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Creating and Sharing Value: The Cornerstone of Business Marketing Management

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Title: Creating and Sharing Value: The Cornerstone of Business Marketing Management


1
Creating and Sharing ValueThe Cornerstone of
Business Marketing Management
2
James 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)
3
Thinking 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.

4
Thinking About ValueBasic Considerations
  • In general, customer firms
  • pay price now and
  • gain value later.

5
Fundamental 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

6
Understanding 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

7
Customer Value Management
Tailor Market Offerings
Conceptualize Value
Profit from Value Provided
Formulate Value Propositions
Substantiate Value Propositions
Transform Sales Force to Value Merchants
8
Profit from Value ProvidedThe Profit Strategy
Pyramid
9
Profit from Value Provided
10
Profit 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.

11
Profit 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?

12
Profit 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.

13
Profit 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.

14
References
  • 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.
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