Value‐based Marketing for Bottom‐line Success

Citation

Socci, A.C. (2005), "Value‐based Marketing for Bottom‐line Success", Journal of Consumer Marketing, Vol. 22 No. 1, pp. 50-51. https://doi.org/10.1108/07363760510576581

The last decade has seen the marketing literature progress from a market orientation to building strong lasting relationships with customers. As we head into the twenty‐first century authors DeBonis, Balinski, and Allen believe that a customer focus based on delivering “superior customer value” while making a profit is essential to changing the way firms look at customers and their own organizations.Value‐based Marketing for Bottom‐line Success is a practical five‐step model based on the authors’ direct observations and experiences that concluded in a framework coined “Pentadigm”. Pentadigm “provides the tools and insights to practically implement value‐driven thinking and behavior” (p. 7). Simply put, it is a way to build your business solely based on the customer through the creation of value. Before value can be created for your customer base, your organization must understand what creates customer value, and then how the company's resources can be leveraged to deliver it.Interestingly, competition is not the driving force in the pentadigm model. Competition does not form the basis of your strategic plan. Only if your customer believes that the competition can deliver a superior value over your offering should you then be concerned with a strategic move. The pentadigm strategy focuses on the benefits that have the greatest impact on your customers, which will then have your competition watching you.The pentadigm model challenges contemporary thinking based on cost cutting and process improvement. Its emphasis is on finding out what the customer really needs and wants and what they would be willing to pay. Does this sound like market orientation, the much written about topic in the early 1990s? Were we not all saying enough is enough about market orientation, but the writings and studies continued? Why? Most likely because many companies fail to do the obvious. This book is similar in nature. As you read it, you find yourself saying, “Well of course we should listen to the customer, yes I am interested in making a profit”.This book, however, does offer a systematic process for those organizations that know everything that they should be doing but do not know how to do it. “Pentadigm provides a framework and a process methodology to make certain that there is a logical order of steps and priorities to turn what you say you want to do into action, creating value for customers and generating profits for your business” (p. 15).The authors suggest that the traditional customer satisfaction programs built on internally‐driven agendas have become too introspective. “A pentadigm business builds a better mousetrap because it knows that customers really need and want – a better mousetrap, it knows what better means, and it knows how much the customer will pay for the improvement” (p. 10).The pentadigm model's major premise is that value is tangible, definable and quantifiable. “Pentadigm is the optimized combination of business processes, people, capabilities, resources, and capital that are focused and implemented in five continuous, dynamic steps” (p. 17). The five steps are:

1. 1.

   Step 1: discover‐understand the customer.

2. 2.

   Step 2: commit‐commit to the customer.

3. 3.

   Step 3: create‐create customer value.

4. 4.

   Step 4: assess‐obtain customer feedback.

5. 5.

   Step 5: improve‐measure and improve value.

The authors do not suggest that the model's steps must be entered in a sequential manner, but eventually you will proceed through all five. Organizations must make their annual check‐up with their optician and agree to dispose of the so‐called intra spectacles, looking from the inside out at its markets and customers. Value specs utilize clear lenses and see their customers and markets from an illuminated perspective. “Without value specs your blind to the true views, perspectives, opinions, and behaviors that build your customer value set” (p. 19).

The business literature is ripe with strategies to combat our competition and attempt to beat them at all costs. The central doctrine of the pentadigm model is to focus on creating value by rendering what really matters to your customers while maintaining profits. When the focus is placed on beating the competition a “costly, brutal, long‐term no win game” (p. 49) is set into motion. The results are organizational improvements driven by the competition as you and your competitors become the central point, neglecting what really matters to your customers. This is one of the central themes in the book that I found interesting in that the pentadigm model is based on the fact that you are more likely to beat the competition when you deliver the best value, not necessarily when you counter their every move.

The pentadigm model refers to customer value commitment. When a customer buys from you their desired benefits exceed the relative costs, and therefore they have received some sort of value. This value exceeds that which is provided by your competition. “The failure to manage and leverage customer value commitments happens because companies become so focused on internal needs, goals, and ambitions that customers have become a distraction and not the reason for doing business” (p. 58). The pentadigm model delivers unique, differentiated, and superior value commitments for a targeted customer that is superior to the competition.

In reference to these value commitments the authors discuss the organization's ability to create the right organization. They discuss the popular notion in the strategy literature of core competencies and cite that doing what you do best might in fact deliver little or no value to your customers. The key is to link the identified customer value commitments to your available resources. “It is counterproductive to concentrate on competencies that make no difference to customers” (p. 61).

The authors cite the age‐old emphasis in many organizations today: maximizing business operations. “All parts of the organization must understand their contribution to customer value” (p. 79). This must be a cultural phenomenon that starts at the top. Similar to the market orientation literature from the 1990s, the pentadigm model stresses that all in the organization must understand what the customer's value expectations are. This is accomplished by an organizational form that is structured to support the pentadigm model by training and development systems based on rewards linked to customer value creation and delivery.

The authors believe that organizations do not meet goals due to a lack of measurement, but because they are measuring the wrong things about customers, measuring what matters to business efficiency, not customers, and measuring its products against the competition.

One of the important measurements offered by the book and cited as often ignored by organizations is to measure how the customer is better off with the new value being offered. “Describing the customer value segment or market opportunity in terms of the value sought by the customer is the first and most fundamental step in changing the mind‐set of you and your organization into a pentadigm customer‐value driven mind‐set” (p. 131).

This book is an easy read and cites very good examples throughout of organizations that adopted this approach. The authors do an excellent job of providing readers with hands‐on tools in order to implement and assess the pentadigm model in the seven appendices that follow the five‐step model.

Is this a book that all practicing academics should read in order to teach a marketing class? I would say no, but it would be a worthwhile supplement in a strategic marketing class. Could this book be utilized by practicing managers who are constantly tutored to believe that competitive moves begin and end with studying and watching the competition? I would say yes. Can this book create upheaval in the organization that stresses process and cost cutting before deciding if it creates value to the customer bas? I would also say yes.