Gale: Managing Customer Value
(create quality & service that customers can see, and brings a competitive advantage)
In his book ‘Managing Customer value’, Bradley T. Gale has proposed a model to quantify the value of a product-service system in order to be able to analyse the competitiveness of a product portfolio of a company. This book has been written in 1994 after the PIMS study (“Profit Impact of Marketing Strategy”), a statistic analysis on 3500 American companies, (Buzzel et al., 1987). This study had revealed that the main drivers for company profits were “relative quality” and “relative market share”, see Fig. 4.7a.
The route to a high profit is clear: via a high ‘relative quality’, a high ‘relative market share’ can be achieved, resulting in a high ROI. But the question then is how to achieve a high relative quality, being a high quality at the right price.
The key to this question is to focus on the quality dimensions (Garvin) that are important to the customers (as perceived
1. either improve the quality/price ratio of the quality dimensions which are important to the customers
2. or try to influence the customer preferences in the direction of those quality dimensions of your own products which are relatively high in comparison with the competitors.
Option 1 is obvious: companies have to deliver products with a good quality/price ratio. Option 2 is often combined with option 1. When a car manufacturer has developed a relatively safe car, this manufacturer has to make the market aware of this fact and has to make it an important quality dimension at the moment of purchase. The same applies to the issue of the environment. Only the right marketing strategy will result in the desired situation that the product is perceived as better at the moment of purchase.
The model is explained here by an example, providing the main methodology, its characteristics, and the philosophy behind this model .
- the concept of Value
- product types
- product-service bundles
- the value chain
- value creation
- assessment of value
Figure 4.7a. The PIMS study (Profit in Marketing Study): the combination of high quality products and high market share generates the highest profit of a manufacturing company