Sustainable Customer Value

Using Credit Card at Register

Senior executives should build value creation in their business strategies. To act otherwise is only asking for trouble. In the infancy of a business’ existence, a good value proposition for customers is essential.

Mark Johnston and Greg Marshall, authors of Relationship Selling, argue that value-added selling changes much of the sales process.[1] Value is defined as “the perceived experience and worth gained from a product or service.”

Phillip Kotler and Kevin Keller, authors of Marketing Management, maintain that it is important for businesses to understand customer perceived value: “Buyers operate under various constraints and occasionally make choices that give more weight to their personal benefit than to the company’s benefit….Consumers have varying degrees of loyalty to specific brands, stores, and companies.”[2]

Customer-perceived value is related to the difference between benefits the customer gets and costs the customer assumes for different choices. Yet, customer-perceived value often is a graded approach.

For example, if an individual wants a cheap, fast-food option, he or she may select McDonald’s. In this case, the buyer’s expectation for quality food is lower than eating at a five star restaurant. Customers are very understanding when the seller’s value proposition is clear.

Given that market framework, perceived value is in the eyes of the customer and varies from business to business. Kotler and Keller further note, “The marketer can increase the value of the customer offering by raising the economic, functional, or emotional benefits and/or reducing one or more costs.” [3]

Therefore, organizations are challenged by selling value. Consequently, managers must better align themselves strategically to provide long- term value for customers, rather than focusing only on short-term profitability.

Being strategic conscious about these business relationships is not simple. Ken Favaro, author of Put Value First, further explains that putting value creation consistently first requires leadership skills, discipline, and perseverance.

He further challenged organizations to demand higher standards from managers who could jeopardize these business relationships. Favaro further adds that sharing information widely within the management team builds a shared sense of commitment toward building value for customers and shareholders. Customers and all members of the supply chain should provide input so that the expectations are clear.

Businesses that pay more would get more benefits (i.e. certain perks, discounts, etc.). Therefore, the value proposition would be enhanced. Yet, all good business transactions start with trust.

Johnston and Marshall argue that customers expect and deserve consistency in the way an organization’s value-added message is put forth.  When a customer begins a relationship with you, he or she already has a specific set of expectations.[4]

Sadly, unproductive firms put little strategic thought in the matter of value creation. Nat Martin, III, Director of Purchasing and Concept Support, Darden Restaurants, Inc. notes: “If the value exceeds expectation, the customer is highly satisfied. If the value falls short of expectation, the customer is dissatisfied.”

Value creation can be considered the powerful engine that energizes sustainable growth. Therefore, value creation for businesses must be strategic and deliberate for any sustainable growth.

Please discuss your professional experience with company’s value creation initiatives.

© 2013 by Daryl D. Green


[1] Relationship Selling by Mark Johnston and Greg Marshall

[2] Marketing Management by Phillip Kotler and Kevin Keller

[3] Marketing Management by Phillip Kotler and Kevin Keller

[4] “Customer expectation vs. customer need” by Ray Miller

Emerging Markets

I remember listening to Kenny Rogers sing “The Gambler” growing up in my community.  As many of you know, Rogers is a country artist.  I was well aware that if my friends knew I listened to country music, I would have lost my ‘cool card’ among my rapped-crazed peers.  Today, the lyrics of “The Gambler” still guide my business strategy. 

“You got to know when to hold ’em, know when to fold ’em
Know when to walk away and know when to run
You never count your money when you’re sittin’ at the table
There’ll be time enough for countin’ when the dealing’s done
Every gambler knows that the secret to survivin’
Is knowin’ what to throw away and knowing what to keep” 
 

If most senior leaders would guide themselves with this simple lyric, their organizations would be better off.  For example, you find a good spot in the lake where there are an abundance of fish.  You keep this secret, but then start sharing it with a few friends. Sadly, the word gets out about your special spot.  

Finally, you find yourself squeezed out from your favorite spot.  It’s a hot spot now.  The fish are being topped out.  Yet, people continue to fish there despite obtaining less fish and requiring more time to get the same results.  Even though you love the spot and have a sentimental connection with this area, you abandon this location and move to another unknown location that shows plenty of potential.  You moved not because you wanted to move; you moved because you are a fisherman who loves catching fish. 

Likewise, today’s businesses are operating abroad in order to catch more fish and obtain more profitability.  U.S. multinational companies, like Coke Cola and McDonalds, realize that America’s market is pretty saturated and riddled with hypercompetitions.  

How many more burgers or cokes can Americans continue to consume?  Additionally, companies hope to lower their costs by searching for a lower cost labor force.  Charles Hill, author of International Business, suggests that outsourcing is systematic:  “By doing this, companies hope to lower their overall cost structure or improve the quality or functionality of their product offering, thereby allowing them to compete more effectively.”[1] Therefore, emerging markets become more attractive. 

The fragility of today’s world’s economies demands that businesses act more prudently and decisively about their market strategies. Emerging markets, which were once stigmatized with the name ‘Third World’ markets, will be a dominate player in the world’s future economy.

 

The top four emerging markets include China, Brazil, India, and Russia.  According to Goldman Sach’s projects, these countries will overtake the seven largest industrialized countries (United States, Japan, Germany, France, UK, Italy, and Canada) by 2040.  Antoine va Agtmael, author of The Emerging Markets Century, argues that the prominent role of emerging markets is in future commerce.   

He predicts revolutionary changes due to these emerging markets and equates these changes to the second industrial revolution.  Some of the key success factors for these emerging companies are the following: (1) an obsessive focus on quality and design, (2) brand building, (3) logistics, (4) being ahead of competitors in adapting to changing market trends, (5) acquisition savvy, (6) sustaining an edge on competition in information technology, (7) clever niche strategies, and (8) unconventional thinking.[2]  

Additionally, these companies have a hunger to compete since their success will improve their way of life. Sadly, many Americans do not understand the level of poverty that motivates these countries. Agtmael further notes: “A new breed of companies will play a critical role in producing this shift; a select number of which truly deserve to be regarded as world class. 

In the face of these firms’ vigorous emergence on the world stage, there will be a temptation to go into protective mode….”[3]  However, globalization makes retreating a passive signal of being defeated in a world market.  Therefore, U.S. companies like IBM and Google may see themselves fighting to keep their dominance from unrecognized firms from these emerging countries with a hunger to topple established U.S. businesses. 

Discuss how U.S. companies can effectively address the competition from firms located in emerging markets. 

© 2012 by Daryl D. Green


[1] International Business by Charles Hills

[2]The Emerging Markets by Antoine va Agtmael

[3]The Emerging Markets by Antoine va Agtmael