by Kenneth Rudich
Part 1 of this article discussed the background to proposing a generic value chain for marketing. If you read it, you may recall that the chain above is an adaptation of a concept originally introduced by Harvard Business School professor Michael Porter.
a generic value chain for marketing
The task of effectively implementing a marketing strategy hinges on being able to identify – and link together – the various activities required to deliver value fulfillment. For our purposes, a linkage exists if the performance or cost of one activity affects that of another. The intent of the generic value chain is to have a tool that helps to isolate the value-creating activities within a marketing strategy, then map them, link them, and track them with time.
The generic activities or components shown in this value chain are common to the marketing function in general, though the specific implementation of them will vary as marketing strategies differ.
Bear in mind that value might be improved from within an individual activity, or it might be enhanced by strengthening the relationships between activities. As such, each separate activity becomes a lever for fine-tuning the value proposition.
Take, for example, the transactions component. What if customers are extended an optional payment plan rather than having to pay for something in full upon receipt? Will it make the product or service more affordable or appealing to some segment of potential customers?
If so, then successfully promoting this value-added benefit depends on making sure there is a strong link between it, the communications component, and the market characteristics component. Getting these three to work in concert with one another – communicating the right message to the right people – is necessary for optimizing the overall value of the optional payment plan. This is known as synergy or a synergistic effect, and it will benefit both the consumers and the business.
In future posts, I’ll flesh out more ways to use the value chain approach in far greater detail. For now, let me briefly introduce the construct of this chain. It is comprised of five generic components, whereby each is but one piece of an integrated strategy for delivering value:
- Market Characteristics: This entails understanding the unique needs and motives that exist within your actual and potential customer base, and then targeting the product benefits accordingly. A market analysis can yield the vital information that is required to do this well.
- Distribution Channels: A distribution channel is the primary delivery path from the provider to the customer. There can be more than one distribution channel in play (indeed, modern technology makes it virtually impossible to ignore the potential value of new delivery applications). Each dissimilar pathway from the provider to the consumer indicates the presence of a separate channel. For example, something might be downloaded from the web, or it might be purchased at a store – which could be either a retail or wholesale outlet. Thus, there are three different distribution channels in this example, and each will possess its own distinct set of resource demands and value fulfillment potential.
- Communications: The activities generally associated with conveying information, managing understanding and expectations, and creating dialogue. It comes with internal and external responsibilities. For example, the internal know-how for effectively handling customer care, versus the external responsibility of conveying the product benefits over appropriate channels or media.
- Transactions/Operations: The activities that support the business aspects of the marketing function (they keep it running) – measured by cost, productivity, and efficiency. It includes the core competencies, inputs, and internal design the organization needs to carry out its marketing mission from a business perspective. One key design aspect is the customer interface for initiating or completing the business transaction.
- Product/Service Attributes: The characteristics that are required to uniquely fill a need, and/or deliver optimum value.
The external forces are the contextual conditions that impact this process. These forces can significantly influence an organization’s marketing strategy – sometimes favorably, other times not. It is important to identify the external forces that are germane to your product or service, and then closely monitor them over time.
three reasons for adopting a value chain approach
At least three reasons favor the adoption of a value chain approach:
- It asks strategic decision-makers to identify all the critical links and alignments associated with the marketing function, including the external factors that bear upon it;
- It conditions people to think in the broader context of how all the pieces and parts of a marketing strategy fit together;
- It encourages a systematic strategy analysis process – what’s working, what’s not working, what can be fixed, what are we unable to do.
As stated in the “About M-S-M” page, these three reasons coincide with the reasons for incorporating the hyphens in the name of this blog. I chose to include them so as to emphasize each word’s stand-alone importance within the larger context of having them work well together.
- Marketing entails the entire universe of concepts that can be tapped.
- Strategy involves choosing the right ones for your particular concern or endeavor.
- Management speaks to the need for constantly tweaking the strategy in response to market dynamics.