Chapter 1 Customers Want Top Value What is CV ? Managerial Implications Value-Creating organizations...

Chapter 1 Chapter 1

Customers Want Top Value Customers Want Top Value

What is What is CVCV??Managerial ImplicationsManagerial Implications

Value-Creating organizationsValue-Creating organizations

Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY SEL:#4

Why Superior Customer Value?Why Superior Customer Value?

Designing and delivering superior customer valueDesigning and delivering superior customer value

propels organizations to marketpropels organizations to market

leadership positions in highly competitiveleadership positions in highly competitive

global marketsglobal markets

Customer Value (CV) eliminates tradeoffs Customer Value (CV) eliminates tradeoffs

customers face in the new economy customers face in the new economy

Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY

TThe Importance of he Importance of Superior Customer ValueSuperior Customer Value

Continual creation of business experiences to Continual creation of business experiences to exceed customer expectations exceed customer expectations

■ ■ Value Value is a strategic driveris a strategic driver

■ ■ Global and domestic businesses Global and domestic businesses

utilize utilize valuevalue for differentiation for differentiation

Outstanding Outstanding valuevalue: continued business : continued business success (lifetime customers) success (lifetime customers)


Companies Practicing CVCompanies Practicing CV FFocus on 9 Key Criteriaocus on 9 Key Criteria

InnovationInnovationSocial ResponsibilitySocial ResponsibilityQuality ManagementQuality ManagementQuality of Products and ServicesQuality of Products and ServicesLong-term Investment ValueLong-term Investment ValueFinancial SoundnessFinancial SoundnessEffective/Efficient use of Corporate ResourcesEffective/Efficient use of Corporate ResourcesEmployees’ Skills/AbilitiesEmployees’ Skills/AbilitiesThe Constant Creation/Addition of ValueThe Constant Creation/Addition of Value


Value-Driven Marketing Strategies Value-Driven Marketing Strategies Assist in 10 AreasAssist in 10 Areas

Understanding customer choicesUnderstanding customer choices

Identifying customer segmentsIdentifying customer segments

Increasing their competitive optionsIncreasing their competitive options

Avoiding price warsAvoiding price wars

Improving services qualityImproving services quality

Strengthening communicationsStrengthening communications

Focusing on what is meaningful to customersFocusing on what is meaningful to customers

Building customer loyaltyBuilding customer loyalty

Improving brand success Improving brand success

Developing strong customer brand success and relationshipsDeveloping strong customer brand success and relationships


Customers Customers SSeek…..eek…..

fair pricesfair pricesacceptable/good valueacceptable/good value

valued business transactions/relationshipsvalued business transactions/relationshipsinnovativenessinnovativeness

image statusimage statusvalue-added servicesvalue-added services

convenience in goods and outletsconvenience in goods and outlets


The Meaning of ValueThe Meaning of Value ( (CCustomer ustomer VValuealue))

Customer Value: long-existing concept, Customer Value: long-existing concept, emerged from ancient trade practices emerged from ancient trade practices

Value: “satisfaction of customer Value: “satisfaction of customer requirements at the lowest total cost of requirements at the lowest total cost of ownership, acquisition and use “ownership, acquisition and use “

Relative worth or importanceRelative worth or importanceJohnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY

The Meaning of Value (Customer Value) The Meaning of Value (Customer Value) cont’d.cont’d.

Value: excellence based on desirability or Value: excellence based on desirability or

usefulnessusefulness

Value: represented as magnitude or quantity Value: represented as magnitude or quantity

(how much, how many, how good? etc.)(how much, how many, how good? etc.)

““Value” as in customer value is influenced by Value” as in customer value is influenced by management’s values (the abstract concepts management’s values (the abstract concepts of what is right, worthwhile, or desirable)of what is right, worthwhile, or desirable)


Customers’ Perception of ValueCustomers’ Perception of Value■ ■ TradeoffTradeoff between benefits between benefits

received from offer received from offer versusversus sacrifices to obtain sacrifices to obtain goods/services offergoods/services offer

■ ■ Value creationValue creation occurs occurs when product/service and when product/service and user interact in particular user interact in particular use situationuse situation


Perceived ValuePerceived Value

Customers evaluate experiences as:Customers evaluate experiences as:

Dis-satisfaction -Dis-satisfaction -Satisfaction 0 Satisfaction 0 High satisfaction + High satisfaction +

Such assessments impact future purchase Such assessments impact future purchase decisions and ongoing relationships with decisions and ongoing relationships with organizationsorganizations


The The SS--QQ--II--PP Approach ApproachValue is a combination of:Value is a combination of:

-> -> SServiceervice , , QQuality ,uality , IImage,mage, PPricerice

■ ■ The service factor must reign supreme in value-The service factor must reign supreme in value-creating organization.creating organization.

The The SS--QQ--II--PP elements do not exist elements do not exist independently; they involve tradeoffs independently; they involve tradeoffs considering the costs of developing and considering the costs of developing and sustaining a leadership positionsustaining a leadership positionJohnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY

The SQIP DiamondThe SQIP Diamond

VALUEVALUE

ServiceService

PricePriceImage

QualityQuality


Customer ValueCustomer Value:: Marketing Management ImplicationsMarketing Management Implications

Maximizing customer value is an evolving Maximizing customer value is an evolving challenge for service marketerschallenge for service marketers::

ReasonsReasons::New breed of smarter more demanding New breed of smarter more demanding customerscustomersIncreased competition resulting from Increased competition resulting from technologytechnologyDecreasing quality gaps and globalizationDecreasing quality gaps and globalization


Marketing Management Implications Marketing Management Implications (cont’d)(cont’d)

SolutionsSolutions::Management must now focus on:Management must now focus on:

Using customer value-based decision-makingUsing customer value-based decision-makingStressing customer retention strategies Stressing customer retention strategies

Finding a need to adapt more effectively and Finding a need to adapt more effectively and efficiently to customers by adding new types of efficiently to customers by adding new types of value providers (adders)value providers (adders)

Developing sound strategic responses to Developing sound strategic responses to changing business environment changing business environment

Delivering superior value to customers! Delivering superior value to customers!


The Value Matrix The Value Matrix

Well- Intentioned

Bureaucratic

Value-Creating

Adversarial

Process

Purp

ose

High

Low

Low High

Adapted from Capowski, G. (1995)

The Value MatrixThe Value Matrix

Consists of 4 quadrants Consists of 4 quadrants Well-intentioned, Value-Well-intentioned, Value-creating, Adversarial and creating, Adversarial and Bureaucratic Bureaucratic There is only one ideal for There is only one ideal for success success

value-creatingvalue-creating


A useful management tool for value creationA useful management tool for value creation

Organizations should view themselves relative to their Organizations should view themselves relative to their competitors’ position on the matrixcompetitors’ position on the matrix

The value matrix maps The value matrix maps an organization’s purpose an organization’s purpose and process orientation and process orientation

CV = Purpose + ProcessCV = Purpose + Process

High in purpose - understanding business High in purpose - understanding business and customers’ desiresand customers’ desiresHigh in process - knowing how to utilize High in process - knowing how to utilize internal procedures to respond to internal procedures to respond to customers effectively and efficientlycustomers effectively and efficientlyMany organizations fail to master both Many organizations fail to master both purpose (customer focus) and process purpose (customer focus) and process (customer support) activities (customer support) activities

-> -> Why is this the case?Why is this the case?Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY

The Value-Creating OrganizationThe Value-Creating Organization

Organizations (along with individual employees) Organizations (along with individual employees) should be seen as value-creating entitiesshould be seen as value-creating entitiesValue-creating organizations solve individual Value-creating organizations solve individual customer problemscustomer problemsA strong competitive edge can be gained by A strong competitive edge can be gained by consistently providing superior customer valueconsistently providing superior customer valueIn order to create and deliver superior customer In order to create and deliver superior customer value organizations must be strong in both value organizations must be strong in both purpose and process.purpose and process.


Value Value CalculusCalculus

Perceived product or service attributes

Perceived product or service price

Perceived substitute product

or service price

Perceived benefitsPerceived priceValue =

Perceived substitute product

or service attributes

90

Value Creation IndexValue Creation IndexInnovationInnovationQualityQualityCustomer RelationsCustomer RelationsManagement CapabilitiesManagement CapabilitiesAlliancesAlliancesTechnologyTechnologyBrand ValueBrand ValueEmployee RelationsEmployee RelationsEnvironmental & Community IssuesEnvironmental & Community Issues

Source: Kalafut, P. and Low, J. (2001) “The Value Creation Index”, Strategy and Leadership, Vol. 20, No. 5, 9-15.

How Southwest Airlines Creates How Southwest Airlines Creates Superior ValueSuperior Value

Process Mastery

Treat Employees as Customers

Recruitment and Training

Maverick CultureTeamwork

Clear ServiceFocus

How Starbucks Creates Superior ValueHow Starbucks Creates Superior Value

Roasting Technology

Create the right Store Atmosphere

Recruitment and Training

Treat Employeesas Partners

Brand Consistency

ServiceConsistency

Value Development Value Development ExerciseExercise

Select one of the following businessesSelect one of the following businesses::- Auto dealership- Auto dealership- Gas station/minimart- Gas station/minimart- Airline- Airline- Mid-priced hotel chain (business travelers)- Mid-priced hotel chain (business travelers)- Quick service restaurant (i.e., Wendy’s)- Quick service restaurant (i.e., Wendy’s)

Prepare a 2-column chart with GOTS on the left side Prepare a 2-column chart with GOTS on the left side and COSTS on the right sideand COSTS on the right side

Brainstorm ways to Brainstorm ways to increase GOTSincrease GOTS and and reduce COSTSreduce COSTS

Chapter 1 Customers Want Top Value What is CV ? Managerial Implications Value-Creating organizations...

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