What Do Consumers Favor: Quality Commodities or Value?

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Researchers suggest that customer satisfaction and a company’s stock price should be connected. If not, marketers would have to reassess how the capitalistic market theory is positioned to work. Empirical information points to the fact that a constructive relationship between customers and companies should result in economic enhancement and performance. However, not much is known about the correlation between good customer satisfaction and a company’s stock price and ROI (Fornell, Mithas, Morgeson, & Krishnan, 2006). At a glance, investigators tend to think that marketing information asymmetry and market imperfection is the culprit for the lack of shareholder value. As postulated by Fornell, Mithas, Morgeson, & Krishnan, “Real economic growth depends on the productivity of economic resources and the quality of the output (as experienced by the user) that those resources generate. In the final analysis, expending economic activity per se is not what is essential. Both marketing and neoclassical economics view consumer utility, or satisfaction, as the real standard for economic growth”.

An example of superior value related to selling goods and services can be recognized through the cost (price) of commodities. Customers, in every segment, want and need both – but the dissatisfaction with raising commodity costs does not appear to have a perceived equilibrium with customers when translated into value. Consequently, in the hearts and minds of consumers, there is a large delta between price and value and the goods and services that fuel the economy. Many commodity producing companies’ stock prices are undervalued due to shareholders’ and Wall Street’s assessment of commodity value and consumer anger. However, a focused set of marketing research studies can determine whether consumers value goods and products over services. Assuming the findings reveal that, relative to commodities, consumers prefer good service of the cost of commodities; then commodity producing industries must strategically convert related services into valued products. The customers want control in the understanding and management of their consumption of commodities. Such control can effectively be achieved if end-use consumers were given or perceived that equilibrium existed relative to goods, services, and value.

Once a commodity producing company has effectively aligned its goods and services with consumer value, new market arenas will open. Moreover, Customer Value Management (CVM) has also risen to a higher level of acceptability with respect to customer retention. Since competition in many industries has become increasingly overwhelming, goods and services producing companies are measuring the importance and value of retaining existing customers while enhancing profits from these same customers (Muthuraman, Sen, Gupta, Seshadri, & Narus, 2006). When applying CVM, organizational leaders should pursue several business objectives: design and institutionalize a strategic response to lower competitive prices by pursuing value added market programs and quality business relationships; identify new methods of growth by selling more to existing customers; eliminate value drains and work with customers to understand, question, and enhance the value chain efficiencies; and generate a non-price program through dialogue with existing customers and distribute the learned and associated value across the consumer base.

Dr. Johnny D. Magwood
Northeast Utilities Service Company
V.P. Customer Experience & Chief Customer Officer; Northeast Utilities Service Company. J. D. Power Smart Grid Advisory Council; Chairman- Housing Authority Baltimore City; Next Generation Utilities Advisory Board; Utility Knowledge Customer Service Council; CS Advisory Council; Magistrate Judge Seletion Committee. Marketing Executive Council; Mechanical Engineer - The Johns Hopkins University; MBA - Loyola University of Maryland; DBA - University of Phoenix; Doctoral dissertation; Mergers and Acquisition: The Role of Corporate Executives' Relationships with Stakeholders

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