Lecture Five: Outline - PowerPoint by 9MI8374q

VIEWS: 5 PAGES: 33

									Lecture Five: Outline

   The Value Proposition
   Components of the Value Proposition
   The Gap between Customer
    Expectations and Perceptions
   Closing the ‘Value Delivery Gap’
   The Value Chain

                                          1
The Value Proposition

   Bovet and Martha (2000) show that:
    “the value proposition is the utility-
    creating product and/or service that a
    company offers to customers”.




                                             2
The Value Proposition (cont’d)

   Best (1997) offers this definition: “the
    value proposition includes all the key
    elements of the situation and the
    benefits the target customer is looking
    for in this purchase”.



                                               3
The Value Proposition (cont’d)

   Sheehy, Bracey and Frazier (1996)
    assert that: “the bundle of value that an
    organisation delivers to its customers is
    called ‘the value proposition’. More than
    just the product itself, it includes price,
    service, selection, and intangibles such
    as image and brand equity. The value
    proposition, in short, is not just what the
    customer is buying but what he or she
                                                4
    thinks they are buying.
The Value Proposition (cont’d)


   Webster (1994) suggests that the value
    proposition identifies both the offer to
    the company and the roles and tasks of
    stakeholders.



                                           5
The Value Proposition (cont’d)


   It becomes the selling proposition to
    potential customers, the reason they
    should do business with company,
    rather than its competitors.




                                            6
The Value Proposition (cont’d)

   It communicates to the whole
    organisation a sense of specific purpose
    and direction, coordinating their efforts
    toward the overarching common
    purpose of creating a satisfied
    customer.


                                            7
Components of the Value
Proposition             Customer expectations
  Customer               Product – service
                           characteristics
                         Service – support
                           characteristics
                         Availability
                         Information


                                                   Relative
                                                   competitive
                                                   positioning
                                Value               Distinctive
  Customer Value
                              Proposition             competencies
  Model
                                                    Competitive
                                                      necessity
                                                    Competitive
                                                      advantage
                           Partner roles:
                            Co-development
                            Co-production
                            Reseller services    Organisation
                            Customer servicing
                                                                     8
  Source: Adapted from Walters (2002)
Components of the Value
Proposition (cont’d)
   Co-development is when customers
    participate in the Research
    &Development (R & D) efforts of the
    company in order to help the company
    produce products and services which
    more closely resemble that customer’s
    needs.

                                            9
Components of the Value
Proposition (cont’d)

   Co-production is when the customer
    assembles part of the product
    themselves in exchange for a lower
    price or some other incentive.




                                         10
Components of the Value
Proposition (cont’d)

   Reseller services are those additional,
    intangible, value-adding activities that
    resellers undertake




                                           11
Components of the Value
Proposition (cont’d)

   Customer servicing include all of
    those additional things that other value
    chain members provide for the end-user




                                           12
Components of the Value
Proposition (cont’d)

   Relative competitive positioning is
    how competing value propositions are
    viewed in the minds of customers.




                                           13
Components of the Value
Proposition (cont’d)

   Barney (1997) suggests a company’ s
    competitive strategy consists of its
    business methods to attract customers
    and fulfil their expectations while
    withstanding competitive pressures, and
    strengthening its market position.


                                         14
Components of the Value
Proposition (cont’d)

   Low cost leadership strategy a low
    cost leader’s basis for competitive
    advantage is lower overall costs than
    competitors.




                                            15
Components of the Value
Proposition (cont’d)

   Differentiation positioning strategy.
    The essence of a differentiation strategy
    is to be unique in ways that are valuable
    to customers in a sustainable way.



                                           16
Components of the Value
Proposition (cont’d)

   Focus positioning strategy is where
    the company chooses to focus on a
    market niche. This involves creating the
    necessary value structure to service a
    small group of customer exceedingly
    well.


                                           17
Components of the Value
Proposition (cont’d)

   With each strategy, a different set of
    distinctive capabilities, competitive
    necessities and competitive advantages
    are necessary.




                                         18
Components of the Value
Proposition (cont’d)

   Distinctive capabilities are those
    capabilities that your company can
    perform better than competitors and are
    not easily clonable




                                          19
Components of the Value
Proposition (cont’d)

   Competitive necessities are those
    things that a company must do
    adequately in order to survive in the
    market




                                            20
Components of the Value
Proposition (cont’d)

   Competitive advantage exists when a
    company can do something better than
    competitors in key success area.




                                           21
   The Gap between Customer
   Expectations and Perceptions
                                      Customer
             Customer                                                Customer
                                  Satisfaction Index
               Value                                                  Value
              Criteria                                               Attributes




Customer            Customer                            Customer
                                                                             Customer
Purchasing            Value                            Perceptions
                                                                              Value
Influences         Expectations                            of
                                                                            Management
                                                        Delivered
                                                         Value


        Customer
                                                                        Value
       Acquisition
                                                                       Delivery
         Costs
                                                                        Costs
                                  Customer Value                     Corporate Value
      Customer Value
          Model                   Delivery Options                       Model
                                                                                       22
        Source: Walters (2002)
The Gap between Customer
Expectations and Perceptions
(cont’d)

   Walters (2002) draws some conclusions
    based on the gap between customer
    expectations and customer perceptions.




                                         23
The Gap between Customer
Expectations and Perceptions
(cont’d)

   Perceptions greater than or equal to
    Expectations = Competitive
    Advantage




                                           24
The Gap between Customer
Expectations and Perceptions
(cont’d)
   Perceptions < Expectations =
    Competitive Disadvantage




                                   25
The Gap between Customer
Expectations and Perceptions
(cont’d)
   Perceptions > Expectations =
    Sustainable Competitive Advantage




                                        26
  Closing the ‘Value Delivery Gap’

  Value Delivery             Identifying and closing the value gap
       Style
1. Exploration      Understand the customers’ business ‘needs’ – the main
                      processes
                    Identify value characteristics that the customer is
                      currently producing that could be supplied
                    Identify value production trends in the market / market
                      segment
                    Measure the gap between customer perceptions of
                      value delivered and value expected currently


                                                                               27
  Closing the ‘Value Delivery Gap’
  (cont’d)

2. Translation    Establish the features of value delivery
                     Under achieving
                     Over achieving
                     Optimising customer and supplier expectations




                                                                      28
Closing the ‘Value Delivery Gap’
(cont’d)

3. Interpretation    Establish reasons for performance achievements
                     Review value delivery organisation and cost structures
                     Identify alternative value delivery structures, their costs
                       and coordination issues
                     Consider the implications of change on customer
                       satisfaction and corporate expectations
                     Agree changes with partners




                                                                                    29
 Closing the ‘Value Delivery Gap’
 (cont’d)
4. Implementation           Agree new / revised value delivery objectives
                            Communicate objectives to both customers and value
                              chain partnership
                            Monitor customer perceptions of value
                            Monitor delivery costs
                            Monitor value chain partner ‘returns’ performances
                              realised / expected




                                                                                  30
  Source: Walters (2002)
The Value Chain




                         31
Source: Walters (2002)
Discussion Questions
   Describe the value proposition in terms
    of the internal and external processes
    that are undertaken in the value chain
    for a product you are familiar with. How
    has this value proposition changed over
    the past 10 years?
   How is the value proposition affected by
    the value delivery gap? How do internal
    and external value chain roles influence
    the value deliver gap?                  32
Discussion Questions (cont’d)

   For both the organisational and the
    customer sides of the value proposition
    identify the inputs to the value
    proposition for a product you are
    familiar with.




                                          33

								
To top