THE VALUE PROPOSITION

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Every organization, from the very largest down to the very smallest, has a value proposition. A company's value proposition is the thing that distinguishes its business offering from all the others in the marketplace . Most senior managers within the organization should be able to articulate their value proposition but often they cannot. It is helpful, when dealing with these people, to discuss their business. Anything they do should be in some way relevant to the overall enhancement of the value proposition of their organization.

It is generally accepted that the value proposition of every organization falls into one of three major categories of value discipline (Treacey and Wiersema, 1993). The three categories are customer intimacy, product leadership, and operational excellence. We'll just briefly examine these.

Customer Intimacy

We call this the customer intimacy discipline because companies that operate this type of value proposition are the types of companies that really do try to understand their individual customer's needs and will try to move heaven and earth to accommodate their customers. For instance, in the retail clothing world, a bespoke tailor will know precisely how their customers like to have their clothes cut. They will specially order in the types and colors of fabric that the customer prefers and will always deal with the customer on a one-to-one, personal basis. These companies are definitely not cheap. In fact, their products are usually quite expensive compared to some and this is because personal service is an expensive commodity. It is expensive because it usually has to be administered by highly skilled, and therefore expensive, people. However, their customers prefer to use them because they feel as though they are being properly looked after and their lives are sufficiently enriched to justify the extra cost.

Product Leadership

The product leaders are the organizations that could be described as leading edge. Their value proposition is that they can keep you ahead of the pack. This means that they are always on the lookout for new products and new ideas that they can exploit to keep their customers interested and excited. Technology companies are an obvious example of this type of organization, but they exist in almost every industry. Just as with the bespoke service, there is an example in the retail fashion industry. The so-called designer label clothes are a good example of the inventor type of value proposition. The people who love to buy these products appreciate the chic-ness bestowed upon them. Another similarity with the customer intimate service is that these products also tend to be very expensive. A great deal of research and development often goes into the production of these products and the early adopters must expect to pay a premium.

Operational Excellence

This type of organization excels at operational efficiency. They are quick, efficient, and usually cheap. Mail order companies that offer big discounts and guaranteed same-day or next -day delivery fall into this category. They have marketing slogans like It's on time or it's on us! If you need something in a hurry and you know what you want, these are the guys who deliver. Don't expect a tailor-made service or much in the way of after-sales support, but do expect the lowest prices in town. Is there a fashion industry equivalent? Well, there have always been mail order clothes stores. Even some of the large department stores, if they're honest with themselves, would regard themselves as operationally efficient rather than being strong on personal service or product leadership.

So are we saying that all companies must somehow be classified into one of the three groups? Well not exactly, but all companies would tend to have a stronger affinity to one of the three categories than with the other two, and it is important for an organization to recognize where its strengths lie. The three categories have everything to do with the way in which the organization interacts routinely with its customers. It is just not possible for a company that majors on operational excellence to become a product leader or to provide a bespoke service without a major change in its internal organization and culture. Some companies are very strong in two of the three categories, while others are working hard toward this. Marks and Spencer is a major successful retail fashion company. Traditionally its products are sold through a branch network of large department stores all over the world. It also has a growing mail order business. That would seem to place it pretty squarely in the operational excellence camp. However, recently it has opened up a completely new range of products, called Autograph, that is aimed at providing a bespoke service to customers. Large areas of its biggest stores are being turned over to this exciting new idea. So here is one company that has already been successful with one value proposition, aiming to achieve excellence in a second. Oddly enough, the Autograph range of products has been designed, in part, by established designers, and so they might even claim to be nibbling at the edges of the product leadership category, too!

The point is this: an organization needs to understand:

How it interacts with its customers
How it would like to interact with its customers

You can then start to come up with a strategy to help to improve your customer relationship management.

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