Chapter 3: Selecting Customsers and Creating Customer Value

Case Study: WWSA:

In search of a value proposition Wolfgang Wiesel SA (WWSA) is a Swiss manufacturer of printing equipment for the graphic industry, specializing in printing large billboards, banners and XL posters. The company started out in Interlaken in the 1950s as a local manufacturer of all-purpose printing equipment, but real growth did not come until the firm's management decided, in 1987, to specialize in the graphic industry. The company moved its headquarters to Basel and grew into a major international player with sales offices, distributors and agents in 34 countries. Annual sales are approximately 230 million. WWSA has traditionally focused on innovation as the engine of growth. Over years the firm has developed and launched an impressive number of technological innovations that have contributed to the state of the art of printing in the graphic industry. Too many products and no focus Recently, WWSA's management has noticed that actual sales growth is no longer according to plan. In most of its major markets, sales are flat, while the total market still grows by 2-3 per cent each year. In 2010, WWSA decides to hire a consultant to take a closer look at the firm's business and find a way out of the slump. After several interviews with senior management and a few selected customers and industry experts, the consultant realizes that, as a result of all these innovation efforts, WWSA simply has too many products. All these products serve specific niche customers with specific needs, but the whole portfolio lacks focus. Even worse, there appears to be no underlying theme to all the products offered to customers in the graphic industry. While every individual product still makes sense, the whole product range has grown unwieldy proportions and it has become impossible to communicate a clear strategy to customers that communicates the firm's corporate identity. This is reflected in management's inability to state succinctly what makes WWSA's products unique. Similarly, WWSA's salespeople are unable to clearly explain to potential customers why they should buy from WWSA rather than from one of its competitors. Fachbereich Elektrische Energietechnik Prof. Dr. Valerie Wulfhorst Betriebswirtschaftslehre, insb. Controlling Telefon 02921 378-451 Telefax 02921 378-409 E-Mail v..t@fh-swf.de Standort Soest Lbecker Ring 2 59494 Soest Fachhochschule Sdwestfalen Sitz: Iserlohn Hagen Iserlohn Meschede Soest www.fh-swf.de Page 2 Developing a value proposition To deal with this problem, WWSA needs to develop a clear value proposition to all of its major products. To jump-start this process, WWSA's management and the external consultant selected one of WWSA's key products that was launched five years ago but failed to command the level of sales that was projected: the XL Big Poster Printer. This is a specialized printer that can print very large posters, which are used to display advertising messages, hide scaffolding when a building is being renovated or increase the aesthetic value of blank concrete walls. These photo-realistic digital prints (with up to 300 dpi) allow advertisers to catch the eye of the target audience in highly frequented locations. The consultant guides WWSA through a systematic process in search of a suitable value proposition that can be used to persuade customers.

Step 1: Identifying potential value elements The process starts with a small group of XL Big Poster Printer salespeople and other managers brainstorming all the elements of the printer that customers may value. This brainstorming session results in a list of eight potential value elements: fast turnaround time, low costs, consistent colour accuracy, large printing formats, near photographic quality on many different media types (high gloss, matte, canvas, silk, vinyl, cloth), high uptime, good product support and close dealer network.

Step 2: Identifying the next-best alternative Having identified the potential value elements, the group of employees is asked to identify the next-best alternative: that is, the vendor that is perceived by customers as the most relevant competitor for this particular product. This turns out to be easy, since a new competitor arrived on the market four years ago and quickly established itself as a major player in the big poster segment.

Step 3: Identifying the key value elements The next challenge is to identify those value elements that are really important to customers and where WWSA offers superior value compared to the next-best alternative. The management team starts with assessing both WWSA's and Competitor X's performance on all eight potential value elements. Initially, the management team assesses performance on all eight value elements only qualitatively.

This results in the following table: Page 3 Value element WWSA Competitor X Turnaround time + ++ Costs ++ + Colour accuracy ++ ++ Printing formats ++ ++ Quality on different media types ++ + Uptime ++ + Product support -/+ + Dealer network -/+ + Next, the management team conducts a series of face-to-face interviews with ten customers of big poster printing equipment. During these interviews, WWSA's team tries to get a better feeling for the customer's perception of big poster printers and WWSA's and Competitor X's performance in this area. Based on these interviews, the team concludes that WWSA's just average performance in these areas of product support and dealer network does not really matter to customers. Customers typically have their own technical support staff to maintain and repair equipment and do not rely on manufacturers or dealers for product support. As a result of these interviews, it becomes clear that customers base their purchasing decisions on two key criteria: print quality on different media types and uptime. Step 4: Formulating a value proposition: WWSA's team takes a closer look at the two criteria of print quality on different media types and uptime. They take an in-depth look at information from current customers and perform several calculations. Based on all of this, they conclude the following: - On some media types, WWSA's printer provides better print quality than Competitor X's printer. - WWSA's uptime is 98.4 per cent, compared to 94 per cent for Competitor X. This results in the following value proposition: WWSA's XL Big Poster Printer offers better quality at significantly higher uptime. Step 5: Formulating Strategy Based on the findings from this exercise, WWSA's management team wants to formulate a strategy to improve the sales and market share of their XL Big Poster Printer. However, a closer look at the data uncovers Page 4 some troubling findings. First, while their printer provides better print quality on some media types, these concern only a few media types that are not commonly used by most customers. So, even though there is a competitive advantage here, it is only minimal. In addition, while the XL Big Poster Printer enjoys superior uptime, the problem is how to convince customers of this, since detailed data to support this claim are lacking. In fact, some members of WWSA's management team doubt that customers can be convinced of the benefits of the superior uptime and suggest that the XL Big Poster Printer should be discontinued, since customers perceive no significant difference in performance between the two alternative offerings. What should be done?

Questions:

1. One problem is that customers do not see the difference in uptime. Indeed, Competitor X's salespeople will dispute the difference in uptime and will point to other advantages of their printer, such as its superior turnaround time and product support. How should WWSA deal with this problem?

2. Analyze which value assessment methods would be suitable for WWSA in order to support their superior uptime to potential customers.

3. Having analyzed the value to its customers, which kind of value proposition according to Anderson/Narus/Narayandas would you recommend to WWSA? Please discuss three different alternatives with respect to their advantages and disadvantages from WWSA's perspective.

4. Discuss various methods that WWSA could use to demonstrate the communicated value to their customers!

5. Discuss reasons for discontinuing the XL Big Poster Printer. Next, discuss reasons for continuing with this product.

6. What kind of information does WWSA's management team need to resolve this situation? How can it get this information? What are the major problems that WWSA might encounter in collecting the required information?

7. How can WWSA use the experiences from this particular exercise to clean up its product range and make its offerings and accompanying strategy more focused?

Hint: Questions 2-4 are closer to real exam questions than the other ones. Page 5 This is a fictitious case, but based on real experiences of real firms. The case description is an amalgam of the experiences of several B2B firms trying to develop a competitive value proposition in competitive markets. Source: Biemans (2010): Business to Business Marketing - A Value-Driven Approach, London: McGraw Hill, 2010, pp. 336-339