mba-marketing management lecture-4value proposition
TRANSCRIPT
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Customer Value propositions (1)
MBA: Lecture 4
Marketing Management
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What is a Value Proposition?
Therefore a value proposition is:
about customers but for your organization;
not addressed to customers but must drive these
communications;
articulates the essence of a business, defining
exactly what the organization fully intends to
make happen in the customers life
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Customer Value Proposition
Inputs
Customer
experience
Offerings
Benefits
Cost and Risk
Price
Alternatives
Output and
outcomes
New and retainedcustomers
Profitable growth
Enhanced offerings
Corporate through
to sales messaging
Source: Barnes, Blake and Pinder, (2009)
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Value proposition in different Markets
Value propositions for business-to-business (B2B)situations can be different as customers inbusiness markets predominantly focus onfunctionality or performance, whereas customers
in consumer markets predominantly focus onaesthetics and taste (Treacy and Wiersema,1995).
For a B2B enterprise, selling without value
propositions must lead, sooner or later, to valuedissipation and commoditization on the basis ofthat lowest common denominator, price.
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Case Study: 2008/2009 financial crisis
Financial services organizations caused pain
for their customers to such an extent that it
recoiled back on them, putting the entire
financial system in jeopardy.
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A very, very, very bad value
proposition
Benefit: A Home
Sacrifices/costs:An expensive Mortgage,
The risk that loan may increasingly
exceeded the assets value,Worry, inability to pay,
The risk (reality) that wholesale
failure of these deals, could ultimately
threaten global financial stability
Source: Barnes, Blake and Pinder, (2009, p.26)
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Value proposition concept (1)
The articulation of the measurable value of
the experience that an organization or
individual will get from an Offering,
Where:
Value = Benefits minus Cost
Source: Barnes, Blake and Pinder, (2009, p.28)
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Customer Value Propositions (2)
Source: Kerper (n.d., p.4)
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Customer Value Propositions (3)
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Customer Value Propositions (4)
Source: Kerper (n.d., p.5)
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Customer Value Propositions (5)
Source: Kerper (n.d., p.6)
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Customer Value Proposition (6)
Product
Describe your
product/service
concept and how it
solves the customer
problem
Placement/Target
market
Describe the target
customer group and
estimate the market
unit volume
Price
Describe your
price/performance
position on
customer value map
Promotion
Describe your plan
for communicating
the value
proposition for this
idea to customer
Customer Value
propositions
Describe your
perceived
cost/performance
(benefits) over
competitions
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Customer Value Proposition (7)
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Value Proposition: Example of IBM
Source: Kerper (n.d., p.15)
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Elements of Value Proposition
Capabilitywhat you can do for a customer.
Impacthow that will help the customer to
succeed.
Costwhat the customer must pay for the
privilege.
Source: Barnes, Blake and Pinder, (2009, p.28)
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Amazon value proposition (1)
Amazons value proposition is based on low cost prices for a highselection of books ordered through an anytime, anywhereextremely convenient mechanism.
To achieve this, they designed a unique organizational systemrelying on an entirely automated order management system, tightly
linked to their suppliers and payment networks, allowing them tominimize human intervention, therefore reducing costs.
Special deals with their partners (suppliers) allow them to maintainvery little physical inventory.
They also use unique roles to create a sense of community amongbook readers, who collaborate to serve as reviewers or
salespersons (through the Associates program). Technology is used both in the back-office as well as in the
interaction with the customer (World- Wide-Web for productinformation and ordering, electronic mail for customer service).
Source: Kambil et al (1996, p.29)
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Ikeas Value Proposition (2)
IKEAs value proposition emphasizes high-quality furnitureat rock-bottom prices.
In order to achieve that feat, the company has created aprocess to look for very low-cost suppliers in remote areasof the world (usually developing countries).
IKEA then sends in training and quality-control teams toinsure that the quality of the production will satisfy itsstandards.
The production of its different suppliers is then coordinated
through a global logistics system and a network ofwarehouses, which insures that the different componentsof a piece of furniture reach the warehouse in time forassembly and the shops in time to restock shelves
Source: Kambil et al (1996, p.30)
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Dells value proposition (3)
Dells value proposition relies on state-of-theart technology, delivered at low price througha convenient ordering process, and offering
top-notch remote support. In order to deliver such a value proposition
with profit, Dell designed a unique valuearchitecture based on direct marketing,extensive use of call centers and magazineadvertising.
Source: Kambil et al (1996, p.30)
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Value Proposition Builder
5. Alternatives and
Differentiations
How you are different
from and better than
alternatives
6. Proof
Substantiated credibility
and believability of yourofferings
2. Value experience
How you are different
from and better thanalternatives
3. Offerings
The product/service mix
that you are selling
4. Benefits
How your offering
delivers clear customer
value
1. Markets
The specific group of
customers you are
targeting
Value
propositions
Source: Barnes, Blake and Pinder, (2009,)
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Business to Business: Value
Proposition (1)
Anderson et al (1996)- comes out with three
value propositions
all benefits,
favorable points of difference,
and resonating focus.
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Business to Business: Value
Proposition (2)- All Benefits List all the benefits they believe that their offering
might deliver to target customers.
This approach requires the least knowledge aboutcustomers and competitors and, thus, the least amount
of work to construct Limitation: Managers may claim advantages for
features that actually provide no benefit to targetcustomers. Another pitfall is that all benefits value proposition is that
many, even most, of the benefits may be points of paritywith those of the next best alternative, diluting the effectof the few genuine points of difference.
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Business to Business: Value Proposition
(3)-Favorable points of differences
Explicitly recognizes that the customer has analternative.
Knowing that an element of an offering is a pointof difference relative to the next best alternativedoes not, however, convey the value of thisdifference to target customers.
Without a detailed understanding of thecustomers requirements and preferences, and
what it is worth to fulfill them, suppliers maystress points of difference that deliver relativelylittle value to the target customer.
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Which Alternative conveys values to
customer?
Source: Anderson et al (2006, p.93)
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Alternative methods to identify value
proposition
Payne (n.d).three elements of value
propositions
Kambil et al (1996)-Dimensions of value
proposition
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Three key elements of value
proposition (Payne, n.d)
Analysing Market based value
Assessing the opportunities in each segment
to deliver superior value
Explicitly choosing the value proposition
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Assessing opportunities in each
segment to deliver superior value
All markets are made up of market segments,
or groups of customers with the same or
similar needs.
Even where the offer made to customers is
technically identical to competitors offers,
efforts to differentiate the total or package
offer in terms of customer segment as well asmarket segment can reap significant rewards.
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Explicitly choosing the value
proposition
Having identified the target market segments,
the next priority is to create a value
proposition of winning relevance.
The characteristics of the segments that form
some markets may vary so radically that
different value propositions will be required
for different segments
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Dimensions of Value Proposition
(Kambil et al, 1996)
Source: Kambil et al (1996, p.13)
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Product Performance
Source: Kambil et al (1996, p.12)
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Product Cost
Source: Kambil et al (1996, p.15)
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Customer Role
the buyer role defines how a customer determines needs,assesses suppliers, orders, and pays for and takes deliveryof a product or service
the user role describes how the end user derives theexpected performance from a product or service to satisfy aspecific set of needs
the co-creator role refers to how customers cooperate withtheir suppliers to produce the expected value, often passingit to another customer
the transferer role defines how customers dispose of aproduct. For example, a physical product can be discarded,recycled, or resold, while information know-how can bestored, transferred to others, or resold.
Source: Kambil et al (1996, p.16)
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Customer Role: Examples
Dell
Dell Computer understood before everyone else
that computers were quickly becoming
commodities and should therefore be treated as
such. By focusing on streamlining the acquisition
process for its customers through standardized
components, direct sales, phone-based orderingand support, the company has redefined the
standard within its industry. (Buyer role)
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Customer Role: Examples (2)
Airbus WhenAirbus, the European airspace consortium,
launched the A320 family of aircraft, it created a familyof airplanes (A319, A320 and A32I) sharing mostcharacteristics, and differing only in size.
By using the same inside equipment, pilot instruments,maintenance procedures, etc., Airbus makes it easierfor companies to schedule the use of these airplanes.
Substituting a larger airplane on a temporarily crowdedroute doesn't require a change in pilots, flight crew,
food carts or any other equipment. Airbus customers can therefore generate much more
value out of the use of their aircraft.(User role)
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Customer Role: Examples (3)
IKEA
IKEA, the Swedish furniture giant, is well known
for partnering with its customers to co-createvalue.
if customers play the role IKEA assigns to them(drive out of town, shop alone, transport theirfurniture home and assemble it), then IKEA willprovide them with one-stop shopping for quality
furniture at excellent prices, while making theirshopping experience fun and rewarding. (co-creator role)
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Customer Role: Examples (4)
McDonald
McDonald's has established a system where
everyone buses their own tray before leaving.
In the these cases, the supplier focuses on
adding the maximum value in its corespecialty and "outsources the rest of the
work to the customer or a complementor. (Co-
creator role)
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Customer Role: Examples (5)
Leasing Companies
Leasing companies have understood that
customers were sometimes not interested in
dealing with their cars after a few years. Rather
than having to bother with reselling them andbuying a new one, it is easier to outsource these
chores to a leasing company.
The leasing company acquires the car, providesbasic maintenance and simplifies its transfer
(disposal) after its useful life. (Transferer role)
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Amazons Value Propositions (2)
Source: Kambil et al (1996, p.21)
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EVALUATING Value Propositions (1)
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Evaluating value proposition (2)
Lawton (n.d)
l l ( )
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Evaluating Value proposition (3):
Ryanair's value proposition
Lawton (n.d)
l l ( )
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Evaluating Value proposition (4):
Ryanair's value proposition Statement
Lawton (n.d)
E l i V l i i (5)
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Evaluating Value proposition (5):
Emirates value proposition
Lawton (n.d)
E l i V l i i (6)
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Evaluating Value proposition (6):
Emirates value proposition Statement
Lawton (n.d)
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Any Questions?