Lecture 2 Flashcards
What is customer value?
The way customers perceive the company’s offerings including products, services, and other intangibles.
Why should the operations management strategies be driven by our customer value proposition?
Because knowing your customer can help you improve your strategy.
Can you mention the 5 dimensions to consider for defining our customer value proposition?
- product innovation speed
- product selection and availability
- price and brand
- value-added services
- relationships and experiences
Depending on product innovation speed, which distinction can we make between products? Please mention example.
- which has more predictable demand?
- which has more product variety?
- which had longer product life cycle?
- which has higher risk for obsolescence?
- which has higher cost of lost sales?
Functional products like groceries, oil, gas.
Innovative products like smartphones, computers, fast fashion.
- functional
- innovative
- functional
- innovative
- innovative
What is a product life cycle?
Length of time from a product first being introduced to consumers until it is removed from the market.
introduction -> growth -> maturity -> decline
In what case should you offer many choices or just a few?
Basically it depends on what the customer wants, but if you have a brick-and-mortar store a smaller selection would be better to minimise costs (less space -> less rent) (less cost to manage stocks), and because consumer could be overwhelmed by a large selection.
What is the Long Tail Phenomena? How could it be used in product selection and availability?
It is also known as the 80/20 rule. It suggests that roughly 80% of the effects come from 20% of the cases, so 80% of the sales come from 20% of the products. The 20% are the hits and the other products are the long tail.
When is it better to go for brick-and-mortar or online?
Online if you want to based it on niche and hits, brick-and-mortar store for hits.
Do hits or niche content have higher profit margins?
- which has high product variety?
- which has possibility for customisation?
- which has high forecast accuracy?
- which has higher volume by product?
Niche content usually has smaller profit margins because of higher costs. You cannot enjoy bulk buying, so no economies of scale.
- niche
- niche
- hits
- hits
Advantage of strong brand? Challenge of low price strategy?
Customers will only pay more if they like/trust a brand.
If a company goes for low price strategy, the company has to keep in mind that competition on price requires tight control of operating costs.
What are value-added services?
Extra features or additional services to add value to a product and increase consumers perceptions of how much they are willing to pay.
Mention 3 different examples of value-added services.
preventive maintenance
complementary freebies
other after-sales services like home delivery
Why is the dimension relationships and experiences important for the customer value proposition? Mention two examples how to use.
It is important as it can significantly reduce customer’s switching likelihood.
You can try building customer trust or create a community.
What is push strategy and when is it preferable?
Push is that the production is initiated in anticipation of future demand, so company starts to produce even without customer order. The focus lies in efficiency and cost reduction. It is preferable when there is high demand for a given product and low demand uncertainty, and when there is high importance of economies of scale EoS.
What is economies of scale?
The cost advantages a company achieves when they are producing larger quantities as production becomes more efficient. It happens because the costs are spread over a larger number of goods.
What is pull strategy and when is it preferable?
Pull it that the production is initiated as a reaction to present demand, so the company does not start production until an order. This means production and distribution are demand-driven rather than based on predictions. The focus here is responsiveness. It is preferable when there is high uncertainty or if there is limited demand for a specific product, low importance of economies of scale, and if cost of managing excess inventory is bigger than the benefit of having a surplus.
What is the reality of push and pull? When is it suggested?
Most companies have some sort of hybrid on a spectrum between two ends (push and pull) as push and pull are not black and white. It is usually suggested for products with high demand uncertainty, but also high importance of economies of scale.
Which different cycles are there from supplier to consumer?
Procurement cycle (time needed to get all material), manufacturing cycle (production), replenish cycle (time for retailer to obtain the product), consumer order cycle (time for product to reach consumer).
What is the impact of uncertainty, EoS, and lead time on the push and pull?
High uncertainty -> pull
High EoS -> push
Long lead time -> push
