The concept of the customer value chain provides a valuable framework for analyzing the organization. The theory may be applied either to a single organization, or to a group of organizations working together to deliver the product to a customer. The theory presents the marketing channel as a set of processes through which the product passes, each of which adds value in the eyes of the customer and means that the customer is willing to pay a higher price for the finished product. The typical value chain for consumer goods might be as follows:
This stage might be handled by the suppliers, who would be responsible for delivering raw materials or components as required. By offering services such as just-in-time delivery, the supplier could add value to its contribution, by reducing the manufacturer’s need for an expensive stock buffer. Alternatively, the supplier could add value in terms of the quality of the goods it delivers.
Manufacturing and operations
As the name suggests, the manufacturer would be responsible for this stage. Here value can be added by attention to production quality, research and development or offering services that reduce costs for the next stage member of the marketing channel. Manufacturers can help retailers, not only by improving systems for delivery, but also by developing mechanisms that help the retailer to deliver good customer service, such as an efficient system for repairing or replacing products returned because of defects. The manufacturer may also seek to increase its power by contributing to the marketing and sales stage.
This part is usually played by the wholesaler – getting the finished products to the point were the customer can most easily buy them. Larger manufacturers, or those serving a small, accessible market, may handle this stage themselves.
Marketing and sales
This function is traditionally handled by the retailer, which conducts the resource-intensive business of persuading the customer to buy the products. Specific services that facilitate this process include bulk breaking, accessibility, sales advice, after-sales support, the provision of an enjoyable purchase environment etc.