VALUE CHAIN

The way to generate high customer loyalty is to deliver high customer value by designing a competitively superior value proposition aimed at a specific market segment backed by a superior value-delivery system. 

The value proposition consists of the whole cluster of benefits the company promises to deliver and is basically a statement about the resulting experience customers will gain from the company's market offering. The brand must present a promise which can only be kept depending on how the company can manage its value-delivery system. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering.

In a hyper-competitive economy, a company's success depends on how it can create and deliver superior value. In order to do so, the company must develop the following five capabilities:

1. Understanding customer value
2. Creating customer value
3. Delivering customer value
4. Capturing customer value
5. Sustaining customer value

In order to succeed, therefore, the company needs to use the concept of value and a value-delivery network. The value chain is a tool developed by Michael Porter for identifying ways to create more customer value. The value chain considers nine strategically important activities among the various activities of a firm; they  create value and cost in a specific business.

The primary value activities represent the sequence of bringing materials into the business, converting them into final products, shipping out the final products, marketing them and servicing them, apart from support activities such as procurement, technology development, human resource management and firm infrastructure, that are required for supporting the primary activities.

Primary value activities
Inbound logistics : material handling and warehousing.
Operations : transforming inputs into the final product.
Outbound logistics : order processing and distribution.
Marketing and sales : communication, pricing and channel management.
Service : installation, repair and parts supply.

Support Activities
The support activities are handled in certain specialized departments.

Procurement : procedures and information systems.
Technology development : improving the product and process or system.
Human resource management : hiring, training and compensation.
Firm infrastructure : general management, finance, accounting, government relations and quality management.