THE GROWTH OF STRATEGIC BENEFITS ROLE IN B2B MARKETS

Transcription

1 THE GROWTH OF STRATEGIC BENEFITS ROLE IN B2B MARKETS Hana Lošťáková University of Pardubice, Czech Republic, Abstract The aim of this paper is to explain the principles of strategic benefits for a customer perceived as an important part of customer value. Such benefits result in the strengthening of potential performance, longterm positions and consumers recognition on the market. The paper also summarizes the results of qualitative research in brand and non-brand automotive services in the Czech Republic focusing on mapping the following problem areas: the forms of strategic benefits required by the automotive oil suppliers, the extent to which individual forms strengthen the long-term service, market position and the way of the provision of such benefits in the contemporary financial and economic recession. Keywords: customer value, strategic benefits, B2B market, automotive services. Introduction Typical features of recent market environment are commoditization, customer consolidation, negotiation force shift from sellers to buyers, margin erosion. All of this supports the need to focus on customer value (Kashani, 2007, p. 3-5). The growth of commoditization is caused by the growing customer know-how and fast moving competition when originally unique products and services lost their natural distinction and value. At the same time, customer consolidation on numerous markets results in a growing sales and profit concentration into a few main customers. This is reflected in retail concentration and in the occurrence of retail chains. A direct consequence of such trend is a general shift of negotiation force from sellers to buyers. Combined effects of commoditization, customer concentration and negotiation strength shift from sellers to buyers had a negative impact on producer s margin. The growing problem of margin erosion ran at the same time as the growing pressure on management to increase profitability and share value. The consequence was the reduction of short-term marketing costs and long-term investment. This was, however, the way to hell. The truth is that traditional marketing methods offer only few ways of fighting margin erosion or a lot of work with a very limited outcome. The above described changes of market environment and growing intensity of competition connected with global economic crisis puts pressure on companies to change the groovy practice operation on the market, other then those offered by traditional marketing methods. Most companies face the problem of how to change their marketing strategy and practice operation on target markets that would reduce negative influence of contemporary recession. This requires the change in the attitudes to customer value management especially on B2B and also on B2C markets. Recent customer value notion There is a growing interest on value based/value focused strategies in recent years. This interest is triggered by the belief that managing organizations from this perspective will increase the likelihood of success. Many marketing strategists and industrial-organization economists emphasize that the creation of superior customer value is a key element for ensuring companies success (Huber et al., 2001). Customer value is discussed in many streams of marketing literature including: relationship marketing, pricing, and consumer behaviour in total quality management literature, and strategy literature (see de Chernatony et al., 2000). There is a general agreement in the literature that customer value is determined by customers perception not by suppliers assumptions or intentions (Woodruff and Gardial, 1996; Anderson and Narus, 1998). Definition of customer value can generally be grouped into three categories, with the same variations within each category: value components models, utilitarian or benefits/costs models, and means-ends models (Khalifa, 2004). Khalifa (2004) notes that value components models focus only on customers benefits, not to customers sacrifices. Kaufman (1998) differentiates the levels of customer benefits as esteem value or want, exchange value or worth and utility value or need. Thompson (1998) includes three components of value: dissatisfiers (must be), satisfiers (more is better), and delighters (exciters). Benefit/costs ratio models see customer value as the difference between customers perceptions of benefits received and sacrifices incurred (e.g. Kotler et al., 2007). Different authors develop this model, 650

2 specifying customer benefits and sacrifices (see Gale, 1994; Horovitz, 2000; Kotler et al., 2007). The authors typically concentrate on transaction benefits relating to the direct product delivery. Recent trends show that, besides such benefits, it is essential to concentrate on the provision of strategic benefits to customers (Spiteri et al., 2004; Kashani, 2007). Means-ends models of customer value are based on the assumption that customers acquire and use products and services to accomplish favourable ends. Means are products or services, and ends are personal values considered important to customers. Linkages between product attributes, consequences produced through consumption and personal values of consumers underlie their decision-making processes (Huber et al., 2001). The means-ends models of customer value fill a gap in the literature by being able to explain why customers attach different weights to various benefits in evaluating alternative products/services (Khalifa, 2004). These three categories of models of customer value are different configurations of the same phenomenon. In identifying, formation, delivery, customer assessment and other forms of customer value increase, it is purposeful to integrate these diverse views on customer value in coherent way. It is recommended to base the strategies on customer s objectives and benefits/costs as described by means-ends models and benefits/costs ratio models, that is the models of customer exchange value models. In the next step, we have to clarify the customer notion of benefits and costs including their structure. This requires to examine the whole process of product acquisition and use by a customer and to understand its purchase and consumer behaviour. The task is to discover the required functional (tangible) benefits of a product/service and also the solution of customer s need to be provided for. This involves an insight into a customer s experience and their psychological attitudes developed during the so far carried purchase and use of the product/service that will probably form their future decision making procedures. The gained knowledge has to be consequently decomposed into individual elements and attributes of products/services and customer care system. An in-depth examination and understanding of customer value formation is important to be carried out, taking their view in consideration, as well as the knowledge of factors that influence the design of the appropriate customer care and offer. The process should result in a good understanding of the value formation dynamics, the customer s explicit and implicit expectations, discovering the so far unexpected and exciting elements of the customer care system. It is essential to take in consideration that the borders of the expected and the unexpected have been shifted in a positive meaning of the word, they change differently depending on different customers, therefore they require a varied market assessment considering both the market segments, sub-segments and micro-segments. In numerous cases, it is required to take in consideration individual customers and to apply the differentiated CRM strategy (Lošťáková, 2009). Strategic benefits as an integral part of customer value formation The recent sophisticated market environment forces businesses to focus on the identification, formation, delivery, assessment and increase of customer value. This customer value must be intensively understood. New customer value concept involve not only the value management for direct customers who buy the company products, but also to manage customer value for clients of direct customers and to understand the customer clients behaviour, sometimes even on several levels. We have to deal with the value management for customer s clients within the consequent value chain (Donaldson, Ishii, Sheppard, 2006). An effective tool is the formation of an effective value propositions with a positive influence on a customer s strategic reality and its strategic market position. This requires the formation of products, services and systems by means of a strategic benefits offer so that the customer s strategic position is strengthened in their clients and customers minds (Kashani, 2007, p. 27). Strategic benefits granted to clients turn out to be needed in a much larger scope for the purpose of winning new clients, especially on B2B markets. Such benefits result in the strengthening of potential performance, long-term positions and consumers recognition on the market. The value propositions based on market analysis of a value chain should be different from traditional marketing practices focusing on direct customers (next in line customers) requirements and their expected transactional profits. It is important to find and to offer products and services that may contribute to a higher customer competitiveness and its long-term prosperity on its market. Besides providing usual transactional benefits (such as the products parameters and logistic activities contacting, business negotiations, ordering, warehousing, transport, invoicing, etc.) business should much more frequently deal with the development of cooperation and customer relations by offering strategic benefits as an integral part of customer benefits. It is essential to transfer from customer value management 651

3 to the management of customer relation value. An effective tool of this process is the set of strategic benefits for a customer (see Figure 1): Perceived Product Benefits Performance, Duality, Reliability etc. Perceived Personal Benefits Pleasant dealing, Personal satisfaction, Value and Recognition Perceived Benefits Perceived Strategic Benefits Transfer of Know-how, Exhance Core Comopetencies, Strategic Position Development New products/services Perceived Sacrifices Price, Time and Effort Perceived Sacrifices Customer or Value Figure. 1. Customer value indicators and links to benefits (Spiteri et al., 2004) Perceived strategic benefits for a customer consist of know-how transfer to a customer in the form of their employees training, consultancy, application service etc., to increase the knowledge and ability of the customer s employees in the processing and utilization of delivered products, which results in the increase in quality of the products/services (Darley et al., 2008). Customer key resources development as a strategic benefit can be the equipment of their premises with modern technology, technical and administration knowhow, the guarantee of an investment bank loan, which results in the increase of productiveness, production quality and strengthening of their market position. The benefits connected with the development of a customer strategic position further concern the strengthening of a customer s position in their final users s minds by participating in various support and loyalty programmes for customers, by organizing their events and open days, etc. Strategic benefits are also represented by the cooperation with customer in the development of new or modified products for the market. Despite the fact that literary resources stress the necessity of strategic benefits provision to customers, this area of customer value formation has not been sufficiently appreciated. This is why we have been focusing on the research into this problem in the field of engine-oils. Research Methodology We have realized a qualitative research in brand and non-brand automotive services in the Czech Republic focusing on mapping the following problem areas: the forms of strategic benefits required by the automotive oil suppliers, the extent to which individual forms strengthen the long-term service ability, market position and the way of the provision of such benefits in the contemporary financial and economic recession. The qualitative research was carried out using the method of detailed individual interviews at the end of The survey was accomplished in ten brand automotive services and in twelve non-brand services. Car garages and owners and managers have been interviewed. The collected data was processed using the content analysis method and the synthesis of the obtained findings. 652

4 Results The research showed that besides the benefits resulting from the products, logistic services and business with high goodwill suppliers, the following strategic benefits are important for automotive services in case of purchase and application of engine-oils only in brand automotive services (Audi, BMW, VW, Renault etc.). Brand services buy only very famous brands of engine-oils as Schell, Total, Castrol and they ask these types of strategic benefits from their supplier: transfer of know-how to both service staff and to car service customers. Know-how transfer to service staff from supplier should be carried out in the form of staff training leading to the improvement of their product knowledge, the way of the products use, preparation of lubrication plan for individual automobile types. Transfer know-how to car service customers may be carried out through the user friendly Internet information support about individual oils benefits leading towards a more qualified client decision making and showing the options of engine service life extension due to the application of special oils, by providing consultancy to final customers about the ways of monitoring the engine oil level I n a car and its fill up between regular oil replacements, etc. the research has proved that it is not always the case. enhancement of the core competences and strategic position of the services due to the provision of the means to equip and modernize the business premises, such as equipment of the workshop with new tools and machinery, e.g. hoisting jacks or other lifting equipment, diagnostic and testing units, motor oil barrel pumping devices with remaining oil level signaling, and also with working aids supporting the uniform visual style of the service, etc.. or at least their co-financing and granting bank loans for such modernization, etc., support to the strengthening of long-term relations with the service clients in the form of cooperation engine-oil supplier and automotive service in loyalty programmes for the car service clients, organization and support to service days for clients, participation in different forms of sales support, client corners and waiting rooms equipment, and also supporting the oil brand by supporting motor racing and rally whilst promoting the service goodwill and service clients social status. Our research showed that non-brands automotive services, unfortunately, don t ask strategic benefits from their suppliers. They even don t know what strategic benefits are and how they are important for strengthening their market position and their competitiveness. Conclusions Recent changes in market environment leading to commoditization, customer consolidation, the shift of negotiating forces from sellers to buyers and margin erosion require more attention to be paid to the identification, formation, delivery, customer assessment and increase of customer value. The research shows that it is not sufficient to manage only the customer value for direct customers, but it is important to focus also on the customer s clients value required within the whole customer chains up to final user. Customer value therefore cannot be assessed only by business transactional benefits connected with direct customers, i.e. the product parameters and logistic services. It is essential to deal with the strategic benefits provided to the customers, i.e to the benefits that strengthen their strategic position on their markets. It is a complex of support programmes and events for customers that increase the awareness, knowledge and skills of their customers, facilitate the improvement of their offer and services, thus increasing their reputation, their products and services, making their production and services more effective and their clients more loyal. Such components of the offer and customer care are beneficial for direct customers and their clients, and consequently for the processing plants within their market. Strategic benefits leading to the increased performance and customers competitiveness within the markets in the value chain in their final result mitigate the negative trends mentioned in the introduction of this contribution It has been proved that it is the provision of strategic benefits that leads to the strengthening of good customer relations and strongly and effectively facilitates their establishment in the market environment. This increases the efficiency and competitiveness of the business itself. 653

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