Designing and Delivering Superior Customer Value

Concepts, Cases, and Applications

Art Weinstein, William C. Johnson

• Publisher: CRC Press
• Year: 2020
• Topic: Business
• eBook ISBN:
  9781000083453
• Subtopic: Consumer Behaviour
• Index: Business

First Published in 1999, this book stresses the service aspects of an organization - especially customer service, marketing, and organizational responsiveness, and how to create and provide outstanding customer value to the target market(s).

Part 1. Customer Value Concepts

1 Customers Want Top Value

“The 1990s have become the ‘value decade’ ... your challenge is to give customers all of what they want, and none of what they do not.” (William A. Band, Vice President of Rand & Strong, Inc.)

Consider the remarkable success of companies such as Amazon.com, America Online, CarMax, Dell Computer, Kinko’s, Starbuck’s, and Yahoo!. These business pioneers have found better ways to create value for customers with changing needs and wants. Adaptable giants such as American Express, AT&T, Hertz, McDonald’s, Marriott, Microsoft, and Wal-Mart have also benefited from customer value thinking. It has helped them design winning marketing strategies to maintain leadership positions in highly competitive markets.

In the 1980s, the battle for customers was won or lost based on quality. As Total Quality Management (TQM) became the rage in business, quality gaps diminished, and companies focused on customer service. Enhanced customer value synthesizes and extends the quality and customer service movements and has emerged as the dominant theme for business success for 21st century companies.¹

Managing customer value will be even more critical to progressive organizations in our service- and information-based economy. Innovative companies that create maximum value for their customers will survive and thrive; they will carve sustainable competitive advantages in the marketplace. Other firms, those not providing adequate value, will struggle or disappear.

By examining relevant customer value, marketing, and services concepts and applications, this opening chapter accomplishes four objectives. First, we explain why customer value must be the overall basis for business strategy. Second, we review the size and scope of the service sector and show how service products create value for customers. Third, we offer several key customer value implications for forward-thinking managers. We conclude the chapter by discussing the attributes of value-creating organizations.

The Importance of Customer Value

Great companies do not just satisfy customers; they strive to delight and “wow” them. Superior customer value means continually creating business experiences that exceed customer expectations. Value is the strategic driver that multinational companies, as well as entrepreneurial firms, utilize to differentiate themselves from the pack in the minds of customers.

How is it that Lexus can sell sport utility vehicles for $60,000 and Taco Bell can offer meal combinations for less than $4.00, and both are considered good values? Value is the answer — and value is defined by your customers. Companies that offer outstanding value turn buyers (“tryers”) into lifetime customers.

What Does Value Really Mean?

The concept of customer value is as old as ancient trade practices. In early barter transactions, buyers carefully evaluated sellers’ offerings; they agreed to do business only if the benefits (products received) relative to the cost (items traded) were perceived as being a fair (or better) value. Hence, value is “the satisfaction of customer requirements at the lowest total cost of acquisition, ownership, and use.”² As an area of formal marketing study, value-based thinking has evolved over a half century; it originated at the General Electric Company in 1947.

According to a dictionary definition, value means relative worth or importance. Furthermore, value implies excellence based on desirability or usefulness and is represented as a magnitude or quantity. On the other hand, values are the abstract concepts of what is right, worthwhile, or desirable.³ Management’s values impact how an organization creates value and, ultimately, its success. The legends about the Frito-Lay sales rep stocking a small grocery store’s potato chip rack in a blizzard and Art Fry’s intrapreneurial initiative that brought the Post-It to 3M reinforce organizational cultures.

A value-driven marketing strategy helps organizations in ten areas: (1) understanding customer choices, (2) identifying customer segments, (3) increasing competitive options (for example, offering more products), (4) avoiding price wars, (5) improving service quality, (6) strengthening communications, (7) focusing on what is meaningful to customers, (8) building customer loyalty, (9) improving brand success, and (10) developing strong customer relationships.⁴

According to Woodruff and Gardial,⁵ a three-stage value hierarchy exists which consists of attributes, consequences, and desired end-states. These levels of abstraction describe the product/service, the user/product interaction, and the goals of the buyer (person or organization), respectively. For example, a new-car buyer may seek attributes such as comfortable seating, an easy-to-read instrumental panel, smooth shifting, a Consumer Reports endorsement, no pressure sales tactics, and a good service/warranty program. At higher levels of abstraction, buyers may want driving ease, no hassles, and reliability (consequences), and ultimately peace of mind (desired end-state).

The Heart of Value: Product Quality, Service, and Price

Customer value can be expressed in many ways and is reviewed next. The approach known as QSP states that value is primarily a combination of quality, service, and price.⁶ This set of three core ingredients — product quality, service quality, and value-based prices — is called the customer value triad. The triad provides a solid springboard for formulating an initial business strategy.⁷

Designing and delivering superior customer value has become a mandate for management. In choice-filled arenas, the balance of power has shifted from companies to value-seeking customers. Value-creating enterprises often differentiate themselves on one key attribute but must meet acceptable threshold levels with respect to quality, pricing, and service; competition provides little room for weakness in any area.

For example, Hewlett-Packard (H-P) is obsessed with new product development and product quality, Nordstrom is renowned for unparalleled customer service, and Wal-Mart stresses “Everyday Low Prices”. While H-P, Nordstrom, and Wal-Mart have each created reputations due to a singular attribute, successful retailers such as Barnes and Noble, Home Depot, and Victoria’s Secret know that price is only part of the value equation — value is the total shopping experience. This includes such customer benefits as dominant product assortment, respect for customers, time and energy savings, and fun, as well as fair prices.⁸

American Airlines attempts to provide relatively high levels of both product quality and service quality. Because tradeoffs exist among the triad elements, companies cannot expect to be market leaders in all three areas. The cost of developing and sustaining a three-dimensional leadership position would be overwhelming.

Building on this idea, value is delivered to customers in one of three ways: (1) companies can opt to have the best product (product leadership), such as Johnson & Johnson, Motorola, and Nike; (2) best total cost (operational excellence), such as Dell Computer, Southwest Airlines, and Target Stores; or (3) best total solution (customer intimacy), such as Airborne Express, Frito-Lay, and Nordstrom. The core capabilities required to implement these strategies successfully are innovation (product leadership), process efficiency (operational excellence), and relationship building (customer intimacy).^9...

Table of contents

• Cover
• Title Page
• Copyright Page
• Preface
• Acknowledgments
• The Authors
• Table of Contents
• Dedication
• Part 1. Customer Value Concepts
• Part 2. Customer Value Cases
• Part 3. Customer Value Applications
• Part 4. Customer Value Abstracts
• Part 5. Customer Value Assessment Tool (CVAT™)
• Index