Page 46 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Unit 2: Customer Value

Consistent with the work of Treacy and Wiersama (1993), the four types of value depicted in the Notes
framework suggest four value creation strategies. Firms such as 3M, Volvo, Nike, and
Rubbermaid, which compete by superior creation of functional/instrumental value, follow a
product-leadership (product-innovation) strategy and invest and excel in value creating processes
relating to new product development, market research, quality, and technology research and
development. These firms place an emphasis on continuous innovation and time to market,
tend to have loose-knit, organic, and team-oriented structures, and promote an entrepreneurial
and creative culture with a willingness to experiment and take calculated risks (Treacy and
Wiersama 1993).
Firms such as Club Med, Nordstrom, and Disney, which compete by creation of superior
experiential value, follow a customer responsiveness (or customer intimacy) strategy and typically
invest in, and excel at, customer service, customer support technology, exible manufacturing,
market research, and facilities (Treacy and Wiersama 1993). These firms place an emphasis on
customer relationships and service quality and provide tailored or customized solutions to
narrowly defined market segments.

Firms such as the Body Shop, Gap Inc., Lexus, and Hallmark, which compete by creation of
superior symbolic/expressive value, follow a brand image/brand equity strategy and typically
invest in, and excel at, advertising and public relations, product quality, and customer service
and support. These firms often structure and define their business around a “family” corporate
culture, place an emphasis on stakeholder relationships, and promote and reward creativity and
novelty.
Firms such as Wal-Mart, Dell, Amazon.com, and South-west Airlines, which compete by creating
superior cost/sacrifice value, follow an operational excellence strategy. The firms that compete
on price and convenience typically focus on efficiency and effectiveness goals, invest in, and
excel at, purchasing, manufacturing, and distribution processes. They tend to have a top-down
emphasis on standard operating procedures and are tenacious at minimizing intermediate
processing steps and overhead.
Few firms create just one type of value, and our framework extends the work of Treacy and
Wiersama (1993) by suggesting the subtypes of value that can be created from different value
creating processes. Our framework can thus be used to describe the value creation strategy of an
organization. Starbucks, for example, creates functional/instrumental value mainly via
appropriate features and attributes (product quality, customization, hot drinks for cold days,
and cold drinks for warm days). They create experiential/hedonic value mainly via sensory
value (aesthetics, ambiance, and aromas), emotional value (pleasure or enjoyment), social-
relational value (by providing comfortable spaces where friends and colleagues can interact),
and epistemic value (such as novelty avours and information about coffees). Starbucks creates
symbolic/expressive value through personal meaning (many Starbucks’ customers consider
their relationship with Starbucks as personal, if not spiritual), self-expression (the ability to
personalize the beverage and experience), and social meaning (there is some status in the brand
name). Finally, with respect to cost/sacrifice value, Starbucks creates economic value (an
affordable luxury) and reduces psychological costs (they are very convenient to find).
Also consistent with the work of Treacy and Wiersama (1993), it is difficult for organizations to
be “world class” at creating more than one of the higher-order value categories, as they require
different resource investments, organization structure, and culture; but organizations need to
be competitive in the value offering across all four dimensions as most customers are thought to
use a compensatory model in making brand choices. Although not yet investigated empirically,
anecdotal evidence suggests (consider most industry leaders such as Starbucks above) that
organizations with a more comprehensive value creation strategy (greater breadth or depth of
value creation) will outperform competitors with less rich value offerings—so long as the value
offered is desired and cost effective to create.

LOVELY PROFESSIONAL UNIVERSITY 41