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Creating customer value and shareholder wealth on an ongoing
basis requires the establishment of a cycle of customer value and
shareholder wealth creation within each customer segment. These
cycles operate more effectively and are more sustainable when the
value created for customers also results in greater value or
benefit for end consumers.
Many industries are now structured in ways that see businesses
operating in relatively small and sometimes isolated components of
their industry value chain where they can become completely
disconnected from end consumers. Much of their energy and resources
are expended in competing with direct rivals. This tends to force
down prices and encourage commoditisation. Often, end consumer
needs are not even apparent let alone explicitly considered when
developing or refining value propositions.
Value propositions that contribute to the creation of value for
end consumers as well as creating value for direct customers not
only help retain those customers and keep revenue streams secure,
they can also provide a real hedge against commoditisation by
permitting a greater degree of value pricing. The key is to ensure
that the value propositions a company offers really help its
customers to create value for their customers, and ultimately for
end consumers. When this is not the case, products and services are
much more likely to be commoditised, and both revenue and profit
growth will generally have to come at the expense of customers and
suppliers through the exercise of market power. This can only be
done for a relatively limited period.
In addition to unlocking opportunities for value pricing, value
propositions that also contribute to end consumer value creation
can be specifically engineered to align with the interests of the
wider community. This is because the long term best interests of
consumers are often closely aligned with those of the wider
community.
KBA has a well developed methodology for helping clients to
align their value proposition development efforts with the long
term best interests of end consumers, regardless of where a company
operates in its industry value chain.
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