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Running Head: VALUE CREATION AND PRICE SEGMENTATION

VALUE CREATION AND PRICE SEGMENTATION 8

Value Creation and Price Segmentation

Jessica Echevarria

MKTG310-1503A-01

Mary Catherine Cattapan

American Intercontinental University

Abstract

This is a survey of value creation and pricing of three products. First case will undertake Dunkin versus Starbuck coffee shops. Following it will be Toyota motor products, and then Oshkosh vehicle firm. To access the three products and related content, the reference materials will be Bolton, N. R. &  Myers, B, M.(2003) article, Jonny, I. M. (2015)book, Customer-Driven Marketing Strategy Creating Value for Target Customers and Tordo, S., Tracy, S. B. & Arfaa, N. (2003) book.

 

Value Creation in Business

Introduction

Business is a challenging area that calls for innovation and advanced ways of maximizing sales and making profits. Today every company is fighting to establish a sustainable business because of the technological advancement and global market completion whose demands are quite involving. As such this essay aims to show how value creation is playing an important role in boosting firms into the contemporary world.

Part 1: Value Creation                    

Value creation is a strategy that arises due to market competition, global knowledge, and sensitivity/consideration of customer varied demands. Most factors that initiate value creation and performance of a company are the prices, the service/product, quality, time, productivity and satisfaction of the target market. According to Tordo, et. al. (2005) value creation often relies on several phenomena. Such phenomena are geology and geography, state context, sector governance, and organization. Often there is value creation when a firm has the immediacy of supply or services, ability to offer optional products and accurate product supply. Value creation often targets the viability, visibility, market season and opening of new markets. Therefore, firms should utilize it so as to grow businesswise.

 

Part 1: Value-Price Connection

 If the price of products has to add value, a firm must consider geological, cultural and orientation of customers. According to Bolton, et. al.  (2003), if the operational, transportation and costs reduce, then the final product pricing will be low. The market of products could also prefer agreeable prices for customers who loyally buy products all the time of buying large quantities. However, in some cases the cost of goods or services may increase as long as the quality of the product is high it will lead to customer’s motivation to purchase it.

Part 2: Overview for Coffee shops.

The first product whose marketability is due to value addition is Dunkin versus Starbucks coffee shops. The two stores operate within Chicago and North Carolina (Customer –Driven- Marketing Strategy 2007). They started with the doughnuts as a snack to sell along with coffee. However since 990 and until now they bear stiff competition amongst themselves.

Part 2: Background on Target Markets for Coffee shops.                      

            The target markets for Dunkin versus Starbucks coffee shops are people who work as blue- and white-collar from all age, race, and income demographics. On the other hand, Starbucks targets professionals who are the working class respectively.

Part 2: Competitive Analysis: Effectiveness of the Pricing Scheme for coffee shops.               

Dunkin and Starbucks as competitors of coffee sales had to note the kind of customers that liked their environments add products for them to create value in their services and products. According to (Customer –Driven- Marketing Strategy 2007), after losing customers due to the sandwich and sugary doughnut, Dunkin opted for coffee sales that made a 35% profit. They, therefore, expanded their store and today they have more benefits than earlier times as they sell at generous quotations too. With time, Dunkin’ added more to the snacks hence providing meals, like smoothies and dough-wrapped pork bites, dawgs, hot dogs wrapped in dough that the customers get attracted. Starbuck sells coffee at $4 and works to maintain their professional, high-class clients.

 

Part 2: Value Creation to Support Pricing for Coffee shops.

The reason behind their growth is that Dunkin has segmented type of clients to all kinds especially those uninterested in individualized meals. According to Customer –Driven- Marketing Strategy 2007, p.184), “their customers are blue- and white-collar workers from all age, race, and income demographics”. It further helped them design the shop to fit customer demands. They positioned themselves when they made dozens of store-redesign resolutions, like purchasing espresso machines, painting pink and orange color scheme and retained its fresh baked goods display perimeter (Customer –Driven- Marketing Strategy 2007). Furthermore, they did differentiation when they replaced square laminate tables with round imitation-granite tabletops and polished chairs. Starbucks, on the other hand, targeted a different culture of customers who are working variety with high income and professional class. They differentiated their shop to retain and sustain clients through offering costly classic items in their hotel. Such items included couches for comfortable sitting of the clients, and eclectic music, to entertain them as they eat. Additionally, there are wireless internet access that allowed them to use laptops, and art-splashed walls to create an impression/position.

Part 2: Overview for Toyota Motors.

Toyota Motors is a global market foe unique customer taste vehicles. It has run for years and managed to monopolize the motor sales.          

Part 2: Background on Markets for Toyota Motors.       

Toyota vehicles target professionals who are suburban versus urban dwellers and civilians through the motor products. Toyota operates on unique and new vehicle models for its clients.

 

Part 2: Competitive Analysis: Effectiveness of the Pricing Scheme for Toyota Motors.           

Secondly, Toyota often works competitively on motor products hence overcoming the other companies in Japan. Toyota Company creates value for products through a competitor’s more-for-more positioning by coming up with a brand whose quality is good enough, but the price is fair then the competitor. For instance, it used Lexus line with a “more-for-the-same” worth scheme versus Mercedes and BMW. Through advertisements and marketing, they popularly advertised in car magazines and video-tape slides. The slogan : “Perhaps the first time in history that trading a $72,000 car for a $36,000 car could be considered trading up”  (Customer –Driven- Marketing Strategy 2007, pp. 205) helped also. Perpetual mapping too had assisted Toyota when it thought of developing sporting motors with Hammer 1 which is individualistic for civilian and Hammer 2 for professionals from both upcountry and in town strikes a perfect balance. These strategies assisted Toyota in making sales and making the firm famous.  

Part 2: Value Creation to Support Pricing for Toyota Motors.

Toyota has continuously made it the motor industry by strategically coming up with vehicles day after day. Though it started with inexpensive cars it then moved to high quality, more technological and fancy types. The strategies of value proposition though more for -the same, more-for-more and more- for less, has worked for it (Customer –Driven- Marketing Strategy 2007).  It showed the high quality of its new Lexus through rare reviews in car magazines and a widely distributed videotape that forecasted comparisons of Lexus and Mercedes vehicles. It published surveys showing that Lexus dealers were providing customers with better sales and service experiences than were Mercedes dealerships (Customer –Driven- Marketing Strategy 2007). Resultantly, 60 percent Lexus repurchase rate occurred. At another time, Volvo’s value proposition won the market due to its safety, reliability, roominess, and styling, at a higher price than earlier motors.

Part 2: Overview for Oshkosh Truck Company

The product is under Oshkosh Truck Company with a variety of vehicles for entrepreneurship and government services. So far they produce heavy-duty fire, airport-rescue, cement, garbage, snow-removal, ambulance, and military vehicles.      

Part 2: Background of Target Markets for Oshkosh Truck Company             

Customer –Driven- Marketing Strategy (2007) sides, Oshkosh Truck as targeting the health care ministry, first aid rescue team that may be the police department. The two customers require vehicles that lie under heavily built cars for rescue .The company targets government and business firms for their vehicles.

Part 2: Competitive Analysis: Pricing Scheme for Oshkosh Truck Company               

The Oshkosh vehicle firm is a successful competitor in vehicles because of creating a unique line of trade in business and government service vehicle as a model of differentiating themselves and segmenting the target market. As Customer –Driven- Marketing Strategy (2007)       suggests, mass customization has enforced the loyalty and interest of clients. Oshkosh is a firm that ensures the clients feel their possession of the products and services through the personalized services to suit the needs of their clients. Oshkosh has grown rapidly and profitably over the past decade due to customized and personalized services due to the customers. Often, when firefighters place orders for a truck from Oshkosh, they make it a special occasion to spectate the creation of the vehicle that is at the cost of $800,000. There are varieties of such vehicles to choose from; approximately19, 000. An open- fire truck costs $130,000, yet more than 70 percent of its clients demand unexpected components (Customer –Driven- Marketing Strategy 2007). They include hideaway stairs, ladders, special doors, compartments, and firefighting foam systems for those difficult- to- extinguish fires.

Part 2: Value Creation to Support Pricing for Oshkosh Truck Company                    

Value creation happens through marketing with particular words that the clients will get attracted. The slogan “whether you need to plow your way through Sahara sands or Buffalo snow, Oshkosh has your vehicle, by gosh,” is very significant. This slogan attracts many people to go to the plant, view the cars and plan to purchase.

Conclusion

The overall impression from the above discussion exposes a fact that business enterprise can achieve if there is consideration of value creation that are at par with the present state of affairs. From the above examples, petroleum, Toyota Motor Corps and Oshkosh vehicles have been successful in the market because of price segmentation, firm differentiation, strategic underpinning and positioning. Through the four models, value creation and pricing come out to build the businesses and sell their products successfully.

References

 Bolton, N. R. & Myers, B, M. (2003). “Price-based global market segmentation for services”. Journal of Marketing. Retrieved from

http://www.ruthnbolton.com/Publications/PriceBasedGlobalMarketSegmentationforServices.pdf

Jonny, I. M. (2015). Principles of marketing. Jakannath University: Dhaka. P. 1-33.Retrieved from http://www.academia.edu/1746449/Principles_of_Marketing.n.a. (2007).Customer-Driven Marketing Strategy Creating Value for Target Customers. pp. 182- 205.Retrieved from http://www.prenhall.com/behindthebook/0132390027/pdf/Kotler_CH07.pdf

Tordo, S., Tracy, S. B. & Arfaa, N. (2003). National Oil Companies and Value Creation. Retrieved from http://siteresources.worldbank.org/INTOGMC/Resources/9780821388310.pdf