Chapter 1 Customers Want Top Value What is CV ? Managerial Implications Value-Creating organizations...
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Transcript of 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)
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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)
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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!
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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.
Johnson/Weinstein 2004 - NOVA SOUTHEASTERN UNIVERSITY
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