Tuesday, April 14, 2015

POM: Session 8 Value Delivery Process

"In hyper competitive economy with increasingly informed buyers faced with abundant choices, a company can win only by fine-tuning the value delivery process and choosing, providing, and communicating superior value."
-- Philip Kotler
As discussed in the previous session, the customers are value maximizes. They seek more and more worth in the marketing offer. Therefore, in order to aim for a value that wins hearts and not just pockets of the consumers’ needs to analyse customer choice parameters.

Customer Perceived Value (CPV) is the difference between the prospective customer's evaluation of all the benefits and all the costs of an offering and perceived alternatives. Total customer benefits is the perceived monetary value of the bundle of economic, functional and psychological benefits customer expects from a given market offerings because of product, service, people and image. (Kotler)

In the campaign, “Kuchh Keemat bhi, Kuchh Keemati Bhi” (best price, as well as something priceless) OLX has given a new (yet old) outlook to value by giving emotional and personal touch to buyer-seller relationships. 

The value aspect of OLX has worked well in C2C markets. But it can be developed in situations at even business to customer markets (something what TataSky Daily Recharge is trying to do).

Value proposition can be defined as an idea that is designed carefully in order to engage the consumer with functional and emotional appeals. The next task is to convert this idea into a plan of action. 

The value delivery process is the stepwise plan of action that executes the idea designed as value proposition.

Identification of Value

The process of value selection involves careful assessment of elements that can be valued by customers. The company may initially identify number of elements that can add value to the marketing offer. For example, a tea brand may want to add many associations like taste, fragrance, freshness, aroma, health, lifestyle, social, party, family and so on. Out of all the elements, only few shall be selected as value proposition. 

The marketers need to prioritise the value best desired by the consumers. The assessment of the customer perceived value can be done through market research and competitor analysis. The objective behind this exercise is to seek maximum customer satisfaction by meeting customer expectations. Also the value proposition should be designed from a long term perspective and should not be changed often. 

The number of elements to be selected in value proposition is decided on EPI (Evaluate, Prioritise and Improvise) principle. The company must be careful that it should select optimum number of elements. Each element of value has its own cost. Thus it is important to understand the expected returns from them. Too many elements can cause confusion and also it is not easy to recover their cost. Too less elements leads to narrow position, that is difficult to sustain in longer run and may not be transferable to other segments.

Creation of Value

Traditional marketers used to believe that the value is embedded in products and services offers. It cannot be created separately. Also, the role of exchange process in value was not paid attention to. In modern marketing, the value creation process is a carefully done analysing the demand and preference of the target audience.

Co-creation 
Co-creation is a process where the inputs are invited from the customers through contests for product designing, logo designing, advertisements and content writing and so on. The idea of co-creation is a very cost effective way of getting customer insights. It builds more trust in the minds of consumers as they connect to the offer. 

There are examples of the companies investing years of research work and field work in value creation, before launching their offering. Indian company like Tata Motors have spent almost 5 years in development of Nano, whereas, MNC like McDonald have invested 4 years in ground work  prior to its launch in India, Value creation at McDonald involved careful selection and development of suppliers. 

Delivering the Value

The marketers must also make sure that the value proposition designed and created with utmost care and precision should reach to its consumers. Delivering the value is the procedure where the value proposition comes to the contact of the consumer. These the decisions related to channel design and activities.

Coming back to McDonald's example, In India, McDonald's success has been built on commitment to the delivery of QSC&V (Quality, Service, Cleanliness and Value), meals served quickly with a smile in a clean and pleasant environment. Also, the prices are kept at a value that the largest segment of the Indian consumers can afford. At the same time, they didn't sacrifice quality for value – rather McDonald’s leverage economies to minimise costs while maximizing value to customers.

Communicating the Value

Marketers needs to follow a holistic approach to communicate value proposition to target consumers. An extensive integrated marketing communication program to inform the consumers about the value proposition may be designed. Personal and mass appeal activities, like, sales promotion, personal selling, events and other corporate social responsibility activities should be used to promote and sell the product. 


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