The Case of Beats Electronics in Relation to Customer Value Creation - Assignment Example

Value Creation: The Case of Beats Electronics Value Creation: The Case of Beats Electronics Introduction Value creation is one of the core aspects of any firm as it is linked to shareholder value. It is important to care about the manner in which customers place value in the brand. Customer perceptions of value are often unclear which creates a wide opportunity for companies to tap into. This subsequently enables a firm to achieve growth that is sustainable in terms of revenues as well as profits. As Jimmy Iovine and Dr. Dre found creating consumer value was an essential strategy in ensuring that their brand was more successful than their competitors. This paper will begin by discussing the consumer value creation in analyzing Beats Electronics. It will then examine why Beats Electronics used this particular concept and the extent to which it has been forced to accommodate changing trends in consumer trends and the resources that were deployed in marketing this concept and finally the analysis will consider how this concept enabled the firm to enhance on its business performance. Using theory to explain the nature of Customer Value Creation Increasingly, firms are placing more emphasis on retaining their customers and often it takes a significant amount of effort, time as well as money in both attracting a new customer. Creating long term customers are seen as most beneficial (Gronroos & Voima, 2011). Relationship marketing is one of the theories which can be used to not only develop but also to liquidate the relationships that firms have with their customers in a manner that not only creates value, but also enhances on the firm’s level of competitiveness (Gronroos & Voima, 2011). Service quality is also another theory that seeks to explain customer value and here the quality of the provided service or product is exactly how the customer wishes it to be. In many instances, customers have a significantly wider speculation of quality which means that firms have to determine the quality in the same manner as their customers (Shamim & Ghazali, 2014). In the case of Beats Electronics, both Dr.Dre and Jimmy Iovine wished to provide the customer with similar headphones to the ones Apple had in the market but with better sound quality (Helm, 2014). Service quality in this instance is made up of two distinct parts which is the expected and perceived service. The perceived quality is made of two aspects: one is technical which is what the customer gets and customers often look to this aspect since it provides an overview of how the firm’s products can provide a technical solution to the problem (Shamim & Ghazali, 2014). The other aspect is functional which strives to examine the extent to which the customer provides a service to the customer. In the case of Beat Electronics, both Iovine and Dr.Dre identified two problems; the decline of sales in records as a result of piracy and the fact that audio quality had gone down due to the use of plastic ear buds by Apple. The two used Apple’s earphones as an inspiration and provided consumers with headphones that would bring the feeling of being in a studio (Helm, 2014). Beats Electronics was attempting to enter a market that was dominated by Apple Inc which already had an established market share. They therefore had to struggle with critics who slammed their idea right from the moment it was brought into the market and customers who did not see the need to purchase headphones valued at $ 200 when the ones they got from Apple were literally being given free (Helm, 2014). Both Iovine and Dr.Dre had to convince the market that purchasing the headphones was beneficial in the long run as it would make the music listening experience better by providing better audio quality (Helm, 2014). Application and Reasoning Customer value creation was seen as the most appropriate marketing concept as it enabled Beats Electronics to interact directly with the customer by providing a product that would appeal to them. Changing consumer trends are what provided the firm with the chance to bring the product to the market (Helm, 2014). The firm sought to capitalize on the fact that Apple’s product, while popular among the customer did not have the music background that Beat’s headphones had. Both Dr.Dre and Jimmy Iovine were players within the industry and understood the need to have an effective audio experience as this is what enhances on the music and the plastic ear buds were doing little to provide this(Helm, 2014). The impact of advertising on creating customer value is becoming even more important especially as firms come to the realization that this is what determines success of a product (Helm, 2014). Beats Electronics used one of the most popular forms of advertising by encouraging celebrities from Lebron James to Will.i.am to P Diddy to the United States Olympic basketball team to endorse the headphones. This did not only give the product added exposure but also ensured an added level of reliability and validity that further drew in the customer and subsequently enhanced on the company’s growth and success(Helm, 2014). In integrating customer value, Beats Electronics essentially sought to enhance on brand awareness considering that it was competing in a market with a brand as large as Apple Incorporated and customers who were already comfortable with the headphones that were already in the market (Helm, 2014). in addition, the firm sought to create personal relationships with the customers by providing them with a product that had higher levels of quality and even though more expensive than the headphones available in the market would in the long run provide better service(Helm, 2014). As is evident, customer value creation shares close links with the concept of targeting as customer value creation essentially seeks to create loyalty among certain segments of the population and encourage them to try out the firm’s products (Shamim & Ghazali, 2014). In the case of Beats Electronics, the success of customer value creation was in the increase in co-marketing with companies from HTC to Chrysler and the over half a billion in product sales that have been thus far(Helm, 2014). Conclusion Customer value creation is one of the most essential aspects for many firms as it enables them to cultivate customer loyalty which in turn has positive impacts on the firm’s revenue. Beats Electronics integrated this strategy in their efforts to raise brand awareness of their headphones and to enter into a market that had for long been dominated by Apple Incorporated. Beats identified two major problems the core of which was the disintegration of audio quality from the use of plastic ear buds that Apple provided and sought to provide a solution to this by introducing their headphones. This strategy coupled with the use of celebrity endorsements was critical in enabling the firm to sell well over half a billion in product sales and create opportunities for major deals to occur with such brands as Chrysler and HTC. References Gronroos, C., & Voima, P (2011) Critical Service Logic: Making Sense of Value Creation and Co-Creation. J.of the Acad.Mark. Sci, 41(2), 133-140. Doi: 10.1007/s11747-012-0308-3 Helm, B. (2014). “What Ubiquity Looks Like.”Inc Magazine, 36(4), 65 Shamim, A., Ghazali, Z (2014) A Conceptual Model for Developing Customer Value Co-Creation Behaviour in Retailing, Global Business and Management Research: An International Journal, 6(3), 183-188 Read More