Concept of customer value in dyson marketing

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27th Apr 2017 Marketing Reference this

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Dyson must integrate the concept of ‘customer value’ into their marketing strategy as this will provide it’s foundation for Business-to-Business (B2B) marketing (Beutin et al 2005, Hutt & Speh 2007, Ulaga 2001). Gale (1944 cited Hutt and Speh 2007) suggests that companies should provide the best value to become better than its competitors. Customer value is the evaluation of providing value to the organisations customer’s, which involves a ‘trade-off’ between benefits and sacrifices; in addition to the core benefits that are provided there are also add-on benefits (Beutin et al 2005, Grisaffe and Kumar 2004, Hutt and Speh 2007). These values can be seen as ‘get and a give’ components (Zeithaml’s 1988 cited Grisaffe and Kumar 2004 p. 46).

SOURCE Nikolas Beutin, Christian Homburg, Ajay Menon, ‘Understanding Customer Value in Business-to-Business Relationships,’ Journal of Business-to Business Marketing. Vol. 12 Issue 2 (2005): p4.

According to Ulaga (2001), different perspectives on ‘customer value’ must be reviewed to understand this concept (see Appendix 1 Fig: 2). He suggests that value comes from three perspectives, the buyers, the sellers and the buyer-seller perspective. The values are created individually by each perspective and then these values are negotiated for a deal. These different perspectives are joined by the benefits and sacrifices of each organisation.

The benefit is typically the quality of the product for a lower price compared to the sacrifice usually being the purchasing price (see Fig 1). There are two types of benefits, core benefits and add-on benefits to maximise customer value.

The core benefits are a set of requirements, which are compulsory for an organisational buyer’s consideration; these are the quality of the product and pre and post -sales service’s (Beutin et al 2005, Hutt and Speh 2007). The ‘Airblade’s’ qualities can include energy saving, fast performance efficiency which removes water within seconds (see Appendix 2 Table 15.1) (Dyson 2007/8). The National Health Service (NHS) are customer’s of Dyson’s, they admire that the ‘Airblade’ reduces their carbon footprint and energy costs as it uses 83% less than traditional models, potentially saving on average £951 per washroom per year (Dyson 2007/8). Another quality can be that it’s small and has long-life reliability coupled with Dyson’s five year guarantee. Dyson’s core benefits within its post-sales department are its nationwide teams that can provide maintenance work; in addition the department also provides a website which involves online instructions for self-installation and other aspects. Grisaffe and Kumar (2004) interpret these ‘customer focuses’ are extrinsic benefits. These are benefits outside the purpose of the product itself. The product provides a variety of core benefits which increases the value for the customer. The ‘Airblade’ hosts a numerous core value benefits as the NHS benefit from the high standards of healthcare as it kills over 99.9% bacteria from your hands (Dyson 2007/8). Dyson should see that it promotes these benefits copiously as it increases its value.

Add-on benefits are attributes which an organisational buyer is not intentionally looking for; these benefits can also be defined as ‘attractor’ or ‘thrill factor’ attributes (Beutin et al 2005 p. 6, Hutt and Speh 2007 p. 368). They are factors which attract extra credit to the product as these add-on benefits can consist of the design of the product. Dyson’s customer’s Nando’s, stated that the ‘Airblade’ is ‘stylish and effective’ within their establishments. The marketing manager should also mention these merits as they create a ‘wow’ factor (Hutt and Speh 2007).

Grisaffe and Kumar (2004) extend that add-on benefits include extrinsic benefits to increase customer value. This can be the ‘innovation’ of the product itself as the Dyson ‘Airblade’ is the only manufacture to receive a certificate from The National Sanitation Foundation and accredited by the Royal Institute of Public Health (Dyson 2007/8, Hutt and Speh 2007). This recognition and achievement provides extraordinary customer value to Dyson’s potential and current B2B markets. Beutin et al (2005) suggest the reputation of the organisation can be an add-on benefit as the quality and image of the brand has a psychological positive/negative effect. Dyson has the image of being one of the most ‘innovative’ brands and consumers see the products within organisations as a ‘stylish and effective’ alternative as Nando’s described.

Sacrifices are more than the purchasing price; an organisational buyer will assume other costs in relation to the product (Beutin et al 2005). There are three types of costs in order to understand sacrifices, which weakens the perception of value for customers. They are acquisition costs, possession costs and usage costs; known as ‘the total cost in use.’ (Hutt and Speh 2007, Stock 2005).

The acquisition costs can be costs like administrative work in expediting orders and correcting order shipments and purchase price. The possession costs could be the financing of the product (e.g. any creditors used in order to purchase the product). Initially the Dyson ‘Airblade’ is an expensive alternative due its high purchase price, to bulk buy for an organisation it costs £599 + VAT per unit whereas the lower end models cost £100 + VAT per unit. Other possession costs can be the logistics, insurance and inspection costs as the Dyson ‘Airblade’ needs maintenance and safety inspections. This also links to usage costs, which are ongoing costs such as installations, field repairs as previously discussed, including replacement and disposal costs (see Appendix 2, Table 15.1). For Dyson to provide value these costs must be assessed with solutions, such as the online tutorials for the organisation to carry out its own maintenance work.

According to D’Aveni (1995 cited Hutt and Speh 2007) companies will have to match its competitors strategies by offering the same (if not more) value to their B2B customer’s. If Dyson’s 50 UK-based competitors were to offer more for less, Dyson will have to replicate its competitor’s strategy.

When offering the ‘Airblade’ to the B2B market, Dyson need to emphasise that customer’s are not only purchasing the product but the inclusive services such as the technical assistance, delivery reliability; even buying into the reputation of the company (Hutt and Speh 2007). To provide ‘value’ to customers other strategies must be adopted. Hutt and Speh (2007) suggested ‘value-based’ strategies; this involves service packs for each cost-in-use components. For example Hutt and Speh (2007) believe that Dyson can offer additional systems like electronic ordering systems to reduce administration costs for customers, this will be an efficient alternative for the ‘acquisition cost’ component. By providing this system, B2B customers can re-order replacements at their time and convenience therefore providing ‘value’. Beutin et al (2005) promotes the idea in highlighting benefits to customers, as benefits have larger psychological effect than sacrifices. They conclude that it helps build a long-term relationship with customer’s however if limitations such as the ordering systems are not met, they can have a negative impact on the perception of value. In order to assess value the pricing processes are most significant in marketing the Dyson to B2B organisations (Stock 2005).

Pricing should be viewed as an important variable within the marketing mix. Thomas Nagle (1987 cited Hutt and Speh 2007 p. 367) quoted “If effective product development, promotion and distribution sow the seeds of business success, effective pricing is the harvest.” In order for the ‘Airblade’ to be effectively marketed, the price should reflect the value of the product and its distribution and communication methods. Though the Dyson is considerably more expensive than traditional solutions, Dyson can promote the energy efficiency of the ‘Airblade’ because of the high saving statistics in the long-term. This will help the marketing manager demonstrate the ‘value’ for money factor. Hutt and Speh (2007) conclude that the price can be consistent to its performance on the market and as Dyson have successfully launched into many reputable B2B organisation they can afford to opt for higher prices.

Beutin et al (2005) supports the idea that increasing customer satisfaction is an important determinant in providing customer loyalty, in addition Stock (2005) states that reducing price sensitivity to increase customer satisfaction plays a major role in providing ‘value’. Hutt and Speh (2007) and Stock (2005) suggest price sensitivity has a major influence only when the product/service is of high importance to the customer. This can be argued as promoting the ‘Airblade’ may be seen as ineffective to certain organisations due to its low importance. Certain environments, such as office based organisations may not see this product as high priority because it may seem as a luxury due to its price. It is of high importance to the NHS because of the health and safety standards (e.g. kills 99.9% bacteria) and the energy efficiency savings therefore saving costs.

Stock (2005) uses the ‘equity theory’ in to understand customer value through customer satisfaction. The theory is when parties are involved in a series of social exchanges for an outcome by assessing each other’s inputs. The theory suggests that in business relationships the customers will want equity, if not more between them. There is an equitable relationship if the individual perceives that the participant receives a ‘fair return’ in exchange for their efforts and resources (Stock 2005 p 63). If there is no equilibrium the party will reduce/adapt their inputs in order to meet at a state of equilibrium. Marketing the Dyson will be a strength, as it provides many benefits as oppose to sacrifices. Dyson provide higher inputs than their customers this will be a bonus as they offer more ‘value’. Dyson the ‘seller,’ are higher on the equilibrium scale, the ‘Airblade’ can provide Dyson’s marketing manager the opportunity to capitalize by illustrating its high ‘value’. In opposition the ‘Airblade’ does have a high ‘input’ in its expensive price; this can lower customer satisfaction and increase price sensitivity (Stock 2005).

The transaction cost theory links back to the ‘total cost in use’ which was examined but in addition to this you have transactional costs. Transaction cost include costs such as “planning, adapting, and monitoring task completion, as well as costs of drafting, negotiating, and safeguarding an agreement” (Williamson 1985 cited Stock 2005 p.63). These determine the frequent use of certain costs and ultimately decide whether to source from internal or external resources which affect the buyer-seller relationship (Coase 1932). Stock (2005) believes the theory can be used to understand the relationship between customer satisfaction and price sensitivity. In relation to Dyson many transactional costs have been eliminated, such as the completion of the product and the adaptation of it. But certain costs like safeguarding agreements with companies in maybe providing the ‘Airblade’ to organisations as replacements or new products have not been recognised. The product is ‘small’ which means major alterations may not be required to be installed within organisations. Dyson can use this theory by promoting the ‘Airblade’ being price effective and efficient.

In conclusion Dyson have formed a firm foundation to promote customer value for the ‘Airblade,’ as the benefits outweigh its sacrifices. The only major issue is its pricing as it’s pricier than its competitors and maybe seen as unnecessary or a luxury. Detiveaux and Rooney (2001 cited Stock 2005) explains that if a company delivers the needs of the customer, price becomes lower priority as efforts are made to reach customer satisfaction. The ‘Airblade’ has a number of benefits; Dyson should maintain the core benefits to provide solid solutions to B2B organisations. Their competitor’s solutions are less advanced and have fewer benefits, therefore providing the opportunity to promote the ‘value’. Dyson can be flexible on its pricing policies as they offer a unique product which they have demonstrated through other B2B organisations (e.g. NHS). In addition effective pricing can never compensate with poor execution of other attributes in the marketing mix, but can prevent some financial failure (Hutt and Speh 2007). The whole concept of ‘customer value’ is still widely interpreted, suggesting other research/theory should be implemented to maximise profitability (Beutin et al, Blythe and Zimmerman 2005, Stock 2005). If Dyson were to concentrate on these aspects mentioned about value to other B2B decision making units, they can expect to make healthy returns.

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