Using Customer Value as Source of Competitive Advantage

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Delivering on customer value is an important topic in the field of marketing in these days. While customer value is considered as a source of competitive advantage in the literature, importance of supportive culture is also emphasised(Slater, 1997; Treacy & Wiersema, 1995; Woodruff, 1997). The existence of a supportive corporate culture is an enabler for delivering on customer value. The rigid and strict corporate cultures are the barriers in the way of delivering on the customer value. This paper has examined few concepts of customer value in the literature to find the link between the customer value and supportive corporate culture. It will elaborate the cultural challenges that come in the way of organizations which intend to use customer value as source ofcompetitive advantage. Two Human Resource Managers are also interviewed to discuss the implications of using Customer Value as source of Competitive advantage in the Pakistani context.

Customer Value

According to Peter Drucker "To satisfy the customer is the mission and purpose of every business" (Drucker, 1973). "The creation of customer value must be the reason for the firm's existence and certainly for its success"(Slater, 1997). Looking into these statements of the two scholars it is quite obvious that how much they are sure about purpose and mission of an organization and the formula or equation of success. Whatever strategy is used, and whatever is the magnitude of the competition, the ultimate win belongs to the business that satisfies the customer needs.

There are good contributions by the researchers in defining the concept of Customer Value:

"The consumer's overall assessment of the utility of a product based on perceptions of what is received and what is given" (Zeithaml, 1988). "Buyers' perceptions of value represent a trade-off between the quality of benefits they perceive in the product relative to the sacrifice they perceive by paying the price"(Monroe, 1990). "Value in business markets [is] the perceived worth in monetary units of the set of econonfic, technical, service and social benefits received by a customer firm in exchange for the price paid for a product, taking into consideration the available suppliers' offerings and prices" (Anderson, Jain, & Chintagunta, 1993). "Customer value is a customer's perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer's goals and purposes in use situations " (Woodruff, 1997).

Customer value-based theories say that the superior performance of a firm is dependent on the customer value-based organizational culture, that firm constantly tries to know what customers want and what are their changing needs, and organizes itself according to the customers' expectations from the business. The Tangible resources are of lesser importance in this theory. The companies like IBM and Compaq that build substantial resource base at one time, but they lost their major shares due to misunderstanding of the customer needs (Slater, 1997). The customer value based theories focus more and more on closely watching the needs of the customers. Slater has emphasised on different ways of learning through the customer, learning about the customers and learning from the customers through formal and informal ways. There were the days when the quality was understood as improvement in the internal processes and developing better products and services, the managers focused on the internal improvements for the better business performance (Garvin, 1983; Leonard & Sasser, 1982).

By delivering the superior customer value firm can achieve customer satisfaction, firm exist to satisfy customer needs, they do not exist to reduce transaction costs or maximize profits (Slater, 1997).

Focus on customer value becomes much important in the environment of intense competition where sources of both product-based competitive advantage and process based competitive advantage are quickly imitated by competitors (Dickson 1992; Ghemawat 1986; Jacobson 1992). The customer focus basically changes the whole framework with which the business activities are carried out. In this framework first it is analysed that what the customer wants from us, then we work backward from there (Hammer, 1996).

Strategies to Deliver on Customer Value

(Treacy & Wiersema, 1995) have given three concepts for the success of business:

(1) value proposition;

(2) value driven operating model

(3) value disciplines.

The first point is about defining what the value is in form of price, quality, performance, selection, or convenience to customers (Bick & Brown, 2004). In the second point, they focused on the importance of supporting corporate culture to deliver on the customer value. According to them the managements systems and the corporate culture enable the organization to deliver on value proposition. The value disciplines given by the (Treacy & Wiersema, 1995) are as follows:

Operational excellence

Product leadership

Customer intimacy

Each of the above value disciplines focuses on particular market segments. The expectations of the customers in each segment are mainly categorised as similar. There is a lack of criticism on these value disciplines because the managers and academicians have intuitively excepted it (Bick & Brown, 2004).

According to Slater: "The customer value creation strategy of a firm substantially influences the scale, scope, and types of activities in which it engages. Customer value strategy includes (1) the establishment of appropriate market objectives, (2) the selection of the specific market segment(s) to be targeted in the broader industry setting, (3) the creation of a value proposition that establishes a position of competitive advantage and (4) the development of capabilities that are necessary to understand customer needs and deliver the promised value"(Slater, 1997).

Slater in his fourth point has emphasised the importance of "development of capabilities". What are those capabilities that a firm requires to understand the customer needs? This is pointing towards the organizational systems or in broader term the corporate culture that exists in the firm. Here he has emphasised the importance of capable systems in the organizations that are well equipped to interact with the customers outside the organizational boundaries and exactly find out what the customers want from them.

Research shows that organizations often do mistakes in measuring the customer values. They use the favourite tools, for the measurement of customer values which do not necessarily tell the actual story. The people who take feedback from the customers are most of the times forced to submit their reports in one page memos or in other forms that filters out the actual feedback, and the managers can know only according to the perception of the employees who take the feedback (Woodruff, 1997).

Corporate Cultures and Challenges for delivering on Customer Value

Analysing "value driven operating model" of Treacy & Wiersema and Slater's stress on "development of capabilities", we find that in both concepts they are associating a supportive organizational culture with the customer value delivery, they are focusing on the linkage between these two variables. Looking into their concepts it is quite evident that to deliver on customer values, an organization needs an organizational structure in which the systems are designed by putting the customer as a focus.

The traditional organizational bureaucracies allow less room for the management to develop the organizational systems on the base of customer values. Especially in the manufacturing organizations where the hierarchies are very tall, there is too much internal orientation. Despite criticism on that organizational structure, the structure of most of the organizations is based on that concept. To secure the internal systems of operations and to facilitate the uniformity in the internal systems the organizations develop intentional or unintentional barriers that seize them from changing their internal orientation to external orientation for customer value delivery(Day, 1990, 1994; Gale, 1994). The organizational cultures and their systems need to be developed in such a way to be receptive and responsive to the changing customer needs.

Woodruff has categorized three kind of organizational barriers in the way of delivering on the customer values.

Organizational Culture Barriers: that is typically due to the traditional performance measurement and reward systems.

Organizational Procedural Barriers: The reporting procedures that are used to communicate the customer voice to the management. The way the information is collected from the customer and the way it is processed and finally communicated to the managers filters most of the essence of it.

Managerial learning Barriers: Managers have limitations in learning about customer values due to their commitment with their routines and they cannot cope with the speed of change (Woodruff, 1997).

In his article, Woodruff has emphasised the importance of supportive organizational culture that facilitates on focusing the customers' values.

The corporate culture is formed by the industry in which a company operates, its geographical location, the events of its history, personality of its employees and the patterns of interaction between them (Sadri & Lees, 2001). A positive culture has become a source of competitive advantage these days and understanding it can bring phenomenal successes for the organizations, but the problem still here is that we are in infancy stages of understanding the corporate cultures (Sadri & Lees, 2001).

In Pakistani Context

To understand the implications of Customer Value Delivery in the Pakistani organizations I contacted two Human Resource Managers of different organizations who have served in numerous organizations of private sector in the last ten to twelve years, and tried to find out how much impact is there of customer voice in their decision making and planning processes.

Mr. Ali who is the Training & Development manager at a local manufacturing organization and Mr. Yousuf, Country Manager Human Resource in an Independent Power Producer company (IPP) told me that in our organizations other than MNC's, we are stuck in the debates of Lean manufacturing and Lean management. The most of the focus of the top management is towards improvement in the internal processes. We are still very reactive in selection of strategies and improvement of systems about which we accept that these are the sources of competitive advantage. The middle management is more interested in developing and using efficient system to improve internal processes. The ERPs and SAP that can be used as tool for Customer Relationship Management are also primarily used for speeding up the internal functionalities. The cultures in our organizations are confused between the Japanese quality systems and GE's Bell Curve based performance management system.

Conclusion

The literature strongly supports the point of view that to use customer value as source of competitive advantage, the organizations must have supportive and flexible corporate culture that shapes itself according to the customer, it may also be termed as customer-oriented corporate culture. Pakistani organizations need to clear their dimension and then they will be able to strongly address the issue of customer values, because the internal conflict of corporate identity does not allow them to focus on the customer value driven system. The customer value orientation is often talk about in the top management meetings, but to "walk the talk" the development of corporate culture needs first attention, because it is the enabler for Customer Value Driven System.

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