What is the Value Chain in Marketing?

In an increasingly competitive market, you’re in a constant battle to not only stand out from the crowd and attract new customers but also keep your existing customer base loyal to you. Competing on price and offering steep discounts might help you close deals, but it also cuts into your margins and detracts from your brand’s value. 

Instead, to stay ahead of the curve, you need to compete on value. Why? Because when prospects understand the unique value of your offerings, aligned to their specific needs, that becomes your competitive edge. Value-based marketing opens up many possibilities for your organization, making it easier to attract new users, engage them more quickly, and ultimately, close more deals with fewer discounts. 

To perform value marketing effectively, you need to first analyze your value chain and understand how to use it in your marketing.

What is a value chain?

A value chain refers to all the activities and steps associated with creating and delivering a product or service to customers. The goal of each step of the value chain is to create more value for your company than it costs, which ultimately leads to profits. 

The value chain includes both primary activities, which directly contribute to the creation, delivery, and support of a company’s products or services and secondary activities which support the primary activities. Analyzing each step of your value chain can help you understand where value is being created, and where costs are eating into your profits. 

What are the 5 primary activities of a value chain?

There are 5 primary activities of a value chain that are fundamental to capturing value. Without these, your company cannot be profitable. For each function, the goal is to drive more value and generate more revenue for the company than they cost to perform. 

• Inbound logistics includes sourcing, transporting, and storing the raw materials and components required for your company’s products or services. 
• Operations activities include the processes your company uses to convert raw materials and components into your final products or services.
• Outbound logistics refers to the process of distributing your products to customers.
• Marketing and sales activities communicate value to potential customers, create demand, and make sales.
• Services activities include everything in the post-sale customer experience like customer service activities, issuing refunds, and repairing or replacing products.

What are the secondary activities (support activities)?

Secondary or support activities generally don’t directly create value, but they are still fundamental to enabling the primary activities to generate value.

• Procurement involves acquiring goods and services needed to support the primary activities of the value chain.
• Human Resources recruits and develops your company’s talent–driving a skilled, motivated, and productive workforce. 
• Infrastructure includes the structures and systems that support the primary and secondary activities of the value chain, including facilities, equipment, information systems, etc.
• Technological development activities include researching and developing new technologies that can enhance your company’s products, services, or processes.

Benefits of value chain analysis 

Whether you’ve analyzed it or not, your business has a value chain. The benefits come not from simply having a value chain, but from understanding and optimizing that value chain. Value chain analysis allows you to identify the strengths and weaknesses of your current value chain, and identify ways to both increase value and reduce costs throughout.

When you optimize your value chain, you can:

• Increase efficiency: By evaluating and streamlining the activities in your value chain, you can find ways to reduce waste, lower costs, and improve productivity.
• Reduce costs: Value chain analysis can help you identify and eliminate unnecessary expenses that are cutting into your profit margins.

• Compete on value instead of price: When you focus on the activities that create the most value for customers, you build a strong brand identity that stands out from the competition and allows you to stop competing on price.
• Improve customer satisfaction: A well-managed value chain can help you deliver higher-quality products, better service, and a more positive overall customer experience.

How to use value chain in your marketing

As a primary activity in your value chain, marketing plays a key role in making your value chain work for you. Taking a value-driven marketing approach can help you attract and engage customers early in the funnel. A few ways that you can use your understanding of your value chain in your marketing include: 

Communicate your value

Once you clearly understand the value that your company provides, you need to be able to articulate that value to your target customer. You need to help your potential customers see the benefits of your solution for their specific needs and priorities.

To do this, you’ll want to start by identifying the unique value that your company provides through its products or services, and then use this information to craft a customer value proposition (CVP). This will become the foundation for your marketing messaging and should be incorporated into all of your marketing materials.

To learn more, see why you should care about the customer value journey.

Build your brand

Your brand identity is key to helping potential customers understand your value–and recognize what sets you apart from your competition. Leverage your value chain analysis to create a consistent and engaging brand that resonates with your ideal customer. Not only will a strong brand help you attract new customers, but it can also help you build brand loyalty with your existing users. 

Generate demand

Ultimately, the goal of your marketing activities is to generate demand for your products and services. That’s how marketing directly adds value that impacts your bottom line. To generate demand, you often need to start by showing the customer that they have a problem–that your solution just so happens to solve! Your value chain analysis can help you identify the biggest pain points and challenges of your target customer so that you can effectively position your product or service as the “hero” of the story in your marketing materials. 

Conclusion

Understanding your value chain can help you find ways to both increase value and reduce costs across every function of your business. This can help you improve efficiency, differentiate your brand, and increase customer satisfaction. 

When used to optimize your marketing activities, value chain analysis can help you hone your customer value proposition, build a strong brand that consistently resonates with your target customer, and open up your sales funnel by generating demand for a company’s offerings. 

To learn more, see Customer Value Best Practices Throughout the Entire Customer Journey.