Title: Creating and Sharing Value: The Cornerstone of Business Marketing Management
1Creating and Sharing ValueThe Cornerstone of
Business Marketing Management
2James A. Narus, Ph.D. Babcock Graduate School of
Management Wake Forest University Suite 150, One
Morrocroft Centre Charlotte, NC 28211-3551
USA 1.704.365.6717 (telephone) 1.704.365.3511
(fax) jim.narus_at_mba.wfu.edu (e-mail)
3Thinking About Value
- Value is the worth in monetary terms of the net
economic, technical, service, and social benefits
a customer receives in exchange for the price it
pays for a market offering.
4Thinking About ValueBasic Considerations
- In general, customer firms
- pay price now and
- gain value later.
5Fundamental Value Equation
- VA - PA gt VB - PB
- where,
- V the net benefits (i.e., benefits minus
cost-of-use) associated with a suppliers market
offering - P the net price a customer firm pays for a
suppliers market offering
6Understanding Customer ValueBasic Considerations
- A customers incentive to buy (CIB) or the market
driving force is - VA - PA
- A customer will prefer offering A when
- VA - PA gt VB - PB
- If suppliers and/or customers dont understand
value, CIB reduces to - PA lt PB
7Customer Value Management
Tailor Market Offerings
Conceptualize Value
Profit from Value Provided
Formulate Value Propositions
Substantiate Value Propositions
Transform Sales Force to Value Merchants
8Profit from Value ProvidedThe Profit Strategy
Pyramid
9Profit from Value Provided
10Profit from Value ProvidedDefinitions
- Solution a complementary group of products
and/or services engineered to meet customer
requirements and sold for a premium price. - Multiple Single Sourcing contract to
exclusively provide most profitable solutions to
one customer location. - Bundle an unrelated group of products and/or
services consolidated for a customer and sold at
a discounted price. - Value Drain a feature or benefit which costs
the supplier more to provide than the customer is
willing to pay. - Value Leak customer processes that needlessly
increase the cost of doing business.
11Profit from Value ProvidedAcademic Research
Questions
- How can firms maximize customer contribution as a
function of the type of working relationship? - Should customer contribution strategies vary as a
function of relationship life cycle? - When should a supplier strive to reduce a
partners total cost of ownership versus
enhancing their revenue streams? - Under what conditions is it more profitable to
sell bundles versus solutions? - When should a supplier seek to improve the
value-added by a customers product versus
reducing the customers operating costs?
12Profit from Value ProvidedPotential Academic
Hypotheses
- H1 For collaborative accounts, solutions and
multiple single sourcing strategies will yield
greater customer contribution to profitability
than bundles and transaction process management
strategies. - H2 For transactional accounts, bundles and
transaction process management strategies will
yield greater customer contribution to
profitability than solutions and multiple single
sourcing strategies.
13Profit from Value ProvidedPotential Academic
Hypotheses
- H3 During the exploration phase of the
relationship life cycle, bundles and transaction
process management strategies will yield greater
customer contribution to profitability than
solutions and multiple single sourcing
strategies. - H4 During the maintenance phase of the
relationship life cycle, solutions and multiple
single sourcing strategies will yield greater
customer contribution to profitability than
bundles and transaction process management
strategies.
14References
- James C. Anderson, Nirmalya Kumar, and James A.
Narus, Value Merchants, Boston, MA Harvard
Business School Press, 2007). ISBN-13
978-1-4221-0335-7. - James C. Anderson, James A. Narus, and Wouter van
Rossum, Customer Value Propositions in Business
Markets, Harvard Business Review, (March 2006)
90-99. - James C. Anderson and James A. Narus,
Selectively Pursuing More of Your Customers
Business, MIT-Sloan Management Review, (Spring
2003) 42-49. - James C. Anderson and James A. Narus, Business
Marketing Understand What Customers Value,
Harvard Business Review, (November-December
1998) 5-15.