The Value Delivering System
Marketers divided the value delivery sequence into three phases. First, they must segment the market, select the appropriate target, and develop the offering’s value positioning. The formula “segmentation, targeting, positioning (STP)” is the essence of strategic marketing. Second, marketing must identify specific product features, prices, and distribution to provide value. Third, communicating the value by utilizing the marketing communications such as the internet, advertising, sales force, and any other communication tools to announce and promote the product.
Michael Porter has proposed the value chain as a tool for identifying ways to create more customer value. Nine strategically relevant activities- five primary and four support activities- create value and cost in a specific business.
- The primary activites are (1) inbound logistics or bringing materials into the business; (2) operations or converting materials into final products; (3) outbound logistics or shipping out final products; (4) marketing, which includes sales; and (5) service.
- Specialized departments handle the support activities— (1) procurement, (2) technology development, (3) human resource management, and (4) firm infrastructure (such as general management, planning, finance, accounting, legal, and government affairs.)
The firm’s task is to examine its costs and performance in each value-creating activity, benchmark against competitors, and look for ways to improve. Furthermore, a firm also needs to look for competitive advantages beyond its own operations in the value chains of suppliers, distributors, and customers. Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network, also called a supply chain.