Customer value can be traced back to nearly two decades back when the first quality management systems started becoming popular as a means to improve the quality of both the product and operations processes consequently resulting in increasing the efficiency of firms and streamline their processes and led to Customer Satisfaction measurement (CSM) with an aim to bring out the “voice of the Customer” into quality efforts. The application of CSM however proved to be lacking as many organizations either failed to act on the results of the CSM or in certain cases the data did not correlate to what the Customer required or in certain other cases organizations CSM failed to keep up with the changes and thus it was outdated. (Woodruff 1997)
The fall of the Berlin as well as end of the Cold War along with China’s entry in the Global Market in the 90’s resulted in increased global competition. In this far rapidly globalized economy quality can no longer provide a clear source of competitive advantage and it usually takes the back seat to the more important challenge of constantly striving for increasing Customer value.
- Schools of Thoughts and Key Ideas
The views and thoughts behind Customer value is quite fragment with different point of view advocated / preached by different authorities on this topic. The views expressed primarily differ on the differences in which “terms such as utility, worth, benefits and quality” are referred to in the various definitions for Customer value. (Woodruff 1997)
One school of thought advocates that customer value can be grouped between five categories of value that the customer is looking for in a product namely functional, social, emotional, epistemic and conditional value. An alternate school of thought however suggests that there are two key aspects on which Customer value differ i.e. Customer value may be intrinsic / extrinsic to the product. A third authority on this topic however suggests that there are four different types of value i.e. product value, value in use, possession value and the overall value that are linked together when a Consumer evaluates a product. (Woodruff 1997)
A common underlying theme running among these various schools of thought however is that “Customer value is a customer’s perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer’s goals and purpose in use situations”. Thus this key definition takes into consideration the various inputs (schools of thought) to link together all the key facets of Customer value to accurately describe the product benefits for a customer’s payment in a purchase exchange. (Woodruff 1997)
- Implications for Contact Energy
The high competitive nature of the energy market along with a lack of product differentiation leads to Customer value along with providing an uninterrupted power supply being of utmost importance for Contact Energy.
The idea(s) highlighted above, well and truly does affect Contact energy as can be seen in the fact that though Contact Energy scores highly in Customer service surveys (Consistently over 8 in Conversa surveys for Customer Service), Contact Energy is still losing customers. This can only be attributed to precisely the fact that was outlined above in that though firms may be very Customer friendly, this may not always translate to an increase in Customers as Customers are always seeking for something in value in return for a purchase. Thus this highlights that there is a gap in what Contact Energy perceives that the Customer values and the values actually desired by the Customer. A continued lack in closing this gap could cause increase frustration among customers and consequently this will reflect in the overall performance of the Company. (Meyer 2006)
- Contact Energy
- Current Impact
The focus on Customer value takes an even greater role in Contact due to events leading to a sharp increase in Customer losses attributed largely due to a doubling of the Director Fees Pool combined with a price increase by up to 10% in Wellington and South Island that partially resulted in a mass exit of Customers with predictions of a loss of up to 35000 Customers due largely attributed to poor Public relation management and also underestimating the perception of the Customers (Stride 2009). Thus this clearly highlights the situation where there is a significant difference in points of views of what the Customers desires from Contact Energy and what Contact Energy perceives that the Customer desires.
- Potential Impact
The continued lack of attention on reducing this gap will result in a significant erosion of Contact Energy’s customer base and though it can be argued that this is clearly a one off matter, the issue that it brought out is something that can’t and cannot be ignored.
- Alternative strategic Responses
In light of the above situation and the potential impact, there are two responses that I would suggest to the board that if implemented in isolation (separately) could help to bridge this ever-growing gap outlined above.
- Contact Energy as a firm is made of a very diverse set of Customers from varying backgrounds, cultures and ethnicities thus leading to varying perceptions of what Customer(s) would truly desire i.e. value which may be required to be addressed on a more personal level as opposed to addressing them as a whole. The flaw with this approach is firstly the basis on which we may distinguish the respective Customers and secondly the reliability of the approach that we have taken to distinguish Customer value along with the period of time it would take to implement this feature.
- An alternate strategic response revolves around Contact Energy employees getting more involved with other departments specifically Customer Service Professionals so that they are better equipped to deal with Customer problems. I would also propose that Marketing and Sales departments be more involved with the other facets of the business so that they are able to understand the entire lifecycle of the product that they are promoting to Customers and hence reduce discrepancies on their part (Roderick J. Brodie 2009). The major flaw with this process is that where does one draw line between what information the Customer service can pass to the Customers and where does he / she need to refer to a Subject Matter Expert (SME) for a particular problem. The other major flaw with this approach is that we may still be unable to figure if this would lead to closing the gap in perception view.
- Recommended Strategic Response
The main essence of the problem at Contact Energy relates to Customer value and what do they actually value and the consequent gap arise due to a lack of understanding what Customer well and truly value is the major issue and hence based on this I would suggest that Contact Energy should implement my response that relates to directly targeting Customers to try and find out what do they value and consequently Contact Energy subscribes to those values in manner that would suit them. The implementation of this strategic task would involve analyzing the Contact Customer base presently and breaking up existing Customers on the basis of their age (age bracket) to better understand the stage of life, the next part would involve researching internally i.e. involving Contact Energy employees to come up with ideas, externally will involve researching to find out the varying levels of what Customers value based on their age bracket. The second phase of this strategy would entail involving the Customers in the form of surveys, seminars etc to get a first hand impression of what do they truly value. This will thus help us to build a customer value model based on the differences as well as similarities in the subscription of what they (Customers) well and truly value i.e. low price, efficient service, customer friendly etc. This model will consequently be required to be implemented across all facets of the business so that all departments are aware of what the end user (Customer) truly values and consequently they can strive to perform keeping that in earnest.
- Conclusion
Thus in conclusion I would like to stress that Customer perception and value needs to be always considered prior to making any decision(s) and also firms (Contact Energy) must constantly strive to narrow / close the gap between what Customer require / desire in return for a purchase as opposed to what the firms perceive that the Customers truly desire. Firms must also understand that Customer value(s) constantly change with time and hence any Customer value model must be constantly updated to truly reflect what Customers well and truly value.
The model described aims to precisely close / narrow the gap in Customer value in Contact Energy and if the model were to be implemented, it will certainly create a Competitive advantage for Contact Energy in the highly competitive Electricity and Gas Market.
Bibliography
Huber, F., A. Herrmann, et al. (2001). "Gaining competitive advantage through customer value oriented management." Journal of Consumer Marketing 18(1): 41-53.
Meyer, C., & Schwager, A (2006). "Understanding Customer Experience." Harvard Business Review 85(2): 116-126.
Roderick J. Brodie, J. R. M. W., Gregory J. Brush (2009). "Investigating the service brand: A customer value perspective." Journal of Business Research 62(3): 345-355.
Stride, N. (2009, 3/4/2009). "Debacles costing Contact Energy." Retrieved 4th May, 2009, from .
Woodruff, R. B. (1997). "Customer value: The next source for competitive advantage." Academy of Marketing Science 25(2): 139-153.
