by Cindy Barnes
This research also indicates why a simple rebranding exercise, however much money is spent, will not paper over the cracks. These cracks are as much about the way a business operates, its systems and employee behaviours, as they are about products, services or price. In order to make an impact it takes more than just saying that a company has changed – the company actually has to make significant changes that are tangible at every customer interaction. If not, customers will soon see through the marketing gloss and the company might, in fact, be in a worse position, with its credibility and ethics under scrutiny. Many rebranding exercises are merely internally focused efforts that make little attempt to understand the changes in the market or customers. They attempt to mould customers’ desires to the company’s needs. This approach is the wrong way around.
So why engage with customers when developing a new market positioning strategy? The simple answer is: to understand what it is that customers value and will pay for. Also, engaging with customers will uncover what it is that will drive them to stop buying from a company and take their business elsewhere.
There are many benefits in understanding what customers value and then following up this effort by creating offerings, solutions and experiences that deliver this value and solve customer problems. Among these benefits are:
Improved customer retention.
Reduced cost of sales.
Low-cost innovation.
Higher margins.
Greater spontaneous customer advocacy and – more importantly – customer engagement, an extremely important benefit in today’s world of social media and the self-educated buyer. In the book The Effortless Experience (Dixon, Toman and DeLisi, 2013) co-author Matthew Dixon notes the importance of the low-effort service experience; creating a situation in which customers can solve their own problems quickly and easily. The book debunks the notion that striving for customer ‘delight’ should be a priority when looking to build customer advocacy and engagement. Customers prefer to solve problems themselves rather than talk to customer service representatives. The book points to research that suggests most of today’s customer service interactions are four times more likely to lead to disloyalty than loyalty.
In fact, an authentic, customer-centric business can produce benefits to a much wider ecosystem, including happier employees, better-motivated suppliers and the support of the surrounding community. This belief is not new, just rare in today’s business world. Béla Hatvany created two extremely successful businesses following these beliefs that grew from nothing to being valued at hundreds of millions of dollars, as described in Putting the Soul Back into Business (Howard, 2015) – Béla’s story. He grew several companies over the decades, failed in growing others, but in each case learning how important it was to him to keep every member of his ecosystem involved in an ethical business. Béla pondered ‘How do you measure the holistic performance of a company and serving its constituents in a balanced way?’ Today he has a process. A third party, appointed by the company’s board, conducts an annual audit to assess whether all the company’s constituents are being well served. Separate specialists are hired to assess the different functions. Money remains important, and additionally, employees must enjoy working and doing their jobs. In Béla’s case it took his determination and leadership to embed this approach into his companies. He summed up his belief by explaining that he believed that businesses should be ‘for profit, for good’.
To take this point even further, Simon Robinson, co-author of Holonomics (Robinson and Moraes Robinson, 2014) says:
The customer experience fully comes to presence in the experience of people who are not your customer, and the reason I say that is this is where we go back to values. When you don’t really have these values you’re only valuing people in terms of money and their ability to generate it for the company. It’s really interesting; those companies that have genuine and authentic higher purposes don’t differentiate between people who are their customer and who are not, because the authentic purpose is being fully expressed in every single behaviour; every part of speech. This is holonomic. You can’t tell the difference.
In essence, successful businesses:
know what it is that the customer loves and wants to buy from the company;
implement a plan to build on these positive factors and attributes, including a new market position;
create and document a vision that encapsulates their value;
mobilize the rest of the company to help to deliver this vision so that the entire business is aligned;
understand how to fully engage with target prospects and customers;
supply happy customers who recommend and endorse the business, and continue to buy from it.
These companies also understand how to reconfigure their sales propositions and sales processes to support these efforts.
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CASE STUDY LotusWorks
LotusWorks is a leading provider of technical services, including calibration, plant commissioning and decommissioning, operations and maintenance to the world’s top manufacturers in the pharmaceutical, medical device, high technology, data centre and engineering sectors. Their customers include Google, Boston Scientific, Intel and Pfizer.
The challenge
LotusWorks had grown steadily but was beginning to suffer from commoditization and price-only-led negotiations with customers. They realized that they were operating at a commodity level in a crowded and competitive marketplace. They needed to understand what their customers truly valued about them as a business in order to enable them to successfully move from being perceived as a commodity supplier to a customer value-led supplier.
Tom Cafferkey, Chief Operations Officer (COO) of LotusWorks, attended a value proposition workshop utilizing the Value Proposition Builder™ process. Following this, he undertook detailed value proposition design work across the whole business.
Approach and solution
The Value Proposition Builder™ approach included interviewing LotusWorks customers, analysing the market, reviewing their existing service offerings and competitor differentiation mapping. This design work was followed by implementing the necessary changes throughout the entire business, which included new service offering development, sales bid management and commercial packaging and pricing, introduction of key account management, marketing and talent management.
Results and benefits
LotusWorks now clearly understands its value proposition and how to implement it through every aspect of the business, including how to communicate to customers via the website and sales bids and through account management. LotusWorks is now selling longer deals, with value pricing rather than cost-plus pricing and it has attracted some of the best blue-chip customers in each sector. Employee attraction and retention is the best it has ever been, with LotusWorks averaging eight new recruits per week. Within nine months of implementing the value proposition across the company, LotusWorks won six new large customers, with most of these being five-year deals:
Understanding the lived experience of our customers through the customer research process made us drop everything we had been thinking about for the past 20 years and re-evaluate our position. It was that powerful. We changed everything. When the management team read the customer feedback, nobody had to be convinced that we needed to change. We introduced key account management, strategic marketing and market research, solutions development, value pricing and talent management. There were an awful lot of things interconnected, in fact everything was, we finally realized. When everything hung together it felt like ‘the truth’ and we all recognized when it was finished – the first design phase anyway. It doesn’t matter where you look now, it all ties together. Our margins have increased and our employee retention is the highest it has ever been. Plus we are growing very fast.
Tom Cafferkey, COO, LotusWorks
Awards and industry recognition since the value proposition work was completed:
won a Great Place to W
ork® Ireland 2017 award;
won ‘Best for Commissioning and Calibration Engineering Services’ – Construction and Engineering Awards 2016;
listed in ‘1,000 companies to Inspire Europe’ London Stock Exchange Group, April 2016;
listed in Irish times 1,000 Top Companies list May 2016;
LotusWorks is the Service Exporter of the Year – Irish Exporters Association 2015–16;
36th position in the Deloitte Technology Fast 50 Awards Programme 2015;
winner, Irish Pharmaceutical Supplier of the Year Awards 2016.
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The difference between price and value
It is important not to confuse ‘value’ with ‘price’. Although price plays a role in value, the two are not the same thing. Value is what the customer gets from the tangible and intangible aspects of dealing with a company. Price is what a customer pays during a specific sales transaction. It may be a genuine good deal, a low price, or even a high price, yet a customer still may not value the interaction with the company that provided the product or service.
The National Health Service (NHS) in Britain today offers a good illustration. Although not a commercial organization, it offers services, and patients play the role of customer. To ‘customers’ or patients, the offerings are free at the point of delivery and yet often the way the service is delivered – long waiting times for operations and appointments with local doctors, the behaviours of some doctors’ receptionists, the state of some of the waiting rooms – all combine to make patients (the customers) unhappy with aspects of the service. Money is being thrown at the various problems and, as in for-profit businesses, many tactical projects are attempted to try to improve the situation, but to date there has been little significant improvement. As in business, where customers can afford it they take their custom elsewhere and choose private medical care because of its customer focus, timeliness, choice and consistency.
Does the NHS provide good medical care? Of course it does, and at state-of-the-art levels in many cases, with dedicated and hardworking professionals. But does it provide it in a way that customers value? Much of the time it does not. And interestingly, much of the ‘better value’ health-care provision provided privately uses the same doctors and hospital facilities as the NHS, but their ‘offering’ gives customers a better value experience. Where money is not the main concern, value often comes down to how the customer is treated and whether the services are designed around the customer’s convenience or that of the delivery organization. As with most issues related to customer-centricity, the key factor is about the perspective taken when designing and delivering the service.
In large organizations with high levels of customer dissatisfaction, employees also become unhappy and stressed. And, indeed, the NHS suffers from high stress levels and significant time off for stress-related illness among its staff: ‘The NHS tops the league table for workplace stress’ (Publicworld.org, 2013). When any organization – commercial or otherwise – fails to provide value to its customers, it will also suffer problems elsewhere.
How the value proposition approach can help public-sector organizations
Public-sector organizations have employed the Value Proposition Builder™ with positive effect.
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CASE STUDY Enterprise Ireland
Enterprise Ireland helps companies to start, innovate and scale internationally. As one of the most prolific start-up investors in the world, Enterprise Ireland offers professional advice, skills development, funding, sectoral expertise and access to global networks.
In response to the 2008 financial crash, Enterprise Ireland redoubled its strategic focus on building sales and marketing capability in its client companies to strengthen their international growth potential. Futurecurve was engaged in 2009 to deliver a series of programmes in value proposition development to Enterprise Ireland client companies.
Having delivered to hundreds of companies over the past seven years, this programme has become integral to getting companies fit for exporting by working on their strategic value propositions. Exports of homegrown Irish companies have almost doubled in the past 10 years, exceeding €20 billion for the first time in 2015.
As Angela Byrne, Sales and Marketing Capability Lead at Enterprise Ireland, stated:
Our organization has engaged extensively since 2009 in the delivery of best practice value proposition development for our client companies with our partners at Futurecurve. These programmes continue to add enormous value for management teams in bringing clarity to their propositions and strengthening their competitive positions for international growth.
As Karen Hernandez, Senior Executive, Client Management Development at Enterprise Ireland, stated:
Over the past seven years Futurecurve have delivered their value proposition programme to hundreds of Enterprise Ireland client companies. The Futurecurve team bring a unique blend of theory, process and experience of practical application, which has supported our client companies successfully to understand and build appropriate customer value propositions in order to drive business growth. Enterprise Ireland has recently engaged Futurecurve to support our client companies to innovate more successfully through helping them understand and ideate around customer needs and challenges.
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CASE STUDY Aylesbury Vale District Council
Aylesbury Vale District Council (AVDC) is run by and for a democratically elected body whose purpose is to look after the social, economic and environmental interests of the people of Aylesbury Vale, Buckinghamshire.
Like many UK councils, AVDC receives less than 10 per cent of the council tax collected from residents and businesses. This money has never covered the full costs of the local services provided and central government grants have always made up the shortfall. Changes in central government policies have led to these grants being cut by 60 per cent over recent years, with the ultimate intention that no government support will be available by 2018–19. Since 2010 the reductions in government grants represent an £8 million shortfall in funding for AVDC.
Chief Executive Andrew Grant tells us how he and his operations team are developing a new, more commercial business model:
We were just looking at the problem: we get £8 million council tax and it doesn’t pay for more than one-third of what we do – to run the waste collection service is something like £4 million, so it doesn’t take a rocket scientist to work out that very soon we could just be a waste collection service. This is a very important service for all of us but we as a council are so much more than a waste management company.
We have made significant cost savings through our efficiency measures and making our assets work harder for us. We have saved around £14 million over six years but we now need to find additional, new income streams. In the business world a similar situation would be that if you only ever did what satisfied people 30 years ago, you probably wouldn’t find many new customers. How many hardware stores do you still see on the high street, selling little packets of nails? There probably is a case for an independent somewhere but the rest of us go to B&Q or Homebase or buy online.
Everywhere you look within our public services you see the mismatch between demand and funding. However more efficient we become, society does not want to pay the levels of income tax that would cover the costs. We have to face the fact that society has shifted. We cannot go back to a golden age of local government. We have to change.
We’ve been very vocal about saying we need to be building a £100 million business in 10 years, which sounds a lot but only because 10 per cent of that, if we ever get to profit, is not that big a number and, quite ironically, £10 million on £100 million is in fact more than the council tax we are going to be left with in three to four years’ time. We are saying, ‘Let’s be tax-free as well as grant-free by 2023’, we want to demonstrate that we can run this business as a social enterprise based on the great things that we’re doing, things that do not need tax
at all, and that could be a new model for local government.
Challenge
We have a business that needs to monetize; I am trying to find ways of reinventing it so that it would be something that people would choose rather than just ‘have to have’. We want to build choice, we want to make the case to customers to ‘choose us’ rather than ‘require us’, which is completely turning local government philosophy on its head.
When we engaged Futurecurve it was to try to give us some help with the concept of an overarching value proposition so that we could then organize our resources and our pricing around that rather than the old preordained value proposition for a council of ‘You will have the bins service whether you like it or not.’ We asked Futurecurve to talk to some of our council tax payers to see whether we could create a value proposition for local people that they would buy into emotionally and literally. Their work proved to be both critical and seminal in the proposition we are now actually presenting to people.
What Futurecurve told us is that ‘You’re trusted, you’ve got 75,000 customers who perhaps haven’t known you for anything other than council services but are willing to consider what your value proposition is.’ So it was trust, it was the ‘why’ of the organization that was important. That is what we will be putting back into our services so people feel that it is wholesome. We are connecting our residents to the services that they might want. We’ve now asked them what services they need and they are saying, ‘We can’t get cleaners, we can’t get repair work done, we want to take the hassle out of getting home care, home maintenance, etc.’ We’ve put on our website some ideas based on £200 to £400 monthly subscription for packages of care and repair, and overnight we have had 900 early registrations, residents who wanted to register for the service packages. It’s not there yet but we’ve got the interest that gives us confidence to move forward.