Defining the value proposition
Value, in the sense most widely used in marketing, is customer spe-
cific and essentially subjective to the customer. At its most funda-
mental, it represents the perceived benefits that customers believe
they receive from ownership or consumption of a product or service
relative to the ‘total costs of ownership’. Customer value can best be
defined in terms of the impact that the supplier’s offer has on the
customer’s own value chain. If the offer delivers enhanced per-
formance, increased perceived benefits or lower customer costs,
then there is a clear added-value from the customer’s perspective.
The starting point, therefore, of any relationship marketing pro-
gramme should be the clear definition and specification of the precise
nature of the value to be delivered, market segment by market
segment – or even customer by customer. This we term the value
proposition or, simply, ‘how to intend to create value for customers’.
Identifying appropriate customer value segments
Because customers’ value requirements and perceptions will differ
between customers, this provides the marketer with a powerful
means of market segmentation. In-depth customer research will
help reveal the salient dimensions of value, and through the use of
techniques such as ‘trade-off analysis’ we can identify groups of
customers who share common value preferences. In other words,
markets can be segmented on the basis of groupings of customers
sharing common value preferences. It is quite possible that the
resulting segments might cut across the more traditional bases for
segmentation such as demographic or socio-economic variables, but
the likelihood is that the construction of marketing strategies based
upon customer value preferences is more likely to succeed.
Designing value delivery systems
The means by which value is ‘delivered’ to customers is in itself a
key element in the relationship. When we talk of delivery systems,
Creating and implementing relationship marketing strategies 421