CONCEPTUAL FRAMEWORK
VALUE-ADDED.
It has been previously distinguished between goods and services, but at the end, every product has both tangible and intangible elements, with a set of added services built around the initial and core product needed by the customer. It can be analyzed through a molecular model (Shostack). For IKEA’s case, see chart 1.
Value-added services are to be studied as the services analysed in this paper are an add-in to the product marketing of the company; for this purpose, some articles and academic papers were chosen. For example, “A Value-Added mind-set can revamp your bottom line”. The article goes around the idea that firms must pull themselves from a state of comfort, competing on the basis of price and delivery, by differentiating
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These factors enhance the experience and perceptions of the product received by the customer, and, thereby, improve market performance of the aforementioned company in the market.
Last paper, “Marketplaces: a new e-business model. The case of the construction industry”, is more focused on online businesses as the services adding the value to firm’s original activity. From the results obtained in the study it is concluded that perceived quality is the main factor for achieving user’s loyalty in this channel of purchase, while of great importance are similarly to improve the corporate image of the online marketplace and the users perception of it providing them with additional value.
Customer loyalty is crucial to the long term survival of a business, particularly in the context of electronic commerce where it becomes essential from the point of view both economic and
1. Customer Perceived Value (CPV) is essentially a consumer's evaluation of total benefits less total costs of a product or service compared against a perceived alternative (Kotler & Keller, 2012). There are a few ways for a company to take to improve CPV on a specific product. First, it may focus on expanding total customer's benefit by improving its product’s image. It may also invest into functional characteristics of the product as well as provide a better and more personalized service. Second, a firm may choose to reduce the time, energy and psychological costs bared by the consumer. Arguably one of the best received approaches would be a monetary costs' reduction technique (lower prices).
Customer loyalty comes from the personal relationship that is developed between the customer and the business. One method used to understand the customer relationship is called customer relationship intensity and Life-cycle segmentation (UOP, 2007). This process includes classifying all the customer relationships into one of five groups.
“Service concept plays a key role in service design and development. It defines the how and what of service design and it helps mediate between customer needs and the organisation’s strategic intent.” (Goldstein, 2002) Hesket (1986) defines the service concept as the way the “organization’s would like to have its services perceived by its customers, employees, shareholders and lenders”. This means how the organisation wants itself and the goods and services that it sells to be seen by the people involved in the organisation.
Among every product selling in the market, products are divided into three levels. From the first level to the third level, they are “core customer value”, “actual product” and “augmented product”.
Also the objection to meet high customer service has depleted a company’s capability to separate itself from its competitors. These factors help find new and different ways in creating a competitive advantage for a company.
In this essay we will discuss the statement: “In a prosperous society, value is predominantly of an intangible nature”. Value is “the sum of the tangible and intangible benefits and costs to customers” (Kotler & Keller, 2012). The question is however if the tangible or intangible benefits and costs are influencing the value of a product the most. This essay will evince that value is mainly of tangible nature.
Customer loyalty is a behavioural state, which reflects value, confidence and commitment between the supplier-customer relationships (Buttler, 2002). Hence, developing a strategy that would retain and boost loyalty from customer has become the objective of most companies nowadays (Duffy, 2003). Many see it as primarily an attitude-based phenomenon; therefore, offering customer relationship management initiatives such as customer loyalty programs can be significantly influenced by it (Uncles, 2003).
Lovelock, C.H. Patterson, P.G. Wirtz, J. (2011). Developing service products: core and supplementary service elements. In: Burgess, P. Stanley, J Services Marketing. 5th ed. Frenches Forrest NSW: Pearson Education. 97 - 126. (Lovelock, Patterson, Wirtz. 2011)
People in the field have used both attitudinal and behavioral measures to define and assess customer loyalty (Zeithaml, 2000). Loyalty, from an attitudinal stand point, implies a specific desire to continue a relationship with supplier and provider (Reza and Rehman, 2012). This means that a customer is loyal to a brand or firm if they have a positive and preferential attitude towards it. Whereas behavioral loyalty is when a customer repeatedly buys from the same company, (Reza and Rehman, 2012) thus the customer is faithful to the company. Oliver (1997) defined customer loyalty as “a deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior. According to Ahmed and Moosavi (2013) “brand loyalty is the customer’s willingness to stay with a brand when competitors come knocking with offers that would be considered equally attractive had not the consumer and brand shared a history.”Rahman, et al., (2010) and Deng, Lu, Wei, Zhang (2010), expressed that same notion. Furthermore, Reza and Rehman (2012) note that customer loyalty represents the repeat purchase and referring the company to other customers. They also stated that customer loyalty is a figure that may be measured directly by measuring the actual repeated sales to customers. Additionally, due to intense competition in the market place, businesses have increased efforts to implement the customer retention strategy in order to maximize the lifetime value of customers (Boshoff and du Plessis, 2009).It is important to note that Cheng et al. (2011) proposed that it is cost-effective to maintain existing customers than obtaining new ones. To this the authors proceeded to state that the cost of
Value is used in a central thought in economic theory (Haksever et al., 2004). The key for the value is an ‘exchange’ between two units such as “benefits and sacrifices” (Möller, 2006), “consumer surplus," value for money or optimize used value, but minimize exchange value (sacrifices in terms of price) (Bowman & Ambrosini, 2010). Normann & Ramirez (1993) use the terms co-produce to define the participation of customers in value co-creation that realized value is not created at supplier level, but between customer interactions. Several authors describe value in terms monetary business value whereas others include non-monetary benefits such as market competitiveness, competencies, and social rewards (Walter, Ritter, & Gemünden, 2001) or could be the combination of both business value. Haksever et al. (2004) describe tangible or intangible value may derive from business activities, policies, and regular action of the firm as the power of the product, service, or activity to fulfill a requirement or deliver a profit to a person or legal entity. Those values may positively influence the “quality of life, knowledge, prestige, safety, physical and financial security, as well as providing nutrition, shelter, transportation, income, etc.” (Haksever et al., 2004, pg. 292). These values are meant for stakeholders of the firms such as its customers, suppliers, owners and other firm’s alliances (Bowman & Ambrosini, 2010). Therefore, the role of firm and customers are different, it is a sequence of activities performed by the firm (Vargo et al., 2008).
...bination of product and service is active for a company’s success, because it effects how a customer sees the product. Operations managers must for that reason direct consideration to both the product and the services that go with the product. In the manufacture of tangible goods, such as cars, cleanser, or alcoholic drink, customer contact is limited to the retail end, after actual manufacturing has been completed. In the project planning and regulator of the associated manufacturing process, the first choice of consumers are important, but the customer’s actual attendance is not. The main difference between service and manufacturing systems is that services are intangible productions that are consumed in the process of their production. The knowledge and process for supplying the service can differ considerably from one industry in the service sector to another.
He listed these five factors as follows: “(1) informing, (2) influencing, (3) reminding and increasing salience, (4) adding value, and (5) assisting other company efforts.” (p.246). To clarify that, the first most important aspect is informing people, which means company needs to enhance the awareness of the consumer about their products by mentioning its advantages and features. Advertising also affects the products in two ways. Firstly, by basic demand, which builds consumer desires for old products of the company and secondly, refers to a new brand of the company.
The customer loyalty is considered as prime determinant of long-term financial performance of firms. Three conceptualizations of customer loyalty have been identified in literature: behavioral loyalty, attitudinal loyalty, and composite measure of loyalty (Uncles et al., 2003b).
In general, a product is defined as a ‘thing produced by labor or effort’ or the ‘result of an act or a process’. In marketing, a product is anything that can be offered to a market that might satisfy a want or need. In retail, products are called merchandise. In manufacturing, products are purchased as raw material and sold as finished goods. In economics, product can be classified into goods and services. Goods are a physical product capable of being delivered to a purchaser and involve the transfer of ownership from seller to customer. Goods are items that are tangible, such as books, pens, hats, shoes etc. Services are activities provided by other people, such as doctors, lawn care workers, dentists, barbers, and waiters or online servers.
There are many description and theory of customer loyalty. We should research and compare which theory is suitable for our business.