Understanding Value Creation & the Marketing Mix – Ikechukwu Kalu
Indeed we had a great time discussing the subject ‘Understanding Value Creation and the Marketing Mix. The sessions were well attended and participation / interaction was good. It is extremely important that we understand what it means to be in business, how to know you are doing business as well as how to leverage the marketing mix to create value in a maner that is consistent and sustainable.
Why are these very important|? Businesses grow when they able to (or are perceived to) create value consistently i.e. understand and solve problems for your customers/clients consistently’. Doing business is not just about I know what to do and what I can do, its about creating value. These are two very interesting concepts – business and value creation’ must understand as you start your business or as you grow your business.
Before we define these two very important concepts, it is important to highlight the different critical players in the market place. They are referred to as the 5Cs of the market or business. These are Company, Customer, Competition, Collaborators and Context / Climate.
These five Cs are very important in business. Your company exists to solve problems for your customers, who are equally being targeted by other businesses (competitors). Also, you sometimes need others in your delivery value chain, they are your collaborators. If you do not manage your collaborators well, they could mess up your processes, amongst other things. Finally, there is a context – the way business is done for every industry. You’ve got understands the legal, cutural and legistration side of things as they relate to your business sector. Not paying attention to the climate or context could result in a huge setback for a business.
If you do not take care of your customers, competition would grab them. It is important to remember that you and your competitors are in a constant battle for the attention and patronage of your customers. It is all about the ‘survival of the fittest’. Why would a customer decide to buy your product and not that of your competitor? It’s simple. You are delivering value; you are consistently solving their problems with efficient and effective processes.
So, we must define value in the context of the needs and aspirations of our target audience and bear in mind the other Cs – competition, collaborators and context. Your product and services are solutions to the needs they have. If you solve their problems, then you would have created value for them. Your solution that is targeted at solving their needs is your value.
Having understood the meaning and consequencies of the C5s, we can now define value and the creation processes. What does value creation really mean? According to Author Guy Kawasaki, we create value by solving problems in a manner that makes ‘meaning’ while ‘making money’. These two (value and problems) must go hand in hand. Value creation is therefore, the act of solving the problems of your customers with solutions, ideas, information, experiences etc to the delight of your customers. It is about being to them what they want you to be to them. Value must therefore be deined from the frame or eye of the customer always. It should be the primary aim of being in business.
For value to be created in a manner that is sustainable, the business must have clear and tangible motivations for being in business. As far as Guy Kawasaki is concerned your motivations for being in business should be any of the following three:
- Improve lives
- Right the wrong and/or
- Prevent the end of something good.
He concludes that with any of these motivations for being in business, you will make money while making meaning to your audience. So, Make Meaning, Make Money.
Fianlly, the value creation follows a simple process which is not difficult to understand and follow. This model provides a simple guide which if follows will help businesses create value consistently. These are; Define, create, deliver and sustain. Some call it the Integrated Value Creation. Very simple. It however calls for some discipline to work it.
Closely related to the climate or context of doing business, is another concept which we can not ignore. It is called the ‘Drivers of Value’. it is important you understand the drivers of value in your market / industry. If customers are looking for value for money solutions that are delivered at the highest quality and within reasonable proximity, then it makes sense for you to organise your business to provide these better than your competitors. When this happens, you customer sees you differently and in more postitive light. it would differentiate you from others in the minds of your customers.
To shed more light on Value Creation, Robert Kaplan, a Baker Foundation Professor at Harvard Business School and David Norton founder and director of The Palladium Group say that “If customers value consistent quality and timely delivery, then the skills, systems, and processes that produce and deliver quality products and services are highly valuable to the organization. If customers value innovation and high performance, then the skills, systems, and processes that create new products and services with superior functionality take on high value”. This means, you deploy your resources based on what would be required to create value for your customers / clients.
Marketing plays a significant role in the value creation process. As you may know, marketing is the process of identifying, anticipating and satisfying customer needs at a profit. It’s the engine of any business and it leverages the marketing mix to keep the engine running.
The creative use of the elements of the marketing mix (let’s stay with the 4Ps for now); Price, Place, Product and Promotion are crucial to value creation. Your business must aim to leverage them in different combinations to create value based on what you know about your customers.
You can create value via your pack size, packing and product quality, to name a few. You can also creatively use pricing to engage your customers in an experiential way. What about the channel of distribution, physical and/or digital? And finally, the way and manner you communicate your value proposition to your customers.
Once again, it is important that your business has a combination of the 4 Ps that enable you provide a valuable experience for your customers that want to repeat.
Few thoughts to bear in mind:
- Value means different things to different people.
- Value looks at what the customer gets relative to what they give up. When they feel they have gotten value, they will come back for more of the product or service being offered, no matter the price.
- The definition of value shifts depending on what the customer is looking for.
- Finally, your customers will rely on promotion to know the different value propositions offered as well as the benefits and attributes of the products.
Therefore, it is up to every business to maximize value and satisfy the needs of their customers by creating their own special blend of the 4Ps.
In summary, customers buy value, in the form of a positive experience, and they will almost always gravitate towards where they perceive more values are being created for them. So, understanding where, how, when and why the value is created for your stakeholders is the best, most objective way to identify which of your activities and assets are distinctive enough to provide a platform for the sustainable and profitable growth for your business.
As a business person, this should guide the direction your business takes and the priorities for your business strategies. Put resources on what would aid the creation of value for your customers. Then you are in business.
Abit About The Lead Facilitator:
Ikechukwu Kalu, BSc, MBA, DipM. FCIM, MNIMN – An experienced Value Creation Consultant, C-Level Marketing, Business Development & Retail Management professional with decent experience from manufacturing, telecoms and financial services. A Lecturer at Pan Atlantic University & Lagos Business School, Lagos, Nigeria. He is currently the Lead Consultant at Customer Passion Point Limited (CPPL), a firm of Value Creation Consultants that provides Marketing and Training Solutions to small, medium and large corporations in Nigeria and Tanzania.