Marketing essay 2

Essay by neyplayerUniversity, Master'sB+, May 2012

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In an increasingly globalized market, the intensification of market competition between organizations, companies need to create efficient strategies to differentiate their products and services, giving them characteristics that can raise their grades before the supply of competitors. From this perspective, the provision of customer value is an important element of business support. The challenge for all organizations is precisely to identify what creates value for its customers and act to generate it. According to Lamb, Jr. et al. (2004), it is the customer who defines what are the value and not the company. Wooddruff (1997) believes that delivering value to consumers of a company is a solid pillar for the acquisition of competitive advantages.

This paper will evaluate topic such services marketing, relationship marketing and co-creation of value and it will demonstrate some of practical management examples on the marketing perspective. The article also intends to provide a methodology for the identification of perceived value, as well as a description marketing applications of the same.

Generation of customer value

According to Toledo (2009), for economists, the greatest value it is in the best product, while that for the market professional, delivering the best total to the customer is the component with the highest valuation. In this latter case, the marketing mix should be balanced between these two factors, in order to provide consumers with better benefits and advantages. Corroborating to this idea, Churchill and Peter (2000, p.13) indicate that the value is the "difference between customer perceptions about the benefits and the costs of buying and using products and services".

This perception is responsible for the fact that the offerings of a company considered to be more or less considered by the client. According to these authors, the benefits that the company provides its customers are classified into:

Functional benefits, they are directly related to the use of products (goods and services), such as comfort, security and quality.

Social benefits, referring to acceptance of other public when a consumer uses a product, brand, technology, among other attributes;

Personal benefits, which relate to psychological aspects of the buyer, such as security, tranquility, and welfare when purchasing products;

Experimental benefits, which refer to the "sensory pleasure" of customers in the acquisition of certain products, for example, a long desired vacation.

But in the process of value generation, count, apart from offering the benefits mentioned, two other important factors for successful business sales Porter (2008).

Reducing the cost of the buyer, resulting in product with more competitive prices;

Monitoring the evolution of its performance in the knowledge of what really matters to the customer it will sustain the supply of goods and different services.

Lamb Jr. et al (2004) point out that the benefit / effort of attention is established by the consumer, based on their needs and not just in their buying motives.

Thus, it presents the safest way to ensure the delivery of value; companies, market-oriented, should aim to collect as much information about customer buying behavior, seeking to identify buying motives and needs to thereby , establishing a relationship more profitable for both.

According to Aaker (2007, p.45), value is whatever a particular product gives the customer / consumer, but it is not limited to " functional benefits, it may include social, emotional and self-expressive benefits".

However, the author reinforces the definition of Kotler and Keller (2006), because emotional and self-expressive benefits are psychological character. Also for them the importance of knowledge by the customer in the use of a product is the great landmark for their perception of value.

In the definitions given, we reiterate that in order to create value, organizations need to understand how it works before buying behavior and the real need for acquisition of goods and services from the public, taking into account the social, cultural, psychological and economic environment forces influences strongly this process. Based on these observations, toledo (2009) presents a model of formation of perceived value. Shown here in Figure 1:

Figure 1: formation of perceived value

Source: Adapted from Toledo (2009, p.20)

By Figure 1, confirms that value consists in estimating the degree of customer satisfaction that builds customer specific goods or services in relation to their initial expectations when purchasing. In the same direction Woodruff (1997) explains that the value lies in the perception, by the customer, the benefits of the product he gets through the assessment of their attributes and facilities generated by its use, as regards the needs solution.

The author greatly contributes, thus, to the process of generation of value to say that business entities should be concerned with the monitoring of delivery value, checking whether it agree with what was requested. However, there is the difficulty of organizations to identify future value to be elected by their customers because of the extensive changes undergone by the external environment, they may not be able to define precisely what they need.

Differences between Perceived value and Actual/Real value

When marketing or selling products, the value of those products is important to the success of the business overall. Both the actual value and the perceived value of the products will play a role in the success of the business. The perceived value can be very different from the actual value of a product, (Reilly 2002).

Actual/Real Value

According to Reilly (2002), the actual value of an item is a measure that is related to the cost that it takes to produce it and sell it for a profit. For example, when a product is manufactured and sold without any brand names or promises, the actual value is the amount that it would go for in the open market. The actual value is what the product is actually worth without any expectations from the customer or the seller.

Perceived Value

Reilly (2002) argue that the perceived value is very different from the actual value of a product. The perceived value is what a customer believes the product is worth. This perception is formed by the opinions of the market and by the benefits that the customer expects to receive if he makes a purchase. The product may be sold for much more than what it cost to manufacture because of the perception of the customer. In some cases, the perception of the value may be less than what the actual value of the product is.

Exchange value and Use value

Bowman and Ambrosini (2000) cited in Walters (2002) offer a theoretical approach to value, from a business strategy perspective. They address value creation and value capture and the role of value in strategy. They suggest two aspects to value: use value and exchange value. Use value is subjectively assessed by customers, who base their evaluation of value on their perceptions of the usefulness of the product. Hence, the total monetary value is the amount the customer is prepared to pay for the product. Exchange value is realised when the product is sold. It is the amount paid by the buyer to the producer for the perceived use value (otherwise known as price). A profit is realised if a positive difference between producer costs and exchange value is realised.

Competitive advantage and Value chain

Competitive advantage can be defined as the extent to which an organization can offer its customers a value superior to that offered by its competition. Setting the value as the price that customers are willing to pay for a given good or service, an organization would have a relative competitive advantage, according to Porter (2008) to achieve:

Provide a good or service equivalent to the competition, but at lower prices than that, or

Provide additional benefits unique to the client, which more than offset a higher price compared to its competitors.

According to Porter, there are only two sources of competitive advantage:

cost leadership and differentiation. The cost leadership is a competitive advantage when an organization can provide a good or service equivalent to the competition, but at a lower price than competitors. Competitive advantage based on differentiation, on the other hand, occurs when an organization can provide a good or service to its customers at a price more than offsets the additional benefits that embedded, which are not offered by its competitors.

According to Porter (2008), the fundamental basis of above-average performance in the long run is sustainable competitive advantage. The company that gets a correct positioning can get high yields, even with an unfavorable industrial structure with low average profitability.

The choice of competitive strategy to be adopted according to Porter, depends on the one hand, the attractiveness of industries (which is a function of its long-term profitability and the forces that determine it) and on the other determinants of relative competitive position within that industry.

If the attractiveness of an industry for a company can be measured by return on investment in the long run (and this is, of course, the degree of rivalry in the industry), since the company's relative competitive position in the industry (which determines their ability to obtain returns above or below the industry average) depends on its ability to create sustainable competitive advantages.

These competitive advantages, however, according to Porter (2008), cannot be understood by observing the company as a whole. These have their origin in its many different activities such as production, marketing, delivery and after-sales service. Each of these activities can contribute to the relative cost position of a company, and can provide a basis for differentiation. Towards the identification of competitive advantage, Porter proposes the use of a tool known as value chain (figure 2).

Figure 2: Generic Value Chain Michael Porter


The value chain is defined by Porter as the result of the breakdown of a company in its activities of strategic relevance. The latter, also called value activities, their activities are physically and technologically distinct, through which the company creates a good or valuable service to their customers. The organization will hold a competitive advantage, according to Porter (2008), if is able to perform the strategic activities of a less expensive or better than the competition.

In addition to the value of own activities, Porter also recognizes that own links (relationships between the way one value activity is performed) between these activities may be interdependent as sources of competitive advantage through the optimization and coordination.

Porter also notes that the value chain, on the other hand, is integrated in a different chain of broader scope, the value system, comprising not only the value chain of the company itself, but also the value chain from supplier to amount and the customer value chain downstream.

Figure 3: Value System Michael Porter

Source: Adapted from Porter, Michael (1992)

The understanding of how value flows through the system value determines, ultimately, the company's ability to provide goods or services at the lowest cost or transferred with the highest perceived value by the customer.

The importance of the relationship

The relationship is important for companies to understand customers so they can earn their loyalty. The relationship has been pointed out in recent years, as the most viable concept to be adopted by organizations that aims to overcome the constant challenges which are subject to environmental, maintaining a strong and loyal relationship with customers.

According to Lamb & McDaniel (2004, p.12) companies build relationships with customers by offering them value and satisfaction. Companies benefit with repeat purchases and referrals that lead to increased sales, market share and profits.

Based on this context, it is observed that customers are seeking value and satisfaction and that the relationship it is an invaluable tool for the company to achieve, and if possible, exceed customer expectations. Companies can relate to customers in several ways, i.e. by telephone sales calls, advertisements, brochures and internet.

With the advent of the internet, the business world has changed and therefore the relationships as well. According to Kotler & Armstrong (2003, p.12) the internet is a technology that enabled a new model of doing business because it allows people to access information, entertainment and communication anytime and anywhere.

Companies are using the Internet to build relationships with their customers and their business partners as well as to sell and distribute their products more efficiently. Companies across all industries are now trying to attract new customers on the Web and many traditional companies are venturing online in an effort to attract new customers and build stronger relationships. Through relationship companies may perceive possible complaints from customers and develop marketing strategies.


The markets are highly competitive and there is no room for negligence or accommodation. Occupying a different space in the mind of the customer requires a concerted effort not only of the sales team, but also its management of marketing area and others that add value to their target audience.

The corporate level of business needs, then, setting out its strategy for growth and its competitive positioning, communicating them to the entire organization will be aware as how will compete in the marketplace.

The sale force that has the responsibility to build a relationship with its client needs to generate competitive advantages of various communication resources. Also, need to maximize the use of such resources in order to not lose ground to competitors.

Given the information, references, and treated in this study, it can be determined that relationship marketing is a strategy used in several companies concerned with developing a competitive advantage to excel in the market.



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