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Enhancing Customer Value: Click-and-Mortar E-Commerce

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Question:

1. Begin your discussion by defining the concept of value for the customer.

2. Prepare a literature review, discussing the concept of value as it relates to other concepts including quality, cost, customer service and logistics lead time.

 

Answer:

Introduction

With the world undergoing globalization the global market place has become a small place. With the time passing by and new kind of technologies have come into the market the market has become highly competitive. In this scenario some of the companies have focused on emphasizing on the marketing aspect, some have focused on innovation and some companies have given paramount importance on developing customer satisfaction and creating value for the customers. Creating value for the customers have helped a lot of companies in this highly competitive market to effectively develop their market position since they have been able provide exactly what the consumers want from them (Cheng & Chen, 2009).

Value creation is an old concept and there are many traditional companies who still focus on value creation for the consumers in order to grab market shares. It could be said that most of the companies who focus on creating value for the company have been able to make it big in the international market. The companies like Wal-Mart, Marks and Spencer, Tesco Plc, Woolworths Ltd, BHP Billiton all have been very successful and their main focus has always been providing the best solution for the customers and this has helped them to understand the needs and wants of the consumers which have helped them to provide the best to the consumers (Hu et al., 2009). They have been able to enhance customer value and have got fair returns for their effective implementation. In the 21st century survival means winning the hearts of the consumers and creating value which have been done very well by companies mentioned above. Hence it could be said that the central task for the managers is to create and provide value for the stakeholders especially the consumers since they provide the much needed advantage to work in a highly competitive market (Yi & Gong, 2013).

It is important to mention that value creation is an old concept but enhancing value for the customers is a contemporary concept which is used by many companies nowadays and this is where concepts like operation management, cost, supply chain all come into the picture and hence it could be said that these aspects are directly related to the concept of value as well as enhancing value creation for the customers. Over the years there have been number of researches on customer buying behavior which has indicated that customers have high consideration for value and the company which could create and enhance value for the customers are likely to get better feedback than the other concerns emphasizing on other aspects (Patrício et al., 2011). Hence it becomes extremely important to understand as well as comprehend the role of components like quality, cost, and customer service and supply chain in enhancing customer value which will help to have clean insight on the concept of value creation and will help to address the objectives of the study successfully.

The study will also take an opportunity to discuss the statement put forward by Christopher (2011) about the enhancing customer value through time and place utility of a product which would help to justify the study done successfully (Lai et al., 2009). Woolworths Ltd an Australian company is highly concerned about enhancing customer value and has been working successfully in the Australian market for a long time so this company is used as the case study to address the objectives.

 

Concept of value for the customer

Value creation as  discussed above is an old concept during the initial age of the market businessmen have concentrated on providing the best possible service to the consumers which will create value for the customers and naturally will increase the sales of the business and even in this contemporary age organizations focus on creating customer value. Many bigger multinational organizations have made creation of customer value their mission statement in order to stick to one path and not to get deviated from their focus. The UK retail Giant Tesco Plc has their vision to be the best in their market through customer satisfaction and the same goes with the Australian retail giant Coles and Woolworths Ltd (Nasution et al., 2011). These companies have taken initiatives to make sure that they are able to provide and create value for the customers. It could be said that there is a huge interest regarding creation and enhancement of value for the customers among the companies working in the present market. Since there is an increased interest among the management professionals in order to understand the concept of value creation for consumers many research scholars and professionals have taken up the initiative to decipher the exact meaning of value as a concept (Chang et al., 2009). Even though the rivals in the Australian market Coles have been effective but Woolworths have been consistent with their value creation for the consumers. The emphasize highly on operations especially the customer service part, fixes their prices in a very strategic manner as well as tries to implement their options available regarding offering different products to the consumers effectively.

As per the classical theory of management value is something which would be found in almost anything and everything. It could be found in the Chocolate Cappuccino bought from Starbucks outlet or in that 99cent iPhone gaming app purchased from the play store. Hence it could be said that the concept of value is different for different people but customer value could be defined as the value that one individual places on a particular product or service that is offered to them at a given time. The customer value is weighted by measuring the relative value of two similar products given to them at a time and they will always prefer the item with the highest value (Han & Ryu, 2009). For instance if one consumer is offered an iPhone and a Windows Phone and is told that both of them have the same specifications and features he might take any one of them and the one he takes is the one he considers having the highest value. Hence it could be said that customer value depends on the perspectives showed by individuals. Hence often value  creation becomes extremely tough for the companies especially in the retail market and  this is why Woolworths use different tools to understand the needs and wants of the consumers in order to be effective for the set or the segment of customers it chooses (Flint et al., 2011). In the recent past the Woolworths have not only focused on creating value but they have also focused on enhancing that value for the customers which mainly helps to develop a strong market base for the customers and also helps to create consumer loyalty. The key concepts that have helped to create and enhance customer value for Woolworths are effective customer service, quality of products and services, costs of the products and services, product mix and also effective supply chain of the organization (Hsin Chang & Wang, 2011).

 

Value and its key components

In the world of sales importance of customer value has unmatchable importance and hence its creation stands to be an arduous task. It could be said that even though most of the companies try all sorts of strategies to create customer value some succeed and some sink without a trace. So, it becomes extremely important not only to understand the components of value but it is also important to understand the relevant components of value which help a company to create customer value and also help to enhance it. What helps to create value for the customers? Building a comprehensive list of aspects is important (Saha & Theigei, 2009). But apparently to see, it could be said that with value creation aspects like quality, customer service, price, and logistics lead time are directly related. It is important to mention that these above mentioned aspects are highly relevant to value enhancement for the customers as the customers see value in a quality product, when they are getting it at an affordable price, the customer service of the organisation satisfies the customers and it is also easily accessible then only the customer becomes ready to buy it and hence the it could be understood that the company has been able to create value for the customers (Prahalad & Ramaswamy, 2011). It could be said through effective value creation the business could retain consumers as well as it can become sustainable for a longer period of time.        

 Dimensions of value Creation                

Fig 1: Dimensions of value Creation (Source: Prahalad & Ramaswamy, 2011)

Quality: Quality of products is one of the key aspects which help a company to create value for the consumers. It is important to mention that most of the bigger companies in the world tend to invest highly on market research which helps them to understand the needs and wants of the consumers and also to understand the kind of product and their quality the competitors are selling and this helps organizations to make better products. It is a common mindset of the consumers to take better quality product (Ryu et al., 2012). Quality of a product is defined with its performance, features, reliability, durability, aesthetics and perceived quality. Woolworths tries to provide consumers that sort products which fulfill all the above attributes of quality. They will never compromise on quality and this is almost similar for every consumer in the world and hence it could be said that quality is one product which helps consumers to differentiate products and what they feel has more value in regards to quality will choose that product which makes it very clear that quality is one of the key components which helps to enhance value for the consumers. Quality has been a key aspect for Woolworths over the years and it makes sure that the consumers get effective quality foods and groceries. It also ensures that the overall packaging is perfect and ethical as well which helps to enhance customer value for the company (Adelaar et al., 2004).

Cost: Cost is another important attribute. It is a known dictum that “consumers are the boss” and yes since every company needs consumers to sustain they have to frame their prices accordingly which means keeping the price within the budget of the consumers. For instance there are various kinds of toothbrushes and in different price range consumers will tend to go for the lower or medium prices toothbrushes as all kinds of toothbrushes do the same thing and hence here lower price toothbrush will create value for the consumers. So regulating the cost factor is also a huge aspect in order to enhance customer value. Even though there has been a price war among the retail companies in Australia but Woolworths have been able to regulate its prices for the products effectively and this has helped to retain customers successfully and also created sustainable environment for the business (Woodruff, 1997).

Customer Service: In Australia there is a heavy competition in the retail market and Woolworths have got the competitive edge due to its effective and professional customer service. It is a common behavior of the consumers that they prefer to stick to the organization who provide effective reception and good service. Woolworths is focused on providing the best possible customer service in their stores and supermarkets which has been a key aspect for their emergence in the retail market (Cronin et al., 2000).

Lead time: One of the major factors to sustain in the market and gain competitive advantage is to provide more offerings within a short period of time. Lead time exactly shows how fast a company is able to speed up its manufacturing and bring a product to offer to the consumers in the market. The company focuses on bringing products to the consumers at regular intervals and providing the consumers with the best shopping experience (Gale & Wood, 1994).

Hence it could be said that Woolworths has been able to use these key aspects to gain market share and retain consumers as they have been able to capitalize on these components which has helped them to enhance customer value and hence create sustainability and customer retention (Gupta et al., 2004).

 

Customer Value and Utility

Customer value creation is highly related to utility and often said that it is utility that regulates customer value creation. As stated by Christopher (2011) customer value is highly related with time and place utility as most of the products have almost the same kind of features and provisions. It has been supported by many scholars since the theory put forward by Christopher (2011) is applicable to a large extent. Time and place are both key factors for consumers. Value creation is almost always dependent on time and place. It is largely an important aspect for the logistics and the supply chain managers as utility or value is created for a customer when the customer gets the product when he or she needs it and this is what time utility is (Ryu et al., 2012). If the consumers don’t get the product when he or she needs it that product doesn’t have any value for the consumers. At the same time the place where the consumers buy the product from is also equally important. Since the consumers give importance to brand purchases made from branded place also create value for the consumers. On the other hand there is another school of thought who feels that only time and place utility is not everything. It is important to mention that they emphasize on quality and also customer services are key aspects. Customer service is no doubt an important aspect as stated by Prahalad & Ramaswamy (2013) that customer service is always key for the companies to create value for the consumers. For instance effective customer service at Woolworths has been a key aspect for the company to attract consumers and this case has clearly opposes the view of Christopher (2011).

 It is stated by Chen & Dubinsky (2003) that place utility is the charge of the supply chain or the logistics manager to take care about the process through which a product reaches the outlet where the consumers prefer to buy the product from but on the contrary it is said that operations manager is responsible to enhance the overall value created for the consumers. The operations manager is responsible to take care of the customer service, quality of the product as well as to offer consumers different types of products that ensure value for the consumers. Hence it is important to mention that even if the statement by Christopher (2011) is contradictory and have been opposed as well as supported it has to be mentioned that time and place utility is equally important as other components like quality, cost, customer service and product lead time (Flint et al., 2011).

 

Conclusion

The present study has been able to discuss key aspects for enhancing the consumer value. The essential attributes like quality, cost, customer service et cetera have been discussed comprehensively. It is important to mention that most of the companies and the case study company Woolworths Ltd have developed a strong hold over the concept of customer value and it has utilized all the key aspect to enhance customer value (Chang et al., 2009). The present study has tried to decipher the role of these aspects in creating customer value which has helped to complete the study successfully.

 

References

Adelaar, T., Bouwman, H. and Steinfield, C., 2004. Enhancing customer value through click-and-mortar e-commerce: implications for geographical market reach and customer type. Telematics and Informatics, 21(2), pp.167-182.

Chang, H.H., Wang, Y.H. and Yang, W.Y., 2009. The impact of e-service quality, customer satisfaction and loyalty on e-marketing: Moderating effect of perceived value. Total Quality Management, 20(4), pp.423-443.

Chen, Z. and Dubinsky, A.J., 2003. A conceptual model of perceived customer value in e‐commerce: A preliminary investigation. Psychology & Marketing, 20(4), pp.323-347.

Cheng, C.H. and Chen, Y.S., 2009. Classifying the segmentation of customer value via RFM model and RS theory. Expert systems with applications, 36(3), pp.4176-4184.

Cronin, J.J., Brady, M.K. and Hult, G.T.M., 2000. Assessing the effects of quality, value, and customer satisfaction on consumer behavioral intentions in service environments. Journal of retailing, 76(2), pp.193-218.

Flint, D.J., Blocker, C.P. and Boutin, P.J., 2011. Customer value anticipation, customer satisfaction and loyalty: An empirical examination. Industrial Marketing Management, 40(2), pp.219-230.

Gale, B. and Wood, R.C., 1994. Managing customer value: Creating quality and service that customers can see. Simon and Schuster.

Gupta, S., Lehmann, D.R. and Stuart, J.A., 2004. Valuing customers.Journal of marketing research, 41(1), pp.7-18.

Han, H. and Ryu, K., 2009. The roles of the physical environment, price perception, and customer satisfaction in determining customer loyalty in the restaurant industry. Journal of Hospitality & Tourism Research, 33(4), pp.487-510.

Hsin Chang, H. and Wang, H.W., 2011. The moderating effect of customer perceived value on online shopping behaviour. Online Information Review,35(3), pp.333-359.

Hu, H.H., Kandampully, J. and Juwaheer, T.D., 2009. Relationships and impacts of service quality, perceived value, customer satisfaction, and image: an empirical study. The service industries journal, 29(2), pp.111-125.

Lai, F., Griffin, M. and Babin, B.J., 2009. How quality, value, image, and satisfaction create loyalty at a Chinese telecom. Journal of Business Research, 62(10), pp.980-986.

Nasution, H.N., Mavondo, F.T., Matanda, M.J. and Ndubisi, N.O., 2011. Entrepreneurship: Its relationship with market orientation and learning orientation and as antecedents to innovation and customer value. Industrial Marketing Management, 40(3), pp.336-345.

Patrício, L., Fisk, R.P. and Constantine, L., 2011. Multilevel service design: from customer value constellation to service experience blueprinting. Journal of Service Research, p.1094670511401901.

Prahalad, C.K. and Ramaswamy, V., 2013. The future of competition: Co-creating unique value with customers. Harvard Business Press.

Ryu, K., Lee, H.R. and Gon Kim, W., 2012. The influence of the quality of the physical environment, food, and service on restaurant image, customer perceived value, customer satisfaction, and behavioral intentions.International Journal of Contemporary Hospitality Management, 24(2), pp.200-223.

Saha, G.C. and Theingi, 2009. Service quality, satisfaction, and behavioural intentions: A study of low-cost airline carriers in Thailand. Managing Service Quality: An International Journal, 19(3), pp.350-372.

Smith, J.B. and Colgate, M., 2007. Customer value creation: a practical framework. Journal of marketing Theory and Practice, 15(1), pp.7-23.

Woodruff, R.B., 1997. Customer value: the next source for competitive advantage. Journal of the academy of marketing science, 25(2), pp.139-153.

Yi, Y. and Gong, T., 2013. Customer value co-creation behavior: Scale development and validation. Journal of Business Research, 66(9), pp.1279-1284.

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