Customer Value Propositions in Business Markets

Suppliers understand the term value proposition in three different ways which are all benefits, favorable points of difference and resonating focus. The first value proposition is made up of all the benefits that customers get from a market offering. The all benefits proposition answers the customer question of why they should buy the supplier's offering. It requires that the supplier has knowledge of their own market offering.

This proposition has the disadvantage of the possibility of leading to benefit assertion by the supplier. Benefit assertion occurs when the supplier stresses an advantage which the customer does not view to be important. Another disadvantage is that many of the things which the supplier views as benefits to the customer may be points of parity with the next best alternative. This could dilute the effect of the few real points of difference (Anderson, Narus, & van Rossum, 2006).

In the favorable points of difference value proposition, the supplier highlights all the positive points of difference that a market offering has in comparison to the next best option. It answers the customer question of why they should purchase the supplier's offering instead of their competitors. Suppliers using this value proposition should have knowledge of their own market offering as well as the next best alternative. The favorable point of difference value proposition has the potential downside of leading to value presumption. This occurs when the supplier assumes that what they view as favorable points of difference are also valuable to the customer.

The resonating focus value proposition consists of one or two points of difference and may also include a point of parity that if improved would deliver the most value to the customer for the near future. It answers the customer question of the most important thing they should remember about the supplier's offering. It requires the supplier to understand how their market offering gives superior value to customers relative to the next best option. This proposition has the disadvantage of requiring the supplier to carry out customer value research. However, the resonating focus value proposition is what should be used by all suppliers. Aside from this, suppliers should be able to substantiate their customer value propositions. Their words should not just be empty rhetoric. Furthermore, they should be ready to demonstrate customer value in advance and must also have documented this customer value. To have superior business performance, companies must implement the most effective customer value propositions. This means that for a firm to be successful, they should incorporate customer value propositions into their business strategy (Anderson, Narus, & van Rossum, 2006).

My favorite quote in the article was the authors' assertion that: Customer managers, increasingly held accountable for reducing costs, don't have the luxury of simply believing suppliers' assertions. I chose this quote because it clearly illustrates the immense pressure that customer managers are under, and the resulting consequences of this pressure. The quote can help one to understand how and why customer managers arrive at their purchasing decisions. It also shows that customer managers bear a significant degree of responsibility in ensuring the success of their organizations.

How knowledge can be applied

Suppliers can use the knowledge from this article to determine the most effective value propositions to present to different customers. It enables companies to understand the weight that customers give to their ability to back their assertions. Suppliers will not only make assertions, they will be in a position to deliver on their promises. Companies can also use the knowledge from this article to distinguish the advantages and disadvantages that their products have in the eyes of their customers. This will enable to them tailor their offerings to suit more specific customer needs.

Rethinking marketing

Stiff competition in the business world has forced companies to rethink their business strategies and shift their focus to maximizing customer lifetime value as opposed to the current common practice of driving transactions. To ensure success in their business operations, companies must be customer-cultivating. A customer-cultivating company is set up to serve customers and customer segments. In such companies, communication is two-way and individualized or may be targeted at specific segments. They seek to build long-term relationships with customers by promoting the company's products that are most valuable to the customer at any given time. On the other hand, traditional companies are designed to push products and brands. Communication is one-way and is aimed at pushing a product to many customers (Rust, Moorman, & Bhalla, 2010).

To remain competitive, firms ought to reinvent their marketing departments to customer departments. They should replace the chief marketing officer with a chief customer officer. The chief customer officer will make the organization more customer-centric while also removing the barriers to the flow of customer information throughout the company. They might achieve this by getting the company's leaders to interact with their customers. This helps management better understand their customer's concerns. In addition, companies should make their brand and product managers subservient to customer managers. The customer managers are responsible for identifying customers' product needs. They then direct the brand managers to produce products that satisfy those needs. Such changes would shift the company's focus from product profitability, current sales, brand equity and market share to customer profitability, customer lifetime value, customer equity and customer equity share.

The firm's customer department will be responsible for all of the company's customer-facing functions that had previously been handled by the marketing department and those that were traditionally not part of it. To further make the organization more customer-centric, they ought to have a customer relationship management program in place. The company's research and development and marketing research efforts should also be tailored towards fulfilling specific customer needs. Such changes will ensure that the firm delivers superior customer service. However, to transform an organization in such a way, the changes must be driven from the top as they entail uprooting of entrenched interests (Rust, Moorman, & Bhalla, 2010).

My favorite quote in the article was the authors' statement: In a sense, the role of the customer manager is the ultimate expression of marketing (find out what the customer wants and fulfill the need) while the product manager is more aligned with the traditional selling mind-set (have product, find customer). I chose this quote because it clearly shows the contrast between traditional and modern approaches to selling. The quote shows that marketing practices have evolved over time to suit changing business needs. They have also led to the creation of new roles, such as those of customer managers, in the marketing profession.

How knowledge can be applied

Companies can apply the knowledge from the article to improve their marketing practices which will in turn increase their profitability. Firms can use this knowledge to improve their customer relationships to increase customer loyalty. They can also know what areas to concentrate their resources especially in the areas of marketing research and research and development. Such measures also increase the company's cost savings since they will not produce goods or provide services that customers do not want. Furthermore, companies can use the knowledge from the article to transform their marketing departments to customer departments.

References

Anderson, J. C., Narus, J. A., & van Rossum, W. (2006). Customer Value Propositions in Business Markets. Harvard Business Review , 91-99.

Rust, R. T., Moorman, C., & Bhalla, G. (2010). Rethinking Marketing. Harvard Business Review, 94-101.

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