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The key to achieving win-win outcomes is to be able to
distinguish between the creation of real and
artificial value for customers and end consumers.
Real customer value contributes to the long term wellbeing of
customers and end consumers. Artificial customer value is derived
by satisfying a desire for a product, a service, or certain
features of a product or service, the consumption of which may not
be in the long term best interest of the customer or end
consumer.
Tobacco is a stark example of a product whose value is almost
entirely artificial. While the potential health consequences
arising from its consumption form an important part of the real
value equation for consumers, in many cases this is completely
overwhelmed by their desire for its artificial value.
At the same time, the health and other social costs arising from
the consumption of tobacco are not captured when investors assess
the economics of the tobacco industry or the financial performance
of its participants. Nor are they measured by the companies
themselves unless they face actuarial liabilities arising from
compensation claims. But compelling arguments have been put by a
number of commentators suggesting that the shareholder wealth
generated by participants in the tobacco industry is derived at
least in part through losses imposed on the rest of society.
There are important issues of individual and collective
responsibility embedded in the notion of real versus artificial
customer value. Suppliers have a responsibility to be open about
both the benefits and the shortcomings of their products and
services. Consumers also need to act responsibly in the face of
this information. And regulators need to decide whether their
primary role is to safeguard the efficiency of a market, or
encourage consumers to behave in a manner consistent with their
long term best interests.
While we make no judgement about these matters, or the extent to
which a particular company or industry quite legitimately sets out
to create artificial rather than real customer value, the win-win
outcomes that consumers, businesses, regulators and governments are
seeking are more likely to be achieved when businesses focus their
energy on creating real customer value.
KBA has developed an innovative analytical methodology with
which to determine the real and the artificial customer value
created by a product or service. This methodology is nested within
a conceptual framework that helps clients make decisions about the
type of customer and end consumer value they wish to create, and
the consequences of that choice for their stance in relation to
corporate social responsibility.
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