In the globalized economy of today, the markets are flooded with tons of products and brands, brand extensions and consumer has a great deal of choices to choose from different market offerings. The global market is highly competitive, with the unwritten rule of survival of the fittest. Survival of the business firm or any firm be it social or non-profit depends on their value creation, value augmentation and value delivery ability for their target market. Value is the customer(s) perception about the ability of the product or brand to satisfy their need(s). Value is created when customer is satisfied or delighted with the market offering(s). Value is enhanced when consumer perceives that product or brand provides more benefits both functional and emotional benefits and costs less both monetary and time cost. Hence Value is enhanced when quality of product is improved at the same price or when quality is same but price of product is reduced. Business is after all value creation, value augmentation and value delivery activity. The family buying automobile are not only buying superior and convenient transportation utility or benefit but they might also be buying emotional benefit of owning a reputed brand of automobile which can boost their status in the society. Brands do have status symbol power for the consumers and can boost the status of its owner(s) in the society. Consumers when they buy a market offering(s) gets functional and emotional benefit(s) and incur monetary cost and time cost.
The ever green area of customer relationship is all about retaining most profitable customer(s) with different marketing initiatives including customer loyalty programs, customer club membership programs, providing consulting, repairs and maintenance service to the customer(s) also called partnering with the customer(s). There are five levels of investment in the customer relationship building basic marketing, reactive marketing, accountable marketing, proactive marketing and partnership or partnering with the customer(s). The lowest level of investment in customer relationship building is called basic marketing, where number of customers is large and profit margin per product is low. Customer(s) having problem with market offering(s) must complain to the producer to seek redress of their problem(s). The 20-80 rule of marketing also called Pareto principle says that 20 percent of the customer(s) account for 80 percent of sales. Obviously the marketer(s) would like to focus on those 20 percent customers who provide 80 percent of the sales.
There is well known basic concept in marketing that it is easy and cost effective to retain the existing customer(s), which can be achieved by delivering market offerings which can better satisfy the need(s) of customer(s). A satisfied customer(s) becomes a repeat customer and talks favorably about the market offering(s) to other customer(s) and may also put favorable word of web. The concept of customer life time value is all about calculating the sales revenue to be generated by retaining the customer(s) for life time or longer duration and what is the cost associated with serving the customer(s). For example an e-commerce site selling books to the customer, comes to know that the customer on average puts an order of books worth 10000 currency a year, and profit margin is 10% after deducting the cost of order serving cost, if the e-commerce site succeeds in retaining the customer(s) for next ten years, then its sales revenue over a period of ten years will be 100000 currency and profit will be 10000 currency. The customer life time value can be achieved by value creation, value augmentation and value delivery.
Today almost all entities be it business organization(s), social organization(s), political organization(s), non-profit organization(s) like business corporations, schools, colleges, universities, hospitals, governance are engaged in the activity of value creation, value augmentation and value delivery to their stakeholders. The increasing usage of digital media has enhanced connectivity between value providers (marketers) and value receivers (customers). The internet provides real time interaction between various members of the supply chain management and enables marketers to better serve customer need(s) with increasing effectiveness and efficiency. Information technology platforms enable the marketers to increase the effectiveness of the other components of supply chain performance like facilities in form of factories and warehouse, inventory management, transportation, sourcing decision, customer(s) and pricing. Today the competition is between various supply chains and each supply chain aims at better serving customer(s) be reducing cost and increasing responsiveness that is delivering right product at right place at right time to right customer at least cost possible. The business firm strives to increase the effectiveness of not only forward supply chain consisting of flow of raw materials to factory, its conversion into finished product and distribution of market offering(s) to the market with the help of transportation, warehousing, and retailing to make market offering(s) available to the customer(s) but also business firms strives to increase the effectiveness of backward supply chain that is flow of products from customers to manufacturers for recycling , repair or replacement.
Value creation, value augmentation and value delivery is the key to marketing success both for profit making organizations and non-profit organizations like schools, colleges, universities, hospitals to mention a few.
Reference:
Kotler, Keller, Koshy & Jha (2007), Marketing Management (12th ed.). New Delhi, Dorling Kindersley (India) Pvt. Ltd.
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