Using Value-Chain Analysis to Discover Customers' Strategic Needs
Using value-chain analysis to discover customers’ strategic needs
David W. Crain and Stan Abraham
David Crain, a marketing and strategy consultant, is visiting professor of marketing at Whittier College, CA, and former Director of Marketing at Fluor Corporation (davidwcrain@aol.com). Stan Abraham is professor of strategy and entrepreneurship at Cal Poly Pomona (scabraham@ csupomona.edu) and author of Strategic Planning: A Practical Guide for Competitive Success (Thomson South-Western, 2006).
ere is a five-step method for discovering a customer’s particular strategic needs based on a unique application of value-chain analysis.[1] Performing this analysis on important customers helps identify high-value new business opportunities. It also can strengthen relationships with customers by clarifying their strategic priorities, regardless of whether their needs are based on a differentiation or low-cost strategy or whether that strategy is implicit or explicit.
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Value-chain analysis is used for many purposes, but the process of examining customers’ value chains is relatively new.[2] In our five-step process, Step 1 explains how internal and external value chains can be used separately and in related ways. Step 2 shows how to construct a customer’s value chain. Step 3 shows how to identify the customer’s business strategy by examining this value chain and using other kinds of information. Step 4 explains how to use additional information and intelligence to leverage that understanding into strategic needs and priorities. Finally, Step 5 explains how a firm’s marketing function can best use this method of value-chain analysis as a new strategic capability.
Step 1: An overview of value-chain analysis
Value chains may be defined in two ways: (1) within a company they describe the various value-added stages from purchasing materials to distributing, selling, and servicing the final product (Porter’s 1985 concept),[3] and (2) they also delineate the value-added
David W. Crain and Stan Abraham
David Crain, a marketing and strategy consultant, is visiting professor of marketing at Whittier College, CA, and former Director of Marketing at Fluor Corporation (davidwcrain@aol.com). Stan Abraham is professor of strategy and entrepreneurship at Cal Poly Pomona (scabraham@ csupomona.edu) and author of Strategic Planning: A Practical Guide for Competitive Success (Thomson South-Western, 2006).
ere is a five-step method for discovering a customer’s particular strategic needs based on a unique application of value-chain analysis.[1] Performing this analysis on important customers helps identify high-value new business opportunities. It also can strengthen relationships with customers by clarifying their strategic priorities, regardless of whether their needs are based on a differentiation or low-cost strategy or whether that strategy is implicit or explicit.
H
Value-chain analysis is used for many purposes, but the process of examining customers’ value chains is relatively new.[2] In our five-step process, Step 1 explains how internal and external value chains can be used separately and in related ways. Step 2 shows how to construct a customer’s value chain. Step 3 shows how to identify the customer’s business strategy by examining this value chain and using other kinds of information. Step 4 explains how to use additional information and intelligence to leverage that understanding into strategic needs and priorities. Finally, Step 5 explains how a firm’s marketing function can best use this method of value-chain analysis as a new strategic capability.
Step 1: An overview of value-chain analysis
Value chains may be defined in two ways: (1) within a company they describe the various value-added stages from purchasing materials to distributing, selling, and servicing the final product (Porter’s 1985 concept),[3] and (2) they also delineate the value-added