Rotman Management

Flipping the Value Creation Model

HISTORICALLY, MARKETING has been based on an ‘Industrial Age’ approach. Marketers saw what they believed to be a customer need, developed a product bearing what they considered to be ‘value’, and then tried to find buyers seeking that value. This ‘supply-chain’ approach required the manufacturer to sell what had been produced, because ‘economies of scale’ required more of that same product to be made to optimize profits.

The inherent assumption in this approach is that sufficient value has been built into the product for the buyer to extract, justifying the asking price. In an age of product development and increasing consumer demand, this approach worked — in many cases, magnificently. Witness the growth of the automobile industry, telecommunications, household products, airlines, television and broadcasting, hotels, computers and a host of other products and services that are considered essential today. The mindset was, ‘Build consumer value into your offering; make it widely available; communicate those

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