Customer Value Proposition - Curled Metal Inc - Case Study Example

Business Model Name: Unit: Course: Supervisor: Date of submission: Introduction The existence of an organisation is normally to create value for its stakeholders and the customers. The delivery of the value to the stakeholders and the customers is the basis of a business model that consists of customer proposition value (CPV), key processes, key resource and profit formula (Johnson, Christensen & Kagermann 2008, p. 51). This paper presents a case study business model for Curled Metal Inc (CMI) and cushion pads, a new product that is more efficient compared to the conventional pads. Customer Value Proposition The customer value proposition is an articulation of the benefits that the customer is supposed to get from using product a company. CVP acts as the experience that the customers get after using a product from a company (Ndaa, 2008, p.1). According to Johnson (Johnson, Christensen & Kagermann 2008, p. 52) for a company to be successful, it has to put up strategies that create value for the customers; this is one of the ways to ensure success and easy penetration to the market. The creation of value is based on providing solution to the needs of the customer. For the CMI, the cushion pads are the main product that the company is supposed to create value for the customers. According to Narmalya (2007, p.8) the customer value preposition is normally specific to the target customer. Therefore, the first step to the customer value preposition is the identification of the end user to the product, people to experience the value. The identification of the user helps in custom making the product. The value for the customers is the fundamental problem in which CMI is supposed to solve. The target customers The process of the customer value preposition is best done by first identifying and profiling the targeted customer who is supposed to experience the value preposition. The identification and the profiling is geared at helping the company to have better understanding of the of the needs of the customer, the place to find the customer, the challenges the customers have been going through and how the product is supposed to benefit the target customers. Hudadoff (2009, p. 4) noted the process of the customer identification and the subsequent profiling cannot be carried in a vacuum, and thus the identification and the profiling is done by sampling and observation of the representatives of the targeted customer. For the CMI the target customers include the pile driving contractors in the construction industry. Even though preliminary studies carried by CMI show that the pile-driving customers have their own pile hammers, the cost implications pointed that the cost of renting the piles for the small contactors was very high. It was also established that the conventional piles are not cost effective and are time consuming (Shapiro& Cespedes 2011, p. 4). In the profiling the customer, the aspects that are to be taken into consideration include the customer the demographics, roles and responsibilities. This means that that CMI will establish features of the customers who are to use the cushion pads. According to Hudadoff (2009, p.9) the place to find the customers is of crucial importance in customer value proposition. This is because the place determines both the micro and macro factors that are likely to affect the product penetration to the market. In addition, CMI will also need to establish the behaviours of the customers in relation to the usage of the cushion pads for the curled metals. This aspect will enable the company to project demand and establish the special requirements that are aimed at creating value. Kaplan and Norton (2004, p 11) noted that the profiling of the customer should also provide the detailed application of the product. The customer value proposition thus depends on the definition of the target customer, the job that is supposed to be done in order to solve or fulfill an important requirement from the targeted customer. It is after understanding the need and profiling of the customer that the company designs the product that fulfils the need of the customer. The fulfilling of the need is depended on the product features and the aspects of marketing that are used to reach the customers (Johnson, Christensen & Kagermann 2008, p. 58). Key processes The customer value proposition is experience based. To achieve the ultimate experience for the customers, the company is supposed to put in place processes that will ensure that CVP is scalable and repeatable. The key processes include the processes, the rules and metrics and norms. Processes entail the design of the product, the development of the product ensuring that all the specifications are met, the sourcing, manufacturing, marketing, the hiring and training of the people to deal with the product (Johnson, Christensen & Kagermann 2008, p. 54). The rules and metrics are important aspects of the margin required for the investment, the terms of the suppliers and credit terms. The norms are the opportunity size that is needed to carry on the investment and the approach to the customers and channels that are key to reaching the customers. The creation of the customer value is not a static undertaking but an ongoing process. For instance, in a business environment, there are competitors who are likely to step up their products in order to keep up with the benefits that a company has introduced to the market. Ndaa (2008, p 3) stated that customer value preposition should be hinged on an ongoing cycle of understanding the customer needs and the situations that are prevailing in the market. This ensures that the customer value preposition is the basis of competition and is integrated into the strategic planning and management system of the company. According to Johnson, Christensen and Kagermann (2008, p. 55) an important factor of the value proposition rests in the precision. The precision entails establishing a workable process that ensures that the customer job is done perfectly. Achieving the precision has been proved to be one of the uphill tasks in customer value preposition. This is because in the development of new products, companies often fail to focus on the specific product. For the CMI to deliver the value preposition to the targeted customers, the key processes will entail designing the cushion pads depending on the needs established during the identification and profiling of the customers. This product will be designed to produce superior features to already existing pads in the market. An excellent design and quality product does not imply guaranteed success in the market, the way the product is presented to the target customers matters (Johnson, Christensen & Kagermann 2008, p. 55). This is because the customers need to be informed of the benefits of the new product and its special attributes. The CMI cushion pads will thus need to be marketed by a process that ensures that awareness is created on the cost effectiveness. For instance, in a trial, the pads were found to drive files 33% faster, lasted for entire job process which resulted to performance increase of 20% compared to the conventional pads (Shapiro & Cespedes 2011, p.3). The marketing of the pads will thus be based on their superiority over the conventional pads. In addition, the process will entail the segmenting of the market and targeting of the customers. The segmentation of the market will be based on the varied needs and sizes for the pads. This will also help dictate the price that will be applied for the different types and size of the pads. It is worth noting that the key selling point of the pads should be based on the efficiency. Key resources Anderson, Narus and Rossum (2006, pp. 4-8) noted that customer value proposition should ensure that the customer is delighted. This is by ensuring the key processes are prepared based on the target customer needs. For instance the cushion pads need to be prepared to cater for different work requirements based on complexity of the work and hence a property of endurance will be very necessary. For the achievement of the key processes, it implies that there are resources that will be required. Johnson, Christensen and Kagermann (2008, pp. 53-54) underscores this important aspect by noting that successful companies should integrate the key processes with resources in a manner that will ensure that the job is done perfectly for the target customers. The integration is core to creation of competitive advantage. The key resources that are essential for the CMI to deliver the customer value include the technology, the equipment, people, the partnerships and the channels that are put in place to ensure that the upstream and downstream processes are not interrupted (Hadadoff 2009, p.9). The proper utilisation of the processes will ensure that the market does not run out of the cushion pads supply. The people entail the human resources in the CMI, these people should be trained to ensure that both the production and the marketing activities are vey high and done with precision. Profit formula The profit formula is an important tool for any organization. It is the roadmap on how the company creates value for the customers and at the same time ensuring profitability. It is worth noting that the core mandate of any business is to ensure profitability. A typical profit formula consists of the revenue model, the cost structure the margin model and the resources velocity (Johnson, Christensen & Kagermann 2008, p. 53). The revenue model entails the returns that can be accrued from the sell of the product to the target customers, i.e. the money that the company can make. This is normally calculated in terms of the price of the product x volume. The volume is related to the customer. It includes the market size the product is supposed to capture, the frequency of purchasing and the supplementary sales. In CMI, the size of the market is main contractors and other smaller contractors who lift piles. This market is not limited to one area; instead, it will target all the possible customers. This will be through forging partnerships with different contractors and manufacturers of machines that will require the cushion pads. A large market size and high frequency of selling the pads will translate to a substantial volume for the products. This will help the company enjoy economies of large scale. The cost structure is the manner in which costs for the operations are allocated. This is paramount for ensuring that a company does not overstretch is finances. The costs include the manufacturing costs, marketing costs and other costs that relate to operation of the company (Johnson, Christensen & Kagermann 2008, p. 56). For CMI, this will include the market research cost, the production cost and the marketing cost for the pads. Margin model entails the contribution that is required from the different transactions for the company to achieve the desired profits. For any business, a transaction is supposed to result to a projected profit level (Johnson, Christensen & Kagermann 2008, p. 51). In CMI, the units sold will be required to ensure good margin of returns for the company. This means that the pricing mechanism will be based on the cost incurred and projected profit margin. On the other hand, the resource velocity entails the frequency of turn over of the resources used to support the company in ensuring that it meets the target volume. It also entails the mechanisms that are set to ensure that resources on the company are utilised efficiently in order to ensure that anticipated profits are attained. Importance of profit formula The success of a company is based on precision in the different fields of operation. The profit formula acts as an in-depth analysis of the business operations through costing and projections on the returns (Barnes, Blake & Pinder, 2009, p. 24). Therefore, the profit formula is crucial in the assessment of whether the strategies set are financially feasible. Through the formula, the business stands at a position to assess points of improvement through detailed evaluation of the market, competition, the stakeholder and stakeholder value preposition. This ensures that there is systemic re-validation of the components that are supposed to drive the customer value (Ndaa 2008, p. 5). Conclusion The introduction of a new product to the market is depended on many factors. The key is establishing the problem the product is supposed to solve. This forms the basis of the customer value proposition. However, the success of the product does not only depend on its good qualities. The manner in which the product is presented to the customers is integral to the success, i.e. marketing. For CMI the cushion pads are to be designed to ensure efficiency and quality than the conventional pads that are already being used in the construction industry. The product is supposed to ensure value for the company and at the same time meet the needs of the customers. References Anderson j. Narus, J. and Rossum, W. 2006. Customer value propositions in business markets. Harvard Business Review, pp. 3-11. Barnes, C, Blake, H and Pinder, D. 2009. Creating and delivering your value proposition: managing customer experience for profits. New York: Kogan Page Publishers, pp. 23-29. Hudadoff, P. 2009. The customer value proposition: Differentiation through the eyes of your customer. New York: Applied Product Marketing LLC , pp.2-11 Johnson M, Christensen, C. and Kagermann, H. 2008. Reinventing Your Business Model. Harvard Business Review, 51-62. Kaplan, R and Norton, D. 2004. Strategy maps: Converting intangible assets into tangible outcomes. Harvard: Harvard Business press, 2-24. Nirmalya, N. 2007. Value Merchants. Harvard: Harvard Business school Press, pp.7-9 Ndaa, P. (2008). Customer value proposition: The BASIS of an Organization’s strategy. Cary, North Carolina: Balanced Scorecard Institute, pp. 2-4. Shapiro, B and Cespedes, F. 2011. Curled Metal Inc: Engineered Products department. Harvard Business School, pp. 1-14. Read More