between value and cost. Costs to the customer include not only monetary costs, but everything associated to acquiring it, such as time and hassle. For example, having to go and pick up concert tickets you've already paid for online adds an additional cost. Therefore, even if your product is more expensive, it will nevertheless be chosen if it carries more value in the eyes of the customer.
The difference between what the consumer perceives as the value of the product offering and its costs, are known by marketers as the delivered value. The goal is to ensure that the delivered value for your product is greater than the delivered value of the customer's alternatives.
Customer Satisfaction Defined
Customer satisfaction is closely related to customer expectations. Once acquiring a product, the customer will compare the actual performance of the product with what was expected. The customer will have feelings of pleasure if product performance meets expectations, and feelings of disappointment if it doesn't. If actual performance exceeds expectations, the customer is highly satisfied or delighted.
Customers form their expectations from a variety of sources such as friends, past experiences, competitors as well as the marketer's messages and promises. A balancing act must be made here. If you set expectations too high with your messages, your customers are more likely to be disappointed. If you set them too low, fewer will buy. The most successful firms set expectations high and then are able to deliver performance to match – at a profit.
Creating Customer Value
Given the importance of customer value, it's useful to use what Micheal Porter of Harvard calls the value chain as a tool to find ways to create more customer value. The value chain consists of company activities that create value and add costs in an organization. The primary activities in the value chain are:
•    Bringing materials into the company (inbound logistics)
•    Converting materials into finished products (operations)
•    Shipping out finished products (outbound logistics)
•    Marketing the products (sales and other marketing activities)
•    Servicing the products (customer service)
Primary activities have secondary support activities which include procurement (or purchasing), technology development, human resource management and firm infrastructure. These support activities may be handled by specialized departments or by multiple departments.