Customer Value Strategy: Differentiating Your Offer for Success

1. Customer value strategy and positioning: What have you got to offer, and how does it makes you different to the rest?

2. The strategic pathway Strategic thinking and thinking strategically Market sensing and learning strategy Strategic market choices and targets Customer value strategy and positioning Strategic relationships and networks Strategic transformation and strategy implementation

3. P&G (again) • Our Purpose • We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers. • As a result, consumers will reward us with leadership sales, profit and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper. • Not incidentally Wall Street hates it

4. Agenda • Customer value strategy and positioning • value propositions • market mission and values • competitive differentiation and positioning • marketing assets

5. Source: Webster, F. E. 1992 p14 Marketing is .. the management function responsible for making sure that every aspect of the business is focused on delivering superior value to customers in the competitive marketplace.

6. Value proposition definitions • The role of marketing is.. to develop the firm’s overall value proposition (as a reflection of its distinctive competence, in terms reflecting customer needs and wants) and to articulate it to the marketplace and throughout the organisation. A major function of the statement of mission, distinctive competence, and overall value proposition is to make clear what the firm will not do, as well as what it will do as stated by corporate objectives and goals (Webster, F. E., 1992 p11)

7. Value proposition definitions • Implicit promise a company makes to customers to deliver a particular combination of values - price, quality, performance, selection, convenience, and so on (Treacy and Wiersema 1993; 1995 quoted in Frew and Payne, 2008) • a clear, simple statement of the benefits, both tangible and intangible, that the company will provide, along with the approximate price it will charge each customer segment for those benefits (Lanning and Michaels, 1988)

8. Value proposition definitions • The articulation of the measureable value of the experience that an organisation or individual will get from an Offering, where Value = Benefits minus Cost. (Barnes et al 2009 p 28)

9. Sources of superior customer value our capabilities, skills and resources our organizational processes our innovation and change processes our commitment and service capabilities Customer value

10. Customer value strategy and positioning Market mission and values Customer value strategy and positioning Competitive differentiation Competitive positioning Marketing assets

11. Mission and market strategy Mission Starts the process of strategizing and planning Objectives Results from strategizing Market strategy Results from planning Marketing programmes

12. A structured model of mission External Internal Organizational philosophy What do we want to be? Product- market domain Where are we going to operate? Broad Broad Mission statement Narrow Narrow Organizational key values How do we want our people to behave? Critical success factors What do we have to be good at? Internal External

13. Competitive differentiation Strategic positions variety-based needs-based access-based Competitive differentiation and positioning

14. Core competences Prahalad and Hamel: successful companies understand, exploit, invest to create and sustain their core competences Differentiating capabilities combine differentiation need with core competence argument what are we good at that creates superior customer value? Competitive differentiation and positioning

15. Marketing assets • What are marketing assets? • differentiating capabilities • customer relationships • channel power • market information • corporate reputation • brands

16. Example of value proposition types all benefits favourable points of difference resonating focus Value propositions

17. All benefits value proposition Favourable points of difference value proposition Resonating focus value proposition Approach: Lists all the benefits customers receive from the market offering Identifies all favourable points of difference in the market offering, compared to alternatives Focuses on the one or two points of difference whose improvement will deliver the greatest value to the customer Responds to the customer's question: Why should we buy your offering? Why should we buy your offering instead of your competitors'? What is the most important thing for us to know about your offering? Risk/cost: We may assert benefits which do not really create customer value We assume favourable differences create value for the customer We need deeper knowledge of what drives value for the customer Types of value proposition

18. BT value proposition development Source: Frow, P. and Payne, A. (2008) The Value Proposition Concept: Evolution, Development and Application in Marketing

19. BT Value Proposition Development Process

21. Deconstructing a Value Proposition Source: Payne, A. and Frow, P. (2011) “De-constructing the Value Proposition of a Service Innovation Exemplar ”. In: Patterson, A. and Oakes, S (eds) Proceedings of the Academy of Marketing Conference 2011: Marketing Field Forever, Academy of Marketing, Liverpool Available at: https://marketing.conference-services.net/programme.asp?conferenceID=2342&action=prog_list&session=15833 [Accessed 13 October 2011].

22. Shouldice Hospital Hernia Centre • renowned globally for its innovation and sole specialization in repair of external abdominal hernias • benefits from scale and standardization - surgeons each perform up to 700 operations a year - 99% success rate • Do not have a formal explicit statement of their value proposition • Lanning and Michaels (1988), propose a structure for representing a value proposition through a formal statement of: the target customers; the key benefits offered; the price relative to the competition; and a concise summary of the value proposition.

23. Target customers : • Otherwise healthy males with external inguinal hernia willing to travel to Ontario Canada to receive ‘gold standard ’ hernia repair Key benefits offered: highly skilled and specialized surgeons performing just one form of operation fast speed of surgery high success rate exceptionally low complications and recurrence fast recovery and return to normal duties low likelihood of infection anxiety and tension reduction club - like atmosphere and group therapy – more like a resort hotel than a hospital Aftercare, check ups for life and long-term relationships

24. Price relative to competition: • Low, highly competitive price - typically about half comparable costs for hernia surgery and recovery • Summary of value proposition: • Highly successful hernia surgery using a proven technique – “The Shouldice Method” - undertaken in a comfortable and supportive environment, with fast recovery and little likelihood of future problems