Value-Based Marketing

Competition Based on Value

Value-based marketing allows organizations to create and sustain differentiating values that enable them to compete within their markets.

Learning Objectives

State what is important when shifting to a competition based on value marketing perspective

Key Takeaways

Key Points

  • For a firm to deliver value to its customers, they must consider what is known as the “total market offering.” This includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared to competitors ‘ market offerings and prices.
  • Total CVM also creates value by creating value for the employees, business partners (customer, delivery chain, supply chain, unions) and thereby for the shareholder.
  • CVM requires implementing a customer-focused vision, which means a major shift in companies strategic thinking, often including radical move from product or price as the basis for competition to process or service value.

Key Terms

  • Total market offering: “total market offering” includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared to competitors’ market offerings and prices.
  • supply chain: A supply chain is a system of organizations, people, technology, activities, information, and resources involved in moving a product or service from the supplier to the customer. Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer.

The customer’s perceived value of a product is the relationship between the perceived benefits in relation to the perceived costs of receiving those benefits. Value is thus subjective (i.e., a function of consumers ‘ estimation) and relational (i.e., both benefits and cost must be positive values).

For a firm to deliver value to its customers, it must consider what is known as the “total market offering.” This comprises the organization’s reputation, staff representation, product benefits, and technological characteristics as compared to competitors’ market offerings and prices. Value can thus be defined as the relationship of a firm’s market offerings to those of its competitors.

The migration from product-oriented to customer-oriented strategies is called Total Customer Value Management (TCVM). This requires implementing a customer-focused vision – a major shift in strategic thinking, often including moving the basis for competition from product or price to process or service value.

TCVM goes beyond conventional customer value management, which provides a rational set of techniques, methodologies, and strategies to weave the needs and wants of customers into the key process designs and management activities of the enterprise. TCVM helps businesses create and sustain differentiating value, enabling them to compete within their markets. TCVM also creates value for employees, business partners (customers, delivery chain, supply chain, unions) and shareholders.

TCVM starts with a customer strategy, which is the precursor of building a conventional business strategy. By assigning customer tasks to traditionally non-customer facing departments like IT, Finance, and HR, a Continuous Customer Improvement Program is created to ensure customer delight.

The value model shows how value planning, value creation, and value realization are tied to revenue and cost.

Value Model: Value creation is tied to cost and revenue.

The Development of Value-Driven Firms

The values of an organization are just as important as the products they sell; having a strong value driven culture is important.

Learning Objectives

Demonstrate how information guides companies to develop value driven marketing plans and approaches

Key Takeaways

Key Points

  • For a long time, the sole purpose of a company, it was thought, is to make profits –at least in the minds of CEO’s who normally focus on short term returns. This was the precursor to customer value management.
  • Becoming a value driven firm involves aligning every function to the customer, discussions with key officers, and assigning customer roles.
  • Becoming a value driven firm involves the training and certification of front line people to provide excellent customer service and value to a customers buying experience.

Key Terms

  • Total Customer Value Management: Total Customer Value Management represents migration from product orientation to customer orientation. This required implementing a customer focused vision that meant a major shift in companies’ strategic thinking, often including radical move from product or price as the basis for competition to process or service value, resulting in the concept Total Customer Value Management (CVM)
  • customer value mapping: A method of measuring how you are doing in general and how you are doing in comparison to your competitors by matching the cost of your product with the benefits your customers receive for it.

Having a strong value driven culture will ensure continuous high performance within an organization. The values of an organization are just as important as the products the organization sells.

For a long time, the sole purpose of a company, it was thought, is to make profits, at least in the minds of CEOs who normally focus on short term returns. This was the precursor to customer value management, which has been practiced for the last 35 years, being incorporated into corporate thinking. Some people focus on customer service, others on customer experience, others on lifetime value for a customer; many companies believe that having a customer service department is all it takes to create customer value.

picture of a bust of socrates

Importance of Values: Socrates was an influential Greek philosopher who studied ethical behavior.

This is not true. A new practice called Total Customer Value Management (CVM) involves a total focus upon the customer.

Total customer value management requires:

  • Aligning every function to the customer, discussions with key officers, and assigning customer roles
  • Incorporating Customer Circles and propagating them. These will align the front line people and make them customer focused
  • Assessing unnecessary and irrelevant tasks from a customer viewpoint
  • Training and certification of front line people. This includes training shop employees, such as the one shown here.
  • Listening to Voice of Employee, Voice of Customer, and Voice of Competitor. Voice of Employee will be captured through the Customer Circles and Employee Value Add, and the Voice of Customer and Voice of Competitor will be captured by Customer Value Added (CVA).

Becoming customer centered with CVM starts by identifying the target customers and securing their vision of the ideal outcomes from doing business with the company. This includes:

1. Customer relations

  • Customer Portfolio Analysis
  • Customer Intimacy
  • Value Proposition
  • Managing the relationship

2. Customer value mapping

  • Identifying what you need to know about the market you’re competing in. Your knowledge includes: customer demographics, the importance of perceived costs and benefits to your customers, and how well you’re doing in these areas compared to the competition.
  • Conducting research to uncover the information you need.