Page 67 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Customer Relationship Management

Notes

Notes Using ABC, analysts have often found that 20% of the customers generate 300% of
the profits.

Task Search the names of the firms which use base profit analysis as their tool of
measurement of revenues and profits.

Self Assessment

Fill in the blanks:
5. Full form of ABM is …………………….
6. …………………… is related to a customer’s perception of the price, quality, and convenience
of purchasing products or services.
7. The concept of customer value represents the link between the customer as the
…………………… with regard to a company’s revenue and the internal processes
representing the costs of a company.

3.3 Value Chain Analysis

The value chain framework is an approach for breaking down the sequence (chain) of business
functions into the strategically relevant activities through which utility is added to products and
services. Value chain analysis is undertaken in order to understand the behaviour of costs and
the sources of differentiation (Shank & Govindarajan, 1993). In education, differentiation is achieved
by creating a perception among targeted learners that the course, the program, or the university’s
offerings as a whole are unique in some important way, usually by being of higher quality. The
appeal of differentiation is strong for higher education institutions, for which image and the
perception of quality are important. This perception allows the institution to charge higher
tuition fees, and so to outperform the competition in revenues without reducing costs significantly.

Porter (1980) argued that a business can develop a sustainable competitive advantage based on
cost, differentiation, or both, as shown in Figure 3.2.

Figure 3.2: Developing Competitive Advantage

Source: Shank and Govindarajan (1993, p. 49).

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