The Customer Proposition

Customisation
● The value of an organisation is not intrinsic to the organisation, but rather resides
within the customer.

● Value is what the customer experiences

● Now to create a unique experiences, business must prolonged their relationship

to customer. A closer relationship where the objects exchanged (product, services,
and information) are more personalised. This hopefully lead the customer to find
the supplier less replaceable and the organisation can prove itself worthy of the
customer’s trust.

● Technology now plays the primary factor to facilitate the interface between
customer and organisation.
It is important that the customer is being involved in the
process of value creation. Several relevant ways to realise
this, are...
● Mass Individualisation

This is a way to get customers to design their own personalised product. By doing
so, manufacturer can learn about customer preferences. (ex: Nike)

● Co-creation

In the creative process there are multiple partners contributing to a creation of

something through an innovative network or platform. The focus is on the end-
user and the place or context in which they live and experience the product. The
manufacturing starts in the needs of end-user.
It is important that the customer is being involved in the
process of value creation. Several relevant ways to realise
this, are...
● User generated content (UGC)

This is a way to get your customer to generate their own content through a media.
(ex: Wikipedia, Youtube, Facebook)

● Crowd sourcing

We can get online communities to generate ideas by asking questions getting

them to react on postings or to vote on ideas they believe are promising. To get
the crowd to contribute, we can arrange a competition with a prize for the best
contributor.
It is important that the customer is being involved in the
process of value creation. Several relevant ways to realise
this, are...
● User Innovation

In a situation where the current solutions seem unsatisfactory, customers may

show high commitment to create new solution. (ex: first heart-lung machine)

● Lead user

By reading the users who have needs or wants to a product that is not exist yet in
the market, the company can manufacture a “futuristic” product and get a
competitive edge.
It is important that the customer is being involved in the
process of value creation. Several relevant ways to realise
this, are...
● Open source software

This software allows the general public to freely adapt, use and distribute a
software program. Many volunteer will contribute to the creation of the product
driven by the dissatisfaction with the current software. (ex: linux)
Co-Creation
● Co-creation has social advantages because people from different backgrounds are being brought together. The biggest
advantage that can be achieved when co-created products or services are distributed freely among users.

● In Business to business markets, Co-creation is a way to direct the innovation process that leads to innovative propositions
that actually are worthwhile for the organization (Ramaswamy and gouilart, 2010)

● Many organizations find it advantageous to engage the customer in the development process. Why?

○ Save cost.

○ Reduce the time-to-market.

○ Reduce the risk of failure due to the low market acceptance.

○ Reduce the need of expensive last-minute adaptations to customer needs.

The Principle of Co-Creation
Dialogue
finding a language level that permits a meaningful exchange of experiences and hidden needs and wants

Access
Opening up each other’s world permits faster, more efficient and better solutions to problems as well as more engaging and meaningful experiences

Risks
It is essential that all risk is honestly and freely addressed

Transparency
Transparency provide a clear feedback

(Prahalad & Ramaswamy,2004)

Giving form and shape to these principles
Weber (2011) used these principles among others to construct a series rules and a
sequencing of steps to guide the co-creation process

1. Precise Question

2. Proper Phasing

3. Involving the Right People

4. Choosing the right format

5. Motivating properly

6. Deploying appropriate techniques

7. Providing feedback
Areas of Application
● Co-creation can take place in many different phases of constructing a new value
proposition.

● The result of the co-creation process may very well be a mass-produced product.

● The value will still have been created by making use of customer relationship and
the product itself will be viewed quite differently by those customers involved in
the co-creation process as the community with whom they share their experiences
The long tail: the complete assortment
What is the long tail?

● A distribution strategy that focuses on products and services in the tail of

distribution

● Products with little sales volume due to their very particular nature

● Offers opportunities to meet specific and very individual customer needs

Example
If you want go to the bookstore, what you can find is popular books or those with high
demand. What if you want to buy a book that is not highly demanded? The answer is
you need to go online for it because physical bookstore doesn’t have that much space
to display all the book available in the whole world.
Cont.
● Online companies are very efficient in using the long tail strategy due to their
capability to serve niche markets. (niches: concentrating all marketing efforts on a
small but specific and well defined segment of the population)

● This is because online company have no limited space, unlike offline stores.
Individualisation of the product offering
- Many products are manufactured by large scale production systems in which customisation
could potentially led to higher costs.

Mass customisation according to Gilmore and Pine:

- Cosmetic customisation - make an adjustment in the product’s exterior (representation)

- Transparent customisation - adapts the product but not the representation

- Collaborative customisation - adapting the product and the representation (helps to

formulate individual customers needs)

- Adaptive customisation - neither the product and the representation are adapted (helps
finding a product that serves different purposes on different circumstances.)
Choosing the right strategy
Adaptive approach - companies create standard products which can be easily tailored
or adapted by the customer themselves.

Cosmetic approach - suitable when the standard products satisfy the majority of
customers and it is only the form of the product that needs to be adapted to their
individual needs

Transparent approach - the product is changed but in such a way that the customers
are not aware. The company follows the behavior of their customers in order to
expand its customer knowledge in an increasingly precise manner
cont.
Collaborative approach (combining the 3 previous approaches) - this approach can be
used when seen as desirable as such can be seen in Datavision Technologies
Corporation. The company gathers data from different sources. The system links every
element of the customer profile. Then it compiles the script and presentation modules.
The combination resulted in an effective and relevant marketing message

Mass customisation is particularly valuable when product attributes or components

are visibly different such as: cars, music, literature, news services, luxury goods, etc.
Individualized Pricing Policy
Distinct from supplying a customised product is the individualisation of the
pricing policy. It would then seem that while individual customers experience the
advantages of customer relationship management, the supplier does not quite dare to
derive the maximum profit from it , and allows a price premium to be lost.

● Possibilities for implementing a precision pricing policy offered by e-commerce.

Within the framework of the adjustments to be implemented in the pricing
structure, it will have to be determined which elements of the value proposition
will be grouped together and for which price will be requested, and which will be
broken down into their constituent parts.
Individualized Pricing Policy
● Revenue Management, is the skill of maximizing yield by differentiating the price
and by allocating parts of the available production capacity across the various
price classes.

○ In order to be able to determine the maximum feasible price at a certain

point in time, data are necessary on the historical booking patterns, current
booking information and accurate predictions on the bookings to be
expected per price class.
Individualized Pricing Policy
○ The effect of revenue management can be clarified through the use of the Marshallian
demand curve from microeconomic theory, which shows the relationship between
sales and price.

○ Formulating a revenue policy:

1. Segmentation buyer groups with homogenous preferences regarding price and

quality,

2. Setting price strategy per segment,

3. Predicting demand per segment,

4. Allocation of capacity across segments.

Conclusion
● Value proposition is not found in the product or services, but in the customer
instead

● Value proposition is all about how we can help customers satisfy their needs,
explore then exceed their boundaries to solve their problem.

● The best opportunities arise when we grant customers access to our resources and
allow them to participate in the creation of value, enabling them to co-create
rather than just purchase