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Customer Value as Marketing Management Published: Sunday, October 1, 2000 By: Dr. Manuel Angel Morales

In a very simple way, value revolves around the tradeoff between the benefits customers receive from a product or service and the price that they pay. The point is that price only has meaning when paired with the benefits delivered, both tangible and psychological. For a given price, value increases when product or service benefits increase. Following the same logic, value decreases when perceived benefits go down relative to price. The prices of perceived product or service substitutes also go into the assessment of value as performed by the customer. Thus, customers determine the value of a product or service based on the organization`s perceived benefits and price, as well as those of a competitor`s offer.

Maximizing customer value is the great challenge for product and service marketers. Visionary and competitive organizations are responding to the new breed of smarter, more demanding customers by rethinking some of their traditional job functions, using customer value-based decision-making and stressing customer retention strategies. To adapt more intelligently to customers, new types of value providers are often needed. The purpose is to go beyond cosmetic appereances and concentrate on the design of strategic responses to the changing business environment and the need to deliver superior value to the customer.

There are certain scientific guidelines for creating customer value. Companies can use a kind of a checklist to establish the following: 1. Do your goods and services really perform? 2. Do your company and its people give more than what is expected? 3. Does your organization stand behind its work with extraordinary warranties? 4. Are your pricing policies decent and realistic? 5. Do your advertising and promotional materials give customers the necessary facts? 6. Do you use value adders to build customer relationships?

Enhanced customer value goes beyond discrete or isolated transactions and builds long-term bonds and partnerships in the market place. Strong customer/ organization ties change buyers to advocates. Delighted customers play an important public relations role that create new business opportunities by way of referrals.

Organizations should be viewed as value-creating entities. Customer – responsive organizations create value by solving individual customer problems. Thus, value relates to the speed by which you create a new idea or solution to the customer by the speed with which you implement it. Delighted customers perceive a high value relative to the economic cost and hassle of obtaining a solution. A strong competitive advantage can be gained through consistently providing superior customer value. The value creating organization scores high in purpose (understanding their business and customer desire`s) and high in process (knowing how to use internal procedures to respond to customers in a wise manner).

Not all organizations can master both purpose (customer focus) and processes (customer support) activities. If an organization scores high on purpose, but low on processes we are in the face of just a well-intended condition. If it scores low on purpose and low on processes we are referring to adversarial relations. If it scores low on purpose and high on processes it is a bureaucracy. When any kind of organization scores high on purpose and processes it is about a value-creating culture.

Segmentation, targeting and positioning plus the dimensions of product, service, price, promotion and place are core points for the value creating company. The idea is to create a new strategy. As markets are dynamics the status quo will not do…

 


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