Customer value creation is a marketing concept that plays an important role in business performance and success.

This essay will describe this concept which is applied by Hangers, a local dry cleaning company founded in 2004 and started as an environmentally safe cleaner in Kansas City in the USA. Moreover, it will explain how customer value creation has been applied by Hangers and what purpose the company aims to achieve by applying this concept. Also, it will discuss the impacts of applying this marketing concept on business performance. Customer value is the difference between the benefits for customers of owning and using a product and the cost of purchasing the product (Kotler, Brown, Burton, Deans, & Armstrong, 2010). Customer value can be delivered through either offering benefits, including product benefit, services benefit, personnel benefit and image benefit, or reducing costs, including monetary cost, time cost, energy cost and psychic cost (Kotler et al., 2010). The concept of creating customer value is applied by Hangers in a number of ways to compete against a large existing business named Procter & Gamble (Ryckman, 2010). Firstly, Hangers uses colorless, odorless liquid carbon dioxide rather than the aggressive chemicals used by traditional dry cleaners (Ryckman, 2010). This environmentally friendly service feature creates customer benefits and value because according to McCarty and Shrum (1994, cited in Larcohe, Bergeron and Barbaro-Forleo, 2001), there is a positive correlation between the fun/enjoyment value and the attitudes towards engaging in environmentally friendly behaviour. They found that engaging in such behaviour can provide customers with a sense of fulfillment in looking after the environment (McCarty & Shrum 1994, cited in Larcohe et al., 2001). Secondly, Hangers would immediately inform the customer of a damaged garment and offer to replace it (Ryckman, 2010). This reflects company accountability for customers items, which helps enhance customer relationship and increases customer-perceived value (Ravald & Gronroos, 1996). Thirdly, Hangers uses vans to pick up and deliver garments in waterproof bags from customers porches or garages twice a week (Ryckman, 2010). This home delivery service is a support service that provides convenience for the customer and complements the companys service feature, which delivers benefit and thus creates customer value (Ravald & Gronroos, 1996). Also, as customers do not need to bring their clothes to the storefront and retrieve them later, this service contributes to reducing the time and energy costs for the customer, which creates even more customer value (Ravald & Gronroos, 1996). Fourthly, Hangers introduced a variety of promotion programs, such as giving away T-shirts that say Sniff me and sending promotional email messages that contain riffs on the latest American Idol episode (Ryckman,

2010). All these aim to deliver customer value by creating an interesting service and company image for the customer, which attracts customer attention and induces purchase. By applying the concept of customer value creation, Hangers aims to achieve a number of outcomes, such as enhancing customer satisfaction and loyalty and thus creating higher customer purchase and profitability. According to Howard and Sheth (1969, cited in Ravald & Gronroos, 1996), customer value plays an indispensible role in creating satisfaction, which measures the degree to which customer expectations of a product or service are met (Kotler et al., 2010). Moreover, customer satisfaction is one of the most crucial determinants of customer loyalty (Heskett, Jones, Loveman, Sasser and Schlesinger, 1994, cited in Ravald & Gronroos, 1996). Customer loyalty exists when customers are willing to continue purchasing from the company and is measured by the retention rate which indicates the percentage of customers purchasing the product this year who continue buying next year (Whitwell, Lukas and Doyle, 2003). A loyal customer not only exhibits repeat purchase but may recommend others to purchase, leading to higher sales and profits. This is consistent with a research finding indicating that a 5% increase in customer retention can lead to a 25-85% increase in profitability (Riechheld & Sasser, 1990, cited in Bharadwaj, Varadarajan and Fahy, 1993). Hence, by creating customer value, Hangers also creates customer satisfaction and loyalty which contributes to more sales revenues and profits. There are a number of monetary and non-monetary impacts of the application of customer value on business performance. Monetary impacts include increased product sales, expansion of market share and profitability. As mentioned previously, there is a strong correlation between customer value and satisfaction, which can potentially lead to customer loyalty that can increase product sales and profits. Also, Hangers offers of an environmentally safe service, home delivery service and promotions not only deliver customer value, but enable the company to gain competitive advantage (Huber, Herrmann and Morgan, 2001) because these are unique and quality services that differentiate the company from competitors. These contribute to attracting customer interest and purchase and thus, create greater market share and profitability. On the other hand, the non-monetary impact of the application of customer value, such as the use of an environmentally friendly dry cleaning service includes creating company reputation. This is because both customers and the environment benefit from the service, which implies that the company does not just aim to make financial gains, but also shows its sense of social responsibility for the quality of the environment. This thus, creates a positive social image and enhances companys reputation.

To conclude, this essay has defined and described what is meant by customer value which can be delivered to customers through either increasing benefits or reducing costs. Moreover, it has explained how Hangers has applied this concept in a variety of ways, including using an environmentally safe dry cleaning method, offering to replace damaged garments, offering home delivery service and employing a number of promotion programs. All these have contributed to delivering customer value through benefits and the provision of home delivery service also helps create greater customer value through reducing energy and time costs. Furthermore, it has discussed a number of outcomes Hangers wants to achieve by creating customer value, such as creating customer satisfaction and loyalty to increase sales and profits. Also, this essay has discussed both monetary and non-monetary impacts of applying customer value on business performance. These include higher product sales, market share, profitability and company reputation.

Word Count: 1022

Reference List Bharadwaj, S. G., Varadarajan, P. R. and Fahy, J. 1993. Sustainable Competitive Advantage in Service Industries: A Conceptual Model and Research Propositions. Journal of Marketing. vol.57, no.4, pp.83-99. Huber, F., Herrmann, A. and Morgan, R. E. 2001. Gaining competitive advantage through customer value oriented management. Journal of Consumer Marketing. vol.18, no.1, p41-53. Kotler, P., Brown, L., Adam, S., Deans, K. and Armstrong, G.. 2010. Marketing. (8th ed.). Frenchs Forest: Pearson Education Australia. Laroche, M., Bergeron, J. and Barbaro-Forleo, G. 2001. Targeting consumers who are willing to pay more for environmentally friendly products. Journal of Consumer Marketing. vol.18, no.6, pp.503-520. Ravald, A. & Gronroos, C. 1996. The value concept and relationship marketing. European Journal of Marketing. vol.30, no.2, pp.19-30. Ryckman, P. 2010. A Local Dry Cleaner Tries to Compete Against P.&G. The New York Times. 14/04/10, p.B4. Whitwell, G., Lukas, B. A. and Doyle, P. 2003. marketing management. Milton: John Wiley & Sons Australia, Ltd.