Showing papers on "Value proposition published in 1997"

Customer value: The next source for competitive advantage

Abstract: Driven by more demanding customers, global competition, and slow-growth economies and industries, many organizations search for new ways to achieve and retain a competitive advantage. Past attempts have largely looked internally within the organization for improvement, such as reflected by quality management, reengineering, downsizing, and restructuring. The next major source for competitive advantage likely will come from more outward orientation toward customers, as indicated by the many calls for organizations to compete on superior customer value delivery. Although the reasons for these calls are sound, what are the implications for managing organizations in the next decade and beyond? This article addresses this question. It presents frameworks for thinking about customer value, customer value learning, and the related skills that managers will need to create and implement superior customer value strategies.

Do Customer Loyalty Programs Really Work

Abstract: A company that initiates a customer loyalty program usually wants to retain existing customers, maintain sales levels and profits, increase the potential value of existing customers, and encourage customers to buy its other products as well. But, based on a review of behavioral loyalty research, Dowling and Uncles posit that the schemes do not fundamentally alter market structure and, instead, increase market expenditures without really creating any extra brand loyalty. Research shows that only about 10 percent of buyers for many types of frequently purchased consumer goods are 100 percent loyal to a particular brand over a one-year period. And consumers do not buy only one brand; for example, surveys of European business airline travelers show that more than 80 percent are members of more than one frequent flyer program. For any loyalty program to be effective, say the authors, it must leverage the value of the product to the customer. Therefore, the program must have: (1) a direct or indirect effect, such as the General Motors rebate scheme that builds up savings toward a new car, or gasoline companies' incentives of free air travel; (2) a perception of value, such as cash, a range of choice, aspirations of exotic free travel, or the likely achievement of rewards; and (3) timing -- when rewards are available. The more delayed the reward, the less powerful. Does it cost less to serve loyal customers? Are they less price sensitive? Do they recommend products to others? Not really, say the authors. The contention that loyal customers are always more profitable is a gross simplification. Dowling and Uncles suggest ways to design an effective program, such as (1) ensuring that it enhances the value proposition of the product or service; (2) fully costing the program; (3) maximizing the buyer's motivation to purchase again; and (4) considering the market conditions when planning.

Reflections on gaining competitive advantage through customer value

Abstract: Woodruff’s detailed discussion of the meaning and measurement of customer value and how companies can use customer value information in designing their strategies makes a major contribution to marketing theory and practice. It provides an insightful synthesis of the literature on customer value and points out why and how current theory on the subject should be strengthened. It also offers suggestions for companies to foster customer value learning and incorporate it as a cornerstone of their competitive strategies. The primary objectives of my commentary have been (1) to critically examine Woodruff’s contributions and highlight unresolved issues requiring further investigation and (2) extend Woodruff’s contributions by proposing and discussing a detailed framework for monitoring and leveraging customer value. In addressing these objectives, I have attempted to raise questions and offer suggestions—some of which are necessarily tentative—in the hope that they will stimulate additional interest, debate, and research on the topic.

Strategy and the New Economics of Information

Abstract: We are in the midst of a fundamental shift in the economics of information--a shift that will precipitate changes in the structure of entire industries and in the ways companies compete. This shift is made possible by the widespread adoption of Internet technologies, but it is less about technology than about the fact that a new behavior is reaching critical mass. Millions of people are communicating at home and at work in an explosion of connectivity that threatens to undermine the established value chains for businesses in many sectors of the economy. What will happen, for instance, to dominant retailers such as Toys "R" Us and Home Depot when a search through the Internet gives consumers more choice than any store? What will be the point of cultivating a long-standing supplier relationship with General Electric when it posts its purchasing requirements on an Internet bulletin board and entertains bids from anybody inclined to respond? The authors present a conceptual framework for approaching such questions--for understanding the relationship of information to the physical components of the value chain and how the Internet's ability to separate the two will lead to the reconfiguration of the value proposition in many industries. In any business where the physical value chain has been compromised for the sake of delivering information, there will be an opportunity to create a separate information business and a need to streamline the physical one. Executives must mentally deconstruct their businesses to see the real value of what they have. If they don't, the authors warn, someone else will.

Customer Connections: New Strategies for Growth

Abstract: Introduction 1. The Value Compass: Finding Untapped Sources of Value 2. All Ye Need to Know: Customer Knowledge Management 3. Getting Wired to Your Customer: Customer-Connecting Technology 4. Finding Out Where the Money Is: Customer Economics 5. Getting Together: Building the Right Customer Portfolio 6. Creating Customer Value: Designing the Right Range of Value Proposition 7. Producing and Delivering Value: Playing the Right Value-Added Role 8. Creating Value Together: Reward and Risk Sharing 9. Putting It Together: Creating a Customer-Based Strategy Appendix Index

Application of the means‐end value hierarchy model to understanding logistics service value

Abstract: In the behavioural science areas of psychology and consumer behaviour, the means‐end value hierarchy model has often been applied to understand individuals’ values structures ‐ in particular, the value of a company’s product/ service offering to its customers. Applying the means‐end value hierarchy model in a logistics context, logistics customer value can be thought of as a higher‐order evaluative standard for customers’ satisfaction and service quality evaluation processes. As such, it is important for a firm to know what its customers value when seeking to build a competitive advantage. Attempts to advance our understanding of logistics customer value through the application of the means‐end value hierarchy model to logistics. More specifically, investigates the customer value of logistics service in a business‐to‐business setting using the means‐end value hierarchy model. Uses focus group interview data for developing the customer value hierarchy.

Reinventing the brand: bridging the gap between customer and brand value

Abstract: Outlines a new approach for managing brands that brings the process into line with recent advances in the management of flatter, customer‐facing organizations. Argues that the traditional marketing and brand‐building approach, characterized by a narrow, product‐focussed selling proposition, no longer adds sufficient customer value. As a result, a gap has arisen between the value offered by the brand and the value expected by its customers. The factors which contribute to this value gap are discussed in the context of the changing customer and the changing organization where customer value is increasingly generated by business processes traditionally outside the remit of brand management. Introduces a management tool, the Unique Organization Proposition (UOP) to bridge this value gap by integrating the company’s core business processes into a visible set of credentials that adds customer value through the supply chain. Identifies and discusses the ways in which the UOP links with each of five core business processes. In conclusion argues that if marketers are to regain their role in the heart of the value‐adding process, they must lead in the management of the UOP and relegate their traditional brand engineering tools to an appropriate place in the overall UOP architecture.

Retail Banking: Caught in a Web?

Abstract: New web-based competitors are positioning themselves as trusted, objective intermediaries Most bank executives are following a "fortress" strategy - defending themselves while they wait for clarity in the online world As electronic networks become more robust and widespread, they are beginning to attract the attention of retail banks. Like ATMs and phone banking before them, however, they tend to be seen as merely one more cheap distribution channel. Accordingly, banks are replicating the branch banking experience on line - even to the extent of creating 3D virtual branches for their customers to navigate through. Such an approach is characteristic of early attempts to use any new technology platform. Consider the first television programs: people stood around microphones in what were essentially radio broadcasts with visuals awkwardly added on. Efforts like these miss the opportunity afforded by the new medium to rethink the entire value proposition of a retail bank. Some non-bank entrants into the online world are experimenting with an altogether different business model. They are exploiting the unique capabilities of electronic networks and leveraging their own resources through web-based strategies. These strategies unbundle the financial services business and mobilize a broad array of specialized providers to deliver increased consumer value through more innovative products, wider choice, reduced complexity, and lower prices. These new entrants could pose a threat to retail banks, targeting their most profitable product lines and customer segments. On the other hand, the same approaches are available to retail banks themselves, should they choose to pursue them. However, to do so will not be easy. It will demand a profound shift in mindset and the development of new organizational capabilities. New entrants, new business models New entrants into the financial services arena vary in their focus, but all are pursuing a business model unlike that of the traditional retail bank. In general, these new entrants fall into two groups: those that are focusing on a specific customer segment and those that are focusing on a specific transaction category. Both are mobilizing a "web" of participants to deliver key elements of an unbundled business system. Targeting customer segments One category of new players, represented in particular by software companies like Microsoft and Intuit, is targeting specific groups of customers, most notably affluent households that are early adopters of new computing and online technologies. Their goal is to develop a trust-based relationship with these customers in helping them obtain a wide range of financial services. Banks that fear these entrants are seeking to enter the retail banking business miss the point. The new players are not interested in providing specific financial services; rather, they want to focus on the acquisition and management of customer relationships. In essence, they are becoming a new form of intermediary that "unbundles" the customer relationship management element of the retail banking business from the product manufacturing and processing elements. Their distinctive value proposition will be to develop a deep understanding of a specific customer's needs and to provide access to the best mix of financial services from a multitude of "manufacturers" (banks and other providers). Banks have, of course, been trying to do this themselves for quite some time, but their information system architectures and organizational structures tend to emphasize products, making an integrated customer focus difficult to adopt. Even if a bank does manage to make the shift, it is hampered by being able to "see" customers only through their use of its products and channels. Unless customers rely on this bank for all their financial service requirements - an increasingly rare eventuality, especially among affluent households - it cannot attain an integrated perspective on the full range of its customers' transactions and needs. …

What Leading Banks Are Learning about Big Databases and Marketing

Abstract: Many banks believe they can improve profits through information-based continuous relationship marketing (CRM).(*) A better understanding of customer needs can help them acquire new customers, sell more products to those customers, and prevent other customers from taking their business elsewhere. In two years, one large North American bank trebled the number of products it sold per client household by using needs-based profiling; another pursuing the same approach saw a 60 percent increase. Yet others have acquired new customers for loan and investment products who hold transaction accounts elsewhere. And, intelligently used, database marketing has reduced mailing sizes for direct mail campaigns by as much as two-thirds. But this type of marketing approach has to be developed carefully. Many of the fast-growing and profitable US financial companies (such as Capital One) that have stolen business from traditional multiproduct banks are expert at it. To build the same skills, many banks are spending tens of millions of dollars on databases and marketing techniques - with no guarantee of success. The fact is that CRM cannot simply be grafted onto the multiproduct, multichannel organization of most banks. The huge amount of information available to these banks, coupled with the wide array of products and services they sell, can make implementing CRM a complicated and time-consuming task entailing broad institutional change. The marketing formula, related business processes, and supporting technology may all have to be redesigned. In particular, customer acquisition and management processes will have to be adapted and channels coordinated. As Nigel Morris, chief operating officer at Capital One, put it, "People talk about Capital One and how it's all in the databases. It's not. It's in the process and the technology."(**) Aware of this challenge, many bankers embark on high-stakes reform. They invest heavily in large databases to market all or many of their products to all their customers; in state-of-the-art statistical models to analyze new data and products; and in organizational structures designed around customers rather than products. But they risk biting off more than they can chew. Although the goals are laudable, those who try to achieve too much, too fast, are likely to find the payoff elusive at best. In our experience, banks that have taken a more modest, gradual approach - building competitive advantage in certain geographic regions or product segment by product segment, and learning by trial and error - have made considerable gains. Those tempted to go for the "big bang" should reexamine the rationale behind their strategy. They are likely to uncover five myths: Myth 1: Excellent CRM capabilities constitute a successful strategy Many banks are tempted to spend time and effort building CRM capabilities in the belief that these alone will deliver success. But without a clear, compelling value proposition, the power of marketing is limited. What, for example, is the point of building a marketing database or developing attractive promotional and enrollment materials if the product is a high-load, unbranded mutual fund that no one wants? Instead, banks must develop value propositions that give them an edge over product-focused rivals. They can then use CRM tools to extract maximum value from their competitive advantage. An emphasis on relationships can indeed become part of their strategy, but first they must make sure that enough customers value the proposition sufficiently to make it profitable, and that they can deliver on that promise. Once a powerful set of value propositions has been defined, a CRM approach can be used to identify which offers are likely to be most attractive to which people. Using databases to test and refine offers can be an element of a strategy, but it is not a strategy in itself. Myth 2: To capture value from CRM, a bank must organize around customer segments rather than products CRM's focus on the lifetime value of a customer and the ability to segment actual and prospective customers by needs, behavior, propensity to buy, and other characteristics lead, not unreasonably, to the assumption that a bank should be organized around customer segments. …

From exchanges to relationships: A reconceptualization of the marketing paradigm

Abstract: This article explores three key questions regarding the “new-old.” concept of relationship marketing. The question of “what.” is answered by recognizing a firm’s need to keep rather than simply acquire customers through mutually beneficial, interactive networks. The question “why.” focuses on the bottom line and, again, the mutually beneficial character of relationships. The question of “how.” identifies three key components for implementation: selective acquisition of customers, designing value propositions, and individualized or customized attention. Thus, the focus should not be on the exchange process, rather it must be on developing and perpetuating relationships. As a consequence, marketing practitioners and theorists must reevaluate the strategies used in the attempt to secure a successful presence in the marketplace.

Accounting for the Value Generated from Innovation

Abstract: Successful Knowledge Management programmes can demonstrate clearly defined links to the value proposition ‐ its bottom line being a contribution to business benefits. This is apparent at British Airways where a programme of external intelligence about information technology (IT) developments is being converted into useful IT applications. This paper explains British Airways’ approach to innovation and examines the difficulty in assigning a specific measure to this intangible asset. It also sets out ways in which innovation can produce improvements in business performance.

Do value constellations supersede value chains

Abstract: Declares that strategy helps firms prepare for the future as it allows managers to identify, and then take, opportunities to add value to their customers. Advocates that the value chain concept is built around the idea that value is added — in sequence — by suppliers along the chain. Suggests however, that a better way to define where value lies is to recognize that it arises in the way the customer uses the offered product or service. Concludes that the fundamental shift in thinking is required to find ways of creating value in a ‘post‐industrial’ economy.