The New Value MatrixThe New Value MatrixA Look at Value Creation A Look at Value Creation
and Enhancementand EnhancementBy Kevin O’Connor, KO-CreativeBy Kevin O’Connor, KO-Creative
What Is “Value”?What Is “Value”?
Advantage, merit, appeal, attraction, cost, Advantage, merit, appeal, attraction, cost, price, worthprice, worth
A tangible metric of what an item or A tangible metric of what an item or service costsservice costs
A tangible metric of what an item or A tangible metric of what an item or service is actually worthservice is actually worth
““More bang for your buck… What’s in it for More bang for your buck… What’s in it for me?”me?”
A core belief or faith in something A core belief or faith in something
What Is “Value”?What Is “Value”?
Actual valueActual value• Overall measurable Quality of the product or Overall measurable Quality of the product or
service vs. the dollar amount that someone will service vs. the dollar amount that someone will pay for itpay for it
Perceived valuePerceived value• The The beliefbelief that a product or service is superior that a product or service is superior
to a comparable product or service, thus to a comparable product or service, thus justifying a higher costjustifying a higher cost
Superior marketing/packagingSuperior marketing/packaging Brand recognition and retentionBrand recognition and retention ““Buzz words”Buzz words”
The Value MatrixThe Value MatrixPerceived Value Actual Value
Moderate
Low
High
Budget-minded marketing provides fringe or generic brand identity, but relatively little brand loyalty in the consumer.
Cheaply-crafted products or services; clients will be looking for least-costly solution. (i.e., packaged foods and consumer goods, raw materials, inexpensive apparel)
Effective marketing ensures repeat customers and longevity. Customers take comfort and reassurance from the brand, even if it is not “the best”.
Best overall products available, for which customers will pay a premium. (i.e., designer clothing, electronics, automobiles, media, recognizable brands)
So/So marketing provides brand identity, but may not reinforce the brand with the consumer, or significantly enhance perceived value.
Reasonably well-crafted products or services; clients may “comparison shop”. (i.e., consumer home goods, furniture)
The Value MatrixThe Value MatrixP
erc
eiv
ed
Valu
e
Actual Value
StarbucksBOSERolls RoyceDisney
Dunkin DonutsSonyToyotaDreamworks
Gourmet CoffeeSanyoFordColumbia Pictures
Motts Apple JuiceTarget/Wal-Mart electr.MercuryNickelodeon
Kool-Aid/Tap waterLocal electronics retailerYugoGolan/Globus
Poland Springs/EvianHigh-end store electr.SaturnIndependent “Art House” studios
Cott SodaRadio ShackHonda20th Century Fox
Store brand sodaSonySmart CarMGM/United Artists
Coke/PepsiSharper ImageCadillacUniversal
Determination of Actual ValueDetermination of Actual Value
Actu
al
Valu
e
Actual value determined by:• Overall cost• Profit potential• Perceived value
Actual value goes up when:• Costs and thus end price are kept
low• Product reviews are favorable• Endorsed or utilized by celebrities
or power players• Copycats appear
Cost of providing a product or service:
• Research• Design• Raw Materials• Manufacturing• Transportation• Marketing/Advertising• Overhead
Profit Potential:• Competitors• Target audience• Repeat customers• Plan for Obsolescence• Selling price initially?
After three years? Ten? Twenty?
Actual value goes down when:• Costs are too high for product to
be attainable• Costs are so low as to suggest
shoddy workmanship• Lack of brand recognition• Product becomes obsolete
Determination of Perceived ValueDetermination of Perceived Value
Perc
eiv
ed
Valu
e
Perceived value determined by:• Effectiveness and type of
marketing• Duration of marketing• Co-branding• Non-marketing-based
exposure (i.e., Twitter)• Customer experience and
word-of-mouth
Perceived value goes up when:• Product or service is repeatedly
seen/heard/talked about in the media
• Favorable reviews• Utilized by someone famous• Pivotal use during historic events,
or in fiction film, television, other media
• Positive word-of-mouth exposure• Reasonably priced
Perceived value goes down when:• Lack of brand recognition• Bigger/Better thing comes along• Potential obsolescence• Price is too high (or in some cases,
too low)
Value DisciplinesValue Disciplines
In his book, The Discipline of Market Leaders, Dr. Michael Treacy explains that companies which excel in one of the three value disciplines, while maintaining competency in the other two, become market leaders.
Market leaders enjoy steady growth, customer loyalty, and enhanced image & branding. Market leaders also are more prone to take risks, try new areas of development or marketing, and usually have a better understanding of what customers want.
• Product Leadership
• Customer Intimacy
• Operational Excellence
Product LeadershipProduct Leadership
Product leaders focus on creating the Product leaders focus on creating the best possible product or service for best possible product or service for which their customers will pay a which their customers will pay a premium.premium.
Product LeadershipProduct Leadership
Product introduction
Product Growth and Brand Recognition
Crest and Maturation
Product Decline
Product is introduced and marketed as “the next big thing,”
ObsolescenceMost products go
through a standard growth cycle.
Achieves a rapid rate of growth. The product becomes more and more visible as it is utilized or referenced on television, print and film.
Eventually, the product matures to where it becomes commonplace, resulting in peaked brand recognition.
Newer, cheaper knock-offs with more features arrive on the market, reducing market share for the initial product.
Eventually, product may become obsolete as it is replaced with newer technologies.
Product LeadershipProduct Leadership
Product leaders “ride the wave” of product growth, before adopting and jumping into the newer technologies as the older technologies start into decline.
A
B
C
D
E
F
G
H
I
J
E. Apple introduces iMac and Mac Books in “designer colors”.
F. Dell Computer introduces line of PC clones with variety of colors and high level of service. Reduces Apple marketshare
G. Apple introduces the iPod; a music MP3 storage and playback device that interfaces directly with any computer system.
Apple Consumer Products
A. Apple Computer introduces line of home personal computers.
B. Microsoft licenses MS DOS for IBM PC clones. Begins to encroach on Apple.
C. Apple introduces graphic user interface (GUI) and begins sales of MacIntosh computers.
D. Microsoft Windows released. Seriously undercuts Apple MacIntosh sales.
H. Copycat MP3 players enter the market.
I. Apple introduces the iPhone.
J. iPhone becomes market leader in portable telecommunications.
K. ???
K
Customer IntimacyCustomer Intimacy
Customer Intimate businesses focus Customer Intimate businesses focus on the best overall experience for the on the best overall experience for the consumer. Solutions will be tailor-consumer. Solutions will be tailor-made to the needs of the client, and made to the needs of the client, and problems are handled quickly, and problems are handled quickly, and with a smile.with a smile.
Customer IntimacyCustomer Intimacy
I have been a member for 17 I have been a member for 17 years. I still receive offers in the years. I still receive offers in the mail to apply for an American mail to apply for an American Express card.Express card.
Calls to customer service involve Calls to customer service involve navigating a maze of “Press 1 navigating a maze of “Press 1 for this, Press 2 for that…” for this, Press 2 for that…”
On finally getting a live operator On finally getting a live operator I must now give them card I must now give them card number, address, access code, number, address, access code, etc.etc.
Hopefully, any problems will be Hopefully, any problems will be resolved. Maybe… Won’t find resolved. Maybe… Won’t find out for sure till my next out for sure till my next statement.statement.
I have been using Direct Tire for I have been using Direct Tire for 6 years.6 years.
Automatically calls to alert me to Automatically calls to alert me to upcoming maintenance (oil upcoming maintenance (oil changes, tires rotated, etc.)changes, tires rotated, etc.)
Picks up the car for me at my Picks up the car for me at my home or office.home or office.
Has the car cleaned and detailed Has the car cleaned and detailed during maintenance.during maintenance.
Returns car to me. Has loaner Returns car to me. Has loaner cars in the event of emergency cars in the event of emergency or prolonged maintenance.or prolonged maintenance.
Remembers my name.Remembers my name.
Which company is more customer intimate?
Customer IntimacyCustomer Intimacy
Stew Leonard (third from the left) and his family, in front of one of their Family Dairy Mart stores. Stew Leonard’s is a genuine American Success Story, with a very Customer Intimate business model.
Customer IntimacyCustomer Intimacy Stocks only about 2,000 different Stocks only about 2,000 different
items for sale. Traditional grocers items for sale. Traditional grocers average about 30,000 items.average about 30,000 items.
Employees are constantly and Employees are constantly and repeatedly schooled in good repeatedly schooled in good customer service and good customer service and good customer management.customer management.
The customer is not an The customer is not an interruption of their work activity; interruption of their work activity; the customer is the REASON for the customer is the REASON for their work activity.their work activity.
Fun, fun, FUN!Fun, fun, FUN! Petting zoo for the childrenPetting zoo for the children Travel photo bulletin boardTravel photo bulletin board
A loyal customer with his Stew Leonard’s shopping bag on top of the Great Wall of China
Customer IntimacyCustomer Intimacy
Among the final request in the will of Among the final request in the will of a woman who passed away in 1980: a woman who passed away in 1980: A few cherished possessions to be A few cherished possessions to be buried with her, in her Stew buried with her, in her Stew Leonard’s shopping bag.Leonard’s shopping bag.
“Now THAT’S customer loyalty!”- Tom Peters
Operational ExcellenceOperational Excellence
Operationally excellent businesses have Operationally excellent businesses have maximized the efficiency of their business to maximized the efficiency of their business to provide the customer the fastest service with provide the customer the fastest service with minimal cost and minimal hassle. Their goal is to minimal cost and minimal hassle. Their goal is to keep the customers happy by keeping the prices keep the customers happy by keeping the prices low and the lines moving.low and the lines moving.
Operational ExcellenceOperational Excellence
Uses their own logistics services to handle shipping of product for its stores, thereby reducing costs for customers, and lowering prices.
Created the concept of “fast food” and “franchising” by setting up a model for store management and operations. All stores are owned by their managers, but must adhere to strict operational guidelines, such that a Big Mac on the East Coast will look and taste the same as a Big Mac on the West Coast.
Placed their Next-Day-Or-It’s-Free guarantee right in their tagline… “When it Absolutely Positively has to be there Overnight.”
Monitors each register transaction to ensure that the customers spend the absolute minimum amount of time in checkout lines. Has streamlined credit application and purchasing to minimize wait time. Automatically opens new register or calls in additional help from other parts of the store if register lines get too long.
Has 19-point inspection process along with each oil/lube job to ensure customer knows what needs maintenance on car, while still guaranteeing fast service. Average wait time: 15 minutes.
Value DisciplinesValue Disciplines
Product Differentiation
Operational Competence
Customer Responsive
Operational Excellence Customer Intimacy
Product Leadership
Best Product
Best Total Cost Best Total Solution
Market leaders maintain excellence in one of the three
chosen disciplines, while maintaining competency in the
other two.
Get a GRIP: New Value CreationGet a GRIP: New Value Creation GoalGoal: Thoroughly examine your : Thoroughly examine your
organization’s value disciplines, organization’s value disciplines, and the viability of a product or and the viability of a product or service, including its current state service, including its current state in the growth/decline cycle.in the growth/decline cycle.
ResearchResearch: Examine past : Examine past creations and see what can be creations and see what can be built on, what has worked, what built on, what has worked, what has not, and why. Decide has not, and why. Decide whether it is better to capitalize whether it is better to capitalize and build on a current product, and build on a current product, vs. something new and different.vs. something new and different.
ImaginationImagination: Conceptualize, : Conceptualize, design, dream, and imagine design, dream, and imagine product that gives desired results product that gives desired results and maximum value.and maximum value.
Plan and ProducePlan and Produce: Create and : Create and build. Test. Perfect. Bring it to build. Test. Perfect. Bring it to market.market.
The Essence of ValueThe Essence of Value Providing value is not just giving a quality product or service Providing value is not just giving a quality product or service
at the best possible cost. There are also customer at the best possible cost. There are also customer experience, after-sales service, word of mouth, and outside experience, after-sales service, word of mouth, and outside influences that affect perceived value.influences that affect perceived value.
It is possible to have a higher-priced product and be It is possible to have a higher-priced product and be successful, if you are providing the best total solution, or the successful, if you are providing the best total solution, or the best product on the market. best product on the market.
It is possible to have an average product and be successful, It is possible to have an average product and be successful, if your delivery and customer-focus are above average.if your delivery and customer-focus are above average.
It is vital that a company and its representatives love their It is vital that a company and its representatives love their product, believe in their product and their level of service, product, believe in their product and their level of service, and go the extra mile to demonstrate it.and go the extra mile to demonstrate it.
Companies that thrive are those that plan for product Companies that thrive are those that plan for product obsolescence and innovate with new products, technologies obsolescence and innovate with new products, technologies and services.and services.
Companies that enhance actual value are likely to succeed. Companies that enhance actual value are likely to succeed. But companies that enhance actual and But companies that enhance actual and perceivedperceived value are value are assured of success.assured of success.
Parting Thoughts About ValueParting Thoughts About Value Keep your thoughts positive, because your Keep your thoughts positive, because your
thoughts become your words.thoughts become your words. Keep your words positive, because your words Keep your words positive, because your words
become your behaviors.become your behaviors. Keep your behaviors positive because your Keep your behaviors positive because your
behaviors become your habits.behaviors become your habits. Keep your habits positive because your habits Keep your habits positive because your habits
become your values.become your values. Keep your values positive because your values Keep your values positive because your values
become your destiny.become your destiny.- Gandhi
SourcesSources Integrity Is a Growth-Based MarketIntegrity Is a Growth-Based Market
• Alan Kolp and Peter ReaAlan Kolp and Peter Rea
• 2005, Atomic Dog Publishing2005, Atomic Dog Publishing
The Discipline of Market LeadersThe Discipline of Market Leaders• By Michael Treacy and Fred WiersemaBy Michael Treacy and Fred Wiersema
• 1997, Basic Books1997, Basic Books
A Passion for ExcellenceA Passion for Excellence• By Tom Peters and Nancy PetersBy Tom Peters and Nancy Peters
• 1989, Grand Central Publishing1989, Grand Central Publishing
Disney, Omaha Steaks, Rolls Royce, Bose, Craftsman, Starbucks Coffee, Apple Disney, Omaha Steaks, Rolls Royce, Bose, Craftsman, Starbucks Coffee, Apple Computer, Dell Computer, Burger King, L.L. Bean, 1-800-MATTRESS.com, American Computer, Dell Computer, Burger King, L.L. Bean, 1-800-MATTRESS.com, American Express, Direct Tire, Stew Leonard’s, McDonalds, FedEx, Amazon.com, Wal-Mart, Express, Direct Tire, Stew Leonard’s, McDonalds, FedEx, Amazon.com, Wal-Mart, SpeeDee Oil Change, Target and their associated logos and licenses are registered SpeeDee Oil Change, Target and their associated logos and licenses are registered trademarks of their respective organizations. trademarks of their respective organizations.
