Marketing Management. A study of consumer perceptions of value in relation to the Blackberry product versus the iPhone

Table of Contents

1. Introduction

2. Theories of Customer Value

3. Current Value Proposition of Blackberry
3.1 Extrinsic and Intrinsic Features

4. Apple’s value proposition
4.1 The synergy between features within single devices
4.2 Cost and Design

5.

6. New value proposition for RIM
6.1 Mission
6.2 Objectives
6.3 Market Strategy
6.4 Marketing Programmes
6.4.1 Internal knowledge capabilities
6.4.2 Creating potential for differentiation
6.4.3. Allocating the necessary budget to achieve milestones
6.5 The implementation stage
6.5.1 Internal implementation of the value proposition
6.5.2 External implementation of the value proposition

7. Conclusion

8. References

9. Appendices

Appendix 1

Introduction

The aim of this assignment is to examine the theme of customer perceived by value and its marketing implications for how organisations become and remain competitive. The essay is using two leading products which operate in the mobilie phone industry. These are Research in Motion (RIM) and Apple and their retrospective products: a) the Blackberry and b) the iPhone. Both companies have a strong branding position in the market. They seek to create value through the manipulation of technology and in offering features that are of satisfaction to the customers.

The structure of the assignment is divided into three parts. The first part discusses Blackberry’s value proposition. This part argues that technology becomes strongly embedded in different forms of communication that people engage with (Kummar and Phrommathed, 2008). The evolution of technology and innovations that are generated through research and development mean that the pace of change remains unprecedented (McCann, 2004). Blackberry offers an attractive option because of its competitive cost structure and the range of technological features that are offered with it. The attributes of a) quality and b) design of the product remain two key features that compete with other leading brands (Hoover, et al., 2004).

The second part of the assignment compares and contrasts the value proposition of the Blackberry phone with Apple’s iPhone. This section discusses the differences between the two products and how their features are seeking to create perceptions of value to customers. Reference is made to the weaknesses of Blackberry’s value proposition and when compared to the iPhone. This part of the essay argues that Apple’s value proposition can be understood in context of the synergies of the features that are part of a group of products that it developed. Hence, customers perceive the iPhone’s value in relation to the wider array of technological features like video, camera, access to the internet. The creation of such features help create new synergies in the mind of consumers and particularly when used with other Apple products (e.g. iPad, iPod, etc). The Blackberry is seeking to compete with Apple in offering a specific range of features that remain central but yet attractive to customers.

The third part of the essay discusses a new value proposition for the Blackberry. This part of the essay argues that cost remains a critical factor for how customers create perceptions of value in the use of technology. The Economist (2009a, 2009b) argues that the recent economic credit crunch has had significant impact on the consumers’ purchasing decisions. This means that cost remains a significant variable that influences the customers’ purchasing decisions. This section proposes a new value proposition that is based on a more competitive cost structure. This part argues that a range of features can be added to the blackberry product whilst maintaining its competitive price. Moreover new features can gain greater marketing strength by alignment them to different consumer groups. Even though Blackberry remains popular because of it easy-to-use texting functions, such functions are not often sought by older consumers. This section discusses the implementation of the new value proposition by making reference to the company’s use of tangible and intangible resources.

Theories of Customer Value

Zeithaml (1988) defines perceived value as, “the consumer’s overall assessment of the utility of a product based on perceptions of what is received and what is given. Though what is received varies across consumers (i.e., some may want volume, others high quality, still others convenience) and what is given varies (i.e., some are concerned only with money expended, others with time and effort), value represents a trade-off of the salient give and get components” (p.234). Value can be understood as the outcome from dividing the perceived benefits and perceived costs prior to purchasing a product.

As figure 1 illustrates consumers engage in some form of assessment and reasoning where the assumed benefits are compared and contrasted with the assumed losses. For example, in purchasing a car, a customer compares and contrasts the benefits that the car provides in terms of its mobility and transportation capacity and against the cost. For consumers, where the quality of engineering and design matter, this also means that the consumers’ perceived benefits are associated with a range of other attributes which concern the image of the car, servicing costs, social status etc (McDonald, and Christopher, 2003). Hence the customers’ interpretation of value comes to be perceived from a new state of equilibrium between cost and benefits. Piercy (2002) support this idea by arguing that “customers develop value expectations and make purchases based on their perceptions of a product’s benefits compared to the total cost of the purchase” (p.439). This means that value is not something that is only formed at the time of purchased but also at the time of consumption (Willard, 2000). According to Piercy (2002) consumers evaluate and reflect back to their experiences before forming statements about their perceived value.

Figure 1 Calculating value through the division between benefits and costs

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Source: Willard 2000 (p.11)

This idea is also supported by Holbrook’s definition of customer value. Holbrook (1999) argues that “consumer value refers to the evaluation of some object by some subject…the “subject” in question is usually a consumer or other customer, whereas the “object” of interest could be any product—a manufactured good, a service, a political candidate, a vacation destination, a musical concert, a social cause, and so on” (p.5). By drawing a distinction between the ‘subjectivity’ and ‘objectivity’ of the customers’ experience Holbrook (1999) alludes to the interaction between a) the tangible dimension of an object with b) the intangible dimension of the experience and the subjective satisfaction or dissatisfaction that is caused from using it. Holbrook (1999) argues that the study of customer value remains relativistic and the aim of the researchers should be to understand the more critical factors that help shape the customers’ experience and subsequently perceptions of value.

According to Piercy (2002) the building of customer value begins from what the company is able to achieve through the utilisation of its tangible and intangible resources. Piercy (2002) argues that there are four key dimension that can help shape how an organisation should develop a value proposition. Firstly, it needs to have a clear understanding about its core competencies that differentiates its products or/and services from competitors. Secondly, it needs to have strong awareness about how customers create perceptions about its brand and also how marketing trends influence the consumers’ wants and needs. Thirdly, the company needs to be able to articulate its strengths and opportunities into a market mission which will influence how decisions are taken at the corporate level running through the hierarchy. Fourthly, the organisation needs to know what is it that sustains its competitive position in the market and what could be the possible threats that could challenge such position.

Figure 2: The value proposition in market strategy

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Source: Piercy 2002, (p.456)

Cronin, et al (2000) suggest that customer value is not static but remains changing, evolving, and dynamic. It is not enough for organisations to identify how consumers perceive the value attributes of a particular product at one point in time only. Instead, they have to appreciate the consumers’ changing trends during the course of time. Spiteria and Dion (2004) argue that perceived value is produced by organisations when they are, ‘considering what they want and believe that they can get from buying and using a seller’s product” (p.15) In this respect Flint et al. (2010) argue that organisations need to develop a customer value ‘anticipation strategy’^[1].

According to Grey the consumer’s purchasing decisions are governed by a consideration over a range of variables that include a product’s functional and practical benefits as well as emotional payoff. Zeithaml (1988) explains, this idea further stating that “how the product is linked through the chain of benefits to a concept called emotional benefit” (p.76). In this model it is shown that consumers organise and evaluate product information from simple product attribute to complex emotional benefits that ultimately convert into an emotional payoff.

Figure 3: Grey Benefit Chain

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Source: Willard, 2000 (p.13)

According to Zeithaml (1988), in the mind of consumers, the outcome in achieving customer value generates a series of affects which include a) increased satisfaction, a) customer loyalty to the brand and c) prospects of increased market performance in terms of market share and sales and profits. This is based on the Zeithaml’s (1988) Means End Model (as shown in figure 3). The model has two parts, Extrinsic and Intrinsic attributes which relate to perceived quality and perceived value that lead to the final act of purchase. The other part is objective price which includes perceived monetary price, perceived sacrifice and perceived-non monetary price.

Figure 4: Zeithaml’s Means-End Model

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Source: Zeithaml,1988 (p.20)

Having provided a brief theoretical discussion over the definitions and interprtations of what customer value represents the following section is going to examine value proposition of the Blackberry product.

Current Value Proposition of Blackberry

The value proposition held by the Blackberry is the opportunity to provide easy access to email and other internet functions (Blackberryguru.com). This is a feature that was not offered with mobile phones but which the Blackberry introduced. As Hempel et. al. (2009) argue “Mobile phone users increasingly want to access the web more than they want to make calls…Over the past decade RIM has sold some 65 million phones to its now 28.5 million subscribers, increasing its stock market capitalization from $96 million to $42 billion in the process” (p.3) (see also Appendix 1).

3.1 Extrinsic and Intrinsic Features

According to Hempel et. al (2009) the value of the Blackberry is to be found in its technological capacity to provide features which combine telephony and internet services. This theme is in alignment with Holbrook’s (2009) reference to the objective dimension of a product. Namely the customers’ satisfaction in using the Blackberry emerged from having practical access to specific technological features that were not offered by similar phone providers.

Having access to emails on-the-go stretched the boundaries of online communication, but, also strengthened the practical applications of the internet. By using the theoretical framework by Zeithaml (1998) this essay wants to argue for the extrinsic and intrinsic attributes of the product. In particular, the design of the Blackberry phone is based on a different concept from the other mobile phones. It allows the easy typing of messages and assists users with sending and receiving messages. The extrinsic attributes of the products are strongly associated with its design and in becoming a gateway to accessing the internet. However, the intrinsic attributes of the product concern the different and numerous opportunities of communication via the internet and by using the handheld device.

Holbrook (1999) discusses the difference between the extrinsic and intrinsic value in the following way: “Extrinsic value pertains to a means-end relationship wherein consumption is prized for its functional, utilitarian, or banausic instrumentality in serving as a means to accomplishing some further purpose, aim, goal, or objective” By contrast, intrinsic value occurs when some consumption experience is appreciated as an end in itself—for its own sake—as self-justifying, ludic, or autotelic (p.10). The application of this argument for the Blackberry concerns the nuanced innovations of technology. Research in Motion (RIM) cannot create value by offering a range of features but by keeping abreast with the latest technological changes. Such changes can comprise particular features like a) the speed with which the internet is accessed, b) the amount of pixels with which photos are taken, c) the feel of the keyboard and the ease with which someone can type on it, d) the incorporation of video-recording. The Blackberry is able to generate perceived value for customers not only where it is offering such features but when the attributes of such features comply with the latest technological developments. Hence, the competition between companies like RIM, Samsung, Sony, etc, moves within the consumers’ tendency for comparing the different attributes of technology and their inclusion within the devices.

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^[1] They define perceived value as, “a supplier's ability to look ahead at what specific customers will value from supplier relationships including their product and service offerings and the benefits they create given the monetary and non-monetary sacrifices that must be made to obtain those offering benefits” (p. 23)