by Kenneth Rudich
Marketing Strategy Management subscribes to the idea that the customer experience sits aloft of everything else, as long as it is able to generate a profit.
By default, this statement comes with a few corollaries:
- when there is an opportunity to reduce the business input costs without hampering the customer experience, it should be seized
- if improving the customer experience results in higher input costs but does not jeopardize the ability to make a profit, then it merits consideration
- an optimal circumstance exists when there is a potential to enhance the customer experience and still decrease the input costs
the value chain for marketing
The above ambition makes the value chain an ideal tool for Marketing Strategy Management. The objective is to assemble a seamless integration of the value chain components, so as to deliver value fulfillment as profitably as possible.
This calls for an outside-in perspective to manage the customer experience, and an inside-out perspective to allocate the business inputs. Simultaneously embracing both, and tracking the performance results for each, has the potential to produce some handsome rewards:
- increased productivity
- sales growth
- customer growth
- reduced marketing costs
- effective resource allocation
value chain strategy and management
Seldom will you see a business that has reached perfection all across the value chain. As admirable as that may be, it is also very difficult to accomplish. A more realistic expectation is to find varying levels of achievement from one business to another.
How much room a business has for improvement will depend on its current development status. This can range from having no value chain approach in place to one that is fully optimized. I’ve assembled four categories of possible development. Each suggests a different starting point for pursuing further development.
4 categories of value chain development
- Piecemeal Marketing: This is an ad hoc or impromptu form of marketing. It’s unlikely the concepts associated with a value chain approach play any role in the decision-making process. Most marketing decisions are either randomly made, or they serve to maintain the status quo of what’s typically been done in the past. There are no measures for tracking and analyzing market performance.
- Novice Value Chain Marketing: This category represents the initial adoption of a value chain approach and starts to build a foundation for it. An effort is made to deploy all the components, but only so far as to make sure all the bases are adequately accounted for and covered. Each component is treated separately as an individual function. As a result, the integration of the value chain may be somewhat ragged or inconsistent. The same may also hold true for the customer experience.
- Integrated Value Chain Marketing: The value chain is formally managed from a people, technologies, facilities and processes standpoint. The chain itself is regarded as one entity with multiple parts that need to be orchestrated into a concerted whole. It seeks to deliver consistent customer experiences, have integrated processes, and measures performance results all across the value chain.
- Optimized Value Chain Marketing: This category is an upgraded version of category 3. It consistently captures the complete range of benefits that are available when the value chain is tapped to full advantage. It regularly realizes a combination of increased (or optimal) productivity, sales growth, customer growth, reduced (or optimally reduced) marketing costs, and effective resource allocation. This category is difficult to achieve, and difficult to sustain once it has been achieved due to constantly changing market conditions.
managing value chain development
It is doubtful a business can move up more than one category at a time from its current development status. Due to factors like costs, enterprise-wide technology deployment, and learning curve implications, it will largely be confined to pursuing incremental gains that keep it on a continuous improvement path, rather than risk biting off too much at once.
Advancing from category 2 to category 3 will likely yield the biggest improvement results, while moving from 3 to 4 will almost certainly prove to be the most difficult to accomplish.
The motivation to reach nothing less than a category 3 status – that is, having a significant amount of seamless integration and measuring performance results – stems from the pressure to ensure a consistent customer experience in today’s highly competitive and rapidly changing business environment.