The strategic pathway is a way of simplifying the market strategy issue to provide a basis for practical decision-making, (Piercy, 2002) which is shown diagrammatically below. In order to answer the question, we have devised our interpretation of Avis’ strategic pathway.
a) Identify the key elements of Avis’ strategic pathway
Mission statements distinguish Avis from other firms and outlines the company’s values and beliefs (Christopher et al, 1991). Therefore missions can be seen as the purpose of vision and strategic intent. (Campbell and Yeung, 1990). Even though Avis’ mission statement is not included in the case, looking at the programmes that have been implemented such as baseline research and customer tracking, we can infer that it is centred on customer care excellence and offering a unique level of service in order to delight their customers.
Therefore these are Avis’ Organisational key values; what they wanted people to be good at; and their critical success factors; they identified what they had to be good at to succeed in the market (Piercy and Morgan, 1994), their employees had to delight their customers if they wished to succeed in the market. It is the fundamental aspect on which the value proposition and relationship systems are based around and reflects the company’s core competencies. This is because the missions are basic principles underpinning the strategic intent (Hamel and Prahalad, 1989)
Competitive Differentiation and Positioning
It has been argued there are only two sources of competitive advantage: low cost and differentiation (Porter, 1985). Either strategy may be used across an industry sector, or maybe restricted to certain niche markets (Clutterbuck et al, 1993). According to Porter’s generic strategies, Avis are following a differentiation strategy, supplying the mass market of car rental and differentiating by service delivery and branding.
Essentially, the generic product was undifferentiated; i.e. car rental, however the offered product, the total package of benefits and services, was what differentiated Avis (Levitt, 1980). As highlighted by Levitt (1980), Avis offered an augmented product as it took it beyond what was required or expected by the buyer, as shown in the case when one employee replaced an unsuitable vehicle later on in the evening. This shows how Avis was differentiated from alternative rental companies and reflected their core competencies. This is because core competencies are the roots of competitive advantage (Prahalad and Hamel, 1990), thus giving competitive differentiation at a service and personnel level (Kotler, 1991).
Companies should aim to position themselves in their market to attract and keep customers (Christopher et al, 1991). Avis built a sustainable and profitable competitive position by producing an unmatched level of service with a superior operating model dedicated to delivering the promise of unique levels of customer service, thus offering value in the eyes of the customer (Ibid). They chose to perform activities differently to achieve this position, for example, by turning customer service into a profit centre. However to sustain this competitive position it has had to continuously innovate. Value innovation is achieved at three levels product, service, and delivery (Kim and Mauborgne, 1997). It can be seen that Avis innovate on all levels as the product (service) is enhanced due to their competence-based training and the service and delivery is improved, as employees own the service encounter.
Marketing Assets and Brands
Avis’ strategic positioning choices, combined with the core competence invested in people, gives Avis a differentiating capability because it uses the resource, i.e. staff, to give them an advantage over the competitor in the customer’s eyes. This is because their core competence makes a significant contribution to the perceived customer benefits of the end product and is difficult to imitate (Prahalad and Hamel, 1990) so is more sustainable. Avis provide many car rental services, however, it can be seen from the case that they are dedicated to customer service delivery. If the latter was its differentiating capability, Avis realised their only unique asset was the brainpower of its employees, in this sense employees’ ideas and imagination are the company (Ridderstrale and Nordstrom, 2000), therefore Avis had to empower its front-line service workers.
The ability to obtain accurate information is a critical factor in any organisation’s ability to plan and compete in an increasingly competitive marketplace (Chaffey et al, 2000). Avis have utilised their technology to continuously track customer satisfaction and this allows them to respond much faster to changing needs.
Avis’ core brand identity is in essence its “we try harder” philosophy. This philosophy sends a clear message to employees and customers. For example, the empowerment of Avis’ employees during the service encounters to satisfy customer’s needs. By taking a very focused approach centred around differentiating themselves on customer service, these efforts are not ancillary to the Avis brand; they are the brand. Just as Volvo “owns” safety, Avis “owns” customer service.
Brand identity should establish a relationship between the brand and the customer by involving functional, emotional or self-expressive benefits (Aaker 1996,). Generically benefits can be seen as what customers think the product or service can do for them (Keller, 1993). Functional benefits are the more intrinsic advantages of product or service consumption and therefore can be easily copied. However, through its focus on customer service Avis has succeeded in taking a service that would normally have functional benefits, e.g. hired transport and personalised the service that is offered that gives the customer a sense of assurance and self-importance offering an emotional benefit to the customer. This is a key point because attitudes often form the basis of consumer choice (Keller, 1993) and helps to build the company’s reputation.
In order to deliver and maintain its value proposition there are several key relationships, which Avis need to successfully manage and rely upon to deliver this. The key relationship with the employees was the mechanism for implementing their promise to customers (Piercy, 2002).
Christopher et al (1991) argue that by recognizing the contribution of people to getting and keeping customers, the company’s competitive performance will be substantially enhanced. Avis have consistently provided employees with the opportunities to add value to the company no matter what level they work at.
Avis rely most importantly on their employee relationships so they can deliver the service required and their recruitment and training processes are all aligned with this to ensure that an employee can achieve their maximum potential. This is because without their employees, customers will never be truly satisfied as it these internal customer that determine the real customer focus (Buttle, 1996)
The provision of quality customer service involves understanding what the customer buys and determining how additional value can be added (Christopher et al, 1991). Through constant customer tracking and surveys, Avis built up a relationship with their customers to provide them with exactly what they wanted, thus increasing the value of the service. This is an example of dialogue marketing allowing you to get closer to the customer (Piercy, 2002) as the information gathered on the customer is used to underpin each service encounter to continuously improve and personalise the offer. Therefore Avis understood its customer and potential customer needs better than the competition, and in doing so built and maintained relationships with them.
Avis’ market position is a culmination of the factors sighted above and the synergy within which this occurs will be further discussed in the next section.
b) Clearly explain Avis’ success by highlighting areas of synergy within the pathway
Mission – Employee Relationship
Campbell (1990) sees mission as an enduring purpose and model of behaviour, compared to strategic goals, which may change with circumstances (Campbell and Young, 1990). Seen as such it becomes clear that Avis has institutionalised service quality and have so inculcated service values that employees would not consider operating in any other way (Clutterbuck, 1993). Avis’ service strategy depends on its people as the main delivery mechanism, therefore they believe that the single most important factor in sustaining their momentum and the ethos of “we try harder” lies with their employees: the way they recruit, train, develop and manage them. This highlights the relationship between the mission of customer service and the integral role the employees played in fulfilling the objectives and programmes to achieve this market mission.
According to Linda Lash, director of Customer Satisfaction at Avis UK, the company’s slogan ‘we try harder’ carries a strong message about team spirit and at the same time promotes a sense of pride in the company among its employees that makes them want to live up to the dream (Clutterbuck, 1993). Avis has built their whole approach around the issue of employee commitment and buy-in strategy (Piercy 2002). Their mission is aligned to what employees believe in, it is not set in a vacuum but rather carries with it an ethos of involvement. Thus, synergy has been created by the mission transcending through to the employee relationship, shifting the balance of self-fulfilment so that delivering superb service becomes more important to its workers personally.
Employee Relationship – Competitive Differentiation
Avis has a clear, well-defined service quality strategy. The employee relationships formed an integral part of this strategy as a customer sees a company through its employees (Kotler 1982 in Cowell 1984). According to Berry et al (1989, in Buttle 1996), quality of service created by employees is the great differentiator; quality of service gets – and keeps – the customer’s attention. Service quality and high levels of customer service are vital in achieving an offering that is distinct from that of competitors and in winning customer loyalty and their employees achieve this.
Despite the belief in the mission that the employees hold, attention must be given to other areas in order for synergy to be created. It is the whole as opposed to the constituent parts, which helps to form their competitive differentiation in the market along the service dimension.
Diagrammatically this can be seen as follows:
Capable systems and processes
(Adapted from Clutterbuck, 1993)
Avis has ensured that the means of achieving high levels of service are embedded in the processes, systems and structure of the service delivery. Its capable systems enable staff and customers to play their part in the service activity. Avis’ organisational culture played a central role in allowing their capable employees to work the capable processes and systems. The innovation-led culture internalises with its employees that the only mistake is not to try something. Communication is concerned with gathering data and information, transferring messages and making sure they have been received and understood.
By continually monitoring and tracking both employee and customer feedback it appears that Avis think of their company as an “employer brand”, as well as a customer brand, and fit the two sides of the brand together well (Piercy 2002). Indeed, obtaining and understanding the employee perspective is a critical tool in managing customer satisfaction. It enables managers to exercise ‘internal marketing’ by satisfying the internal customer needs and the organisation upgrades its capability of satisfying external customer needs (Berry, 1980). These factors combine together to give competitive differentiation as they complement each other and help to build a business model that creates superior value for the customer.
Competitive Differentiation – Marketing Intangibles and Brand
It has been shown how Avis has built its competitive differentiation through delighting its customers with unique levels of service. This has created synergy in the sense that it has concurrently developed a strong brand through its consistent advertising and activities centred on offering high levels of customer service. This has built up a great deal of customer based brand equity, defined as the differential affect of brand knowledge on the customer response (Keller 1993).
From the competitive differentiation of listening to its customers and employees and adding value at all levels, Avis has successfully built favourable, strong and unique brand associations. Brand associations are the informational nodes linked to the brand node in people’s memory and contain the meaning of the brand for customers (Keller 1993). Through concrete experience and word of mouth advertising a strong company reputation has been formed. Indeed, the reputation that Avis carries is a strong reinforcement of its service values. It further creates synergy through helping them to acquire high calibre staff; it develops expectations among customers that are automatically reflected in staff behaviour; and it promotes further word of mouth advertising.
Marketing Intangibles and Brand – Competitive Position
The marketing assets a company has underpins its competitive position (Piercy, 2002). Avis’ brand identity of “we try harder” positioned them as the underdog and helped to build the competitive position. The differential position at the brand’s emotional level that Avis has created is much harder to copy than purely functional benefits and the end result is that consumers have strong positive attitudes towards the company.
Competition will eventually close the gap unless the organisation continues to improve its capabilities (Cravens et al, 1997). By continuously listening to its employees and customers, Avis is able to sustain its competitive position by adapting its offering to meet the needs of the evolving market better than the competition. This is highlighted in the case “We believe that sustainable competitive advantage comes from our ability to continuously innovate ahead of the competition. In achieving this we look for continuous improvement”. The ongoing understanding of its customers has been facilitated through the vast amount of market information that has been gleaned from the investment in new technologies.
However, one of the key reasons for success is that the vast amount of data that is collected by Avis is turned into useful information and filtered from Board level to every rental location in the network. This means that improvements are made along dimensions of service quality that are relevant and indeed most valued in the eyes of the customer, therefore creating a competitive position.
Competitive Differentiation – Competitive Position
Avis’ competitive differentiation has always been with its staff. This had to become a capability if it needed to preserve this differentiator. Capabilities are complex bundles of skills and collective learning exercised through organisational processes that enable firms to coordinate activities and make use of their assets (Day, 1994). However it is not enough for Avis’ staff to be a capability, it needs to be distinctive. This is because distinctive capabilities are those where the organisation possess an advantage (Cravens et al 1997).
The rationale for competing on capabilities is that an organisation should identify, develop, and leverage a set of capabilities that will enable it to excel at providing customer value (Cravens et al, 1997). Avis knew its capability was their staff and built upon this by developing a highly structured training programme and organisational processes to offer superior customer service. Therefore they concentrated on the capabilities that would create a competitive position in the marketplace.
Treacy and Wiersema (1996) propose that few, if any, firms can excel across all capabilities and as such Avis’ path to market leadership has focused on customer intimacy. Avis’ offer is superior to the competition and is difficult to duplicate, therefore it is competing on its capabilities (Craven et al, 1997) as it is reliant on their staff as an intangible core competence. Consequently through this Avis has created a competitive differentiation that positions itself by offering superior customer value in the customer’s eyes, (Piercy, 2002) which is sustainable as it continuously improves the core capability and leads to a successful competitive position.
Competitive Position – Customer Relationships – Competitive Position
Avis’ competitive position of a customer intimate company which personalises basic service and customises the product to meet unique customer needs (Treacy and Wiersema 1996), has led to them building strong customer relationships. Through understanding its customers, Avis is better positioned to organise its resources in the service delivery in a way which builds value for its customers. Synergy is created because by concentrating on critical success factors in the service delivery, efficiency is built into the business model; therefore resources are not allocated to non-value adding activities. For example, Avis produced customer satisfaction reports for their corporate customers which highlighted agreed service standards are being achieved. This built long-term relationships and thus strengthened their competitive position.
The significance of gaps in understanding customer satisfaction of what is required and the way things happen has been demonstrated in many service sectors by Parasuraman et al (1985). This conceptual model of service quality highlights five gaps that occur between consumer expectations and perceptions. According to Buttle (1996) firms must understand these customer expectations, therefore there must be a continuous flow of information into the business; continuity is required because expectations change overtime. Avis’ continuous customer tracking ensures they build a relationship with the customer, over time they are able to identify the key elements of the service i.e. those that influence the perception of the service quality.
These are the dimensions which Avis can improve upon and in so doing enhance the customer’s perception of the service. Therefore any gaps that may occur are reduced because the expectations and perceptions of customers are more closely aligned. This alignment means that perceptions of the service often exceed consumers’ expectations ensuring that long-term relationships of mutual advantage are developed (Christopher et al 1991). The development of these relationships reinforces Avis’ competitive position, as there is a greater understanding of the customer.
Mistakes are a critical part of every service, but dissatisfied customers are not (Hart et al, 1990). Avis has realised this and follows a two-pronged strategy – doing it right the first time and managing complaints effectively to mitigate damage when it doesn’t (Clutterbuck, 1993). Employees are the first to know about problems therefore by empowering its staff, the capability that gives Avis a competitive position, they are able to turn dissatisfied customers into loyal ones (Hart et al, 1990), which will develop long-term relationships. This is because it can create more goodwill than if the things had gone smoothly in the first place (Ibid.). This is highlighted in the case where an unsuitable car for a customer was changed later in the evening. This further reinforces the competitive position and the ethos of ‘we try harder’.
Customer Relationship – Market Position
The successful customer relationships that Avis has developed can be seen as one of the major reasons for the company’s success. Their strong market position is both created and reinforced by the relationships it has with its customers. By consistently meeting and exceeding customer expectations and having an effective service recovery strategy in place, they are able to benefit from the lifetime value of their customers. Avis have developed strong loyalty within their existing customer base that provides continual revenue streams (Aaker, 1996). Synergy is thus created as these existing customers provide powerful word of mouth advertising. This can be seen to highlight another reason for the companies success, indeed market research carried out by Avis found that one of the most significant factors influencing which car rental company people use was the recommendations of friends and family (Clutterbuck, 1993).
Through the service that is delivered to customers Avis has successfully built both commitment and trust. According to Morgan (1994) commitment and trust lead directly to co-operative behaviours that are conducive to relationship marketing success. By developing this customer relationship the market position is strengthened because customers have a lower propensity to leave, cooperate with Avis, lower functional conflict and overall reduced uncertainty (Ibid.).