by Cindy Barnes
Amazon is working continuously to improve its customer interactions. It takes a similar approach with some of its product delivery errors – even customer errors. Sometimes, if an item is accidentally misdelivered, or ordered twice, Amazon tells the customer to keep the second item for free. This approach is very sensible for a $10 book or other small item because the cost of processing the returns is much, much higher. The customer feels good, so Amazon’s customer service ratings benefit. And it makes more sense to spend less and let the customer keep the item than to go through the hassle of returning it to stock. Virgin Atlantic is another company that did its homework and determined that sometimes, good customer service could also be justified by increased costs, with employees at all levels being given discretionary budgets to make unhappy customers feel better about the brand (Virgin Trains, 2015).
Virgin Atlantic and Amazon are both examples of turning a potentially negative situation into one where the customer feels ‘special’. They also illustrate that focusing on the customer and empowering employees to make appropriate customer service decisions need not cost the business more money. Finally, they show that success is achievable.
Shifting to being a customer-centric organization can be done – and it has been done many times. However, the ultimate decision and ability to make these changes rests with senior executives. It is they who must decide to play an instrumental role in creating and living a company value proposition that reflects how the business behaves and is perceived. These executives must also want to create an organization that can deliver on an authentic proposition that is delivered in every customer journey.
In Chapter 3 we summarize how to create the value proposition that gives your organization its platform for change.
Self-test: is your organization product-centric or customer-centric?
From each pair of descriptive statements (A and B) note which statement more closely resembles your organization.
A
Select A or B
B
1
Focus on the best product for the customer
Focus on the best solution for the customer
2
Your main offering is new products
Your main offerings are personalized packages of products, services, support and education
3
You create value through cutting-edge products
You create value through customizing for the best total solution for the customer
4
Your priority is on managing portfolios of products
Your priority is on managing portfolios of customers
5
Measures include: numbers of new products, percentage of revenue from products less than two years old, market share
Measures include: company share of most valuable customers, customer satisfaction, lifetime customer value, customer retention
6
Pricing is done by cost-plus or price to market
Pricing is value-based
7
Organizational structure is by product or manufacturing profit centres
Organizational structure is by customer segments, customer teams and customer profits and losses (P&Ls)
8
Your approach to your people is to give power to product developers
Your approach to your people is to give power to people with in-depth knowledge and understanding of customer’s business
9
Your thinking is divergent, ‘How many possible uses of this product are there?’
Your thinking is convergent, ‘What combination of solutions is best for this customer?’
10
Your behaviours focus on product experimentation and being open to new product ideas and innovations
Your behaviours focus on relationship management and searching for more customer needs to satisfy
If you have scored:
Mostly As: you are a product-centric organization. You may want to consider starting a company value proposition initiative to help move you towards being more customer-centric.
50/50 A and B: your company has some insight into customers but is missing key elements by focusing on products. Working on your company value proposition will help you to become more customer-centric and make a material difference to your sales performance.
Mostly Bs: you are a customer-centric organization and you should already be reaping the rewards of customer intimacy.
SOURCE Based on an idea by Galbraith
References
Barnes, Cindy, Blake, Helen and Pinder, David (2009) Creating and Delivering Your Value Proposition, Kogan Page, London
Dixon, Matthew, Toman, Nick and DeLisi, Rick (2013) The Effortless Experience, Portfolio Penguin, New York
Galbraith, Jay (2014) Designing Organizations: Strategy, structure and process at the business unit and enterprise levels, Jossey-Bass, San Francisco
Gallup (2016) [accessed 24 August 2016] A Guide to Customer Centricity – Analytics and Advice for B2B Leaders [Online] http://www.gallup.com/ services/187877/b2b-report-2016.aspx?ays=n
Howard, Tamara (2015) Putting the Soul Back into Business, Verve Business Books Ltd, Oxfordshire
Hutchins, Edwin (1996) Cognition in the Wild, MIT Press, USA
Peterson, Hayley (2015) [accessed 15 November 2016] McDonald’s CEO Reveals his Massive Plan to Save the Business, Business Insider [Online] http://www.businessinsider.com/mcdonalds-ceo-reveals-turnaroundplan-2015-5
Publicworld.org (2013) [accessed 31 October 2016] The NHS Tops the League Table for Workplace Stress [Blog] [Online] http://publicworld. org/Blog/time_to_insist_nhs_employers_talk_about_staff_stress
Robinson, Simon and Moraes Robinson, Maria (2014) Holonomics: Business where people and planet matter, Floris Books, Edinburgh
Virgin Trains (2015) [accessed 31 October 2016] Passenger’s Charter [Online] https://www.virgintrains.co.uk/~/media/vt/files/pdf/passengers-charter.ashx?la=en
03
How to develop a value proposition
Now that we have explored why value propositions matter, let’s explore how to develop one. To recap:
A value proposition is a blueprint for the whole organization that enables the business to deliver genuine value to its customers. It is the sum of all the offerings and experiences that you deliver to your customers, during all their interactions with your organization.
Once you have defined your organization’s value proposition, you have the necessary foundation on which to build powerful sales propositions. The book Creating and Delivering Your Value Proposition (Barnes, Blake and Pinder, 2009), explains in detail the stages of the Value Proposition Builder™. In this chapter, we summarize those stages.
The Value Proposition Builder™
The Value Proposition Builder™ process follows six steps:
Market: understanding the specific group of customers you want to target.
Value experience: defining and understanding precisely what it is that your customers value.
Offerings: mapping, defining, categorizing and managing the life cycle of your offerings around value.
Value hierarchy: taking the external and internal views of your value experience and prioritizing them, including the cost component (price and customer risk).
Figure 3.1 The Value Proposition Builder™
SOURCE Futurecurve, 2016
Alternatives and differentiation: what the alternatives are to using your organization and how and why you are different (and better) than those alternatives.
Proof: benefits realization techniques and evidence of your ability to deliver the customers’ desired value experience.
Who does this work?
After 600 value proposition designs and implementations globally, based on the Value Proposition Builder™, it would seem that a multifunctional team from across the key areas of the business is the optimal answer. Usually the project lead is a senior strategic marketing person. A senior, board-level sponsor is a
lso needed to keep the strategic direction on track and ensure that the board is kept onside and supportive throughout so that it will be receptive to the changes and innovation made necessary by this work. It is also important to take into consideration the various departments and areas of the business that are likely to be impacted. At a minimum the commercial departments need to be involved, including sales, marketing, product management and pricing.
Dave Brock, a leading sales expert and principal at Partners in Excellence, makes an important point about bringing product management into this mix:
A lot of marketing organizations that I see today, even in very large companies, have a chief marketing officer (CMO), but they really focus on more tactical, outbound marketing. How do we create awareness, visibility, interest? They seem to miss the true strategic nature of marketing that did a lot of real market and customer analysis. What is happening? Who are our customers? What are the trends? What does this mean for our offerings? What is the opportunity? All that classic stuff. Very few marketing organizations today seem to own that and it has been moved to product marketing and product management. So it is important for the whole organization to be working strategically together as an integrated unit. It is important, too, that this is clearly understood and that product management is brought together with marketing and with sales.
It is therefore important to understand the differences between the various types of roles required in marketing and sales and how they integrate with all aspects of commercial function. Many organizations today are unaware of the specialized roles and activities required for truly customer-centric marketing and selling. This brings us to the next law:
5th Law of Value Proposition Selling: an organization must understand and be clear about the difference between marketing and selling.
The Value Proposition Builder™ is a structured, rigorous and proven process that starts from an understanding of your market and ends with developing proof that your value proposition works. Each step is valuable in its own right. And indeed organizations often have intelligence about one or more of the steps. But bringing them all together in a way that reflects back what customers want is the key to crafting a truly powerful value proposition.
1 Market
This first stage involves analysing target markets in detail, starting at the strategic, organization-wide level, then narrowing down the focus to sectors, regions, products or services, before looking at individual sales opportunities and marketing messages.
This exercise includes drilling down to specific organizations, buyers, influencers, original equipment manufacturers (OEMs), resellers and end customers. The analysis creates an understanding of the cultural and political nuances of the markets and the risks associated with buying from the company.
Key questions executives should ask:
Where is your organization positioned in the marketplace? Is it where you want it to be? If not, where do you want it to be?
Which markets or customer types offer the best opportunities for profitable growth? Who are the specific groups of customers you are targeting?
What do customers need? What keeps them awake at night? What are their pain points? Are there discrete market segments?
What risks do customers perceive when choosing your organization?
What is going on in your target segments? What’s hot? What’s not?
What will the company be able to do differently at this stage?
Even after only one stage of the Value Proposition Builder™ process has been completed, an organization can achieve immediate benefits. It will be able to:
plan sales and marketing by aligning with customers;
enable its sales professionals to have significantly improved confidence and certainty about targeting;
understand what drives customer behaviour;
see how the company needs to adapt to meet customers’ needs and to remain competitive – both now and in the future;
understand competitive forces and identify the desired market position.
2 Value experience
Customer interviews
Fully nuanced customer insights are at the heart of this step and are probably the single biggest area of value in this process. However, obtaining these insights requires specialized skillsets and processes, because as celebrated advertising guru David Ogilvy pointed out: ‘The trouble with (conventional) market research is that people don’t think how they feel, they don’t say what they think and they don’t do what they say.’ Using a combination of qualitative, psychological and phenomenology-based techniques will unlock what people think, feel and do. It is vital that the interview is carried out by a trained, independent practitioner with experience of business and psychology-based research. Otherwise, customers may feel they are being manipulated through directed questioning to give answers the company wants to hear. At worst, some research feels like poorly disguised sales efforts.
The interviewer needs to uncover and understand the depths of the customer value experience from a rational, an emotional and a social perspective. Together, these three components enable the analyst to understand how customers experience value. It is also important to understand what customers don’t value and to capture any constructive criticisms.
This approach is unusual. Yet it is fundamental to acquiring the necessary insights. As the artist Grayson Perry pointed out in an article in the New Statesman magazine: ‘There is a habit of denying or suppressing emotions in business. This gives business the veneer of “professionalism”. To be unaware of or unwilling to examine feelings means those feelings have free rein to influence behaviour unconsciously. Unchecked, they can motivate us covertly, unacknowledged, often wreaking havoc’ (Perry, 2014). So a business today ignores its customers’ feelings at its own peril. Conversely, businesses that successfully navigate this process will reap unexpected benefits.
Internal company interviews
The external qualitative interviewer should also interview key company employees. This feedback will reveal what the company believes about its value to customers. In fact, carrying out this process regularly reveals a gap between what customers experience and what people in the company believe is actually delivered. At this stage, it doesn’t matter who is right. What matters is the mismatch in perception.
Qualitative research allows a company to create a hypothesis about the issues uncovered and helps identify solutions. This hypothesis can then be tested with a larger sample, using a quantitative approach. This is where quantitative surveys can be useful for validating the discoveries provided by qualitative research; however it is essential to do the qualitative research first.
Getting inside customers’ heads: a new approach to qualitative research
In Chapter 2 you will have read the story of the global financial services company that ran market research exercises over several years to try to understand customer loyalty problems, yet could not get to the heart of the issue. There was nothing wrong with the research itself: it analysed transactions and statistics effectively, creating a picture of what thousands of retail customers and consumers were doing. The problem was the type of research. Crunching the numbers is important, of course. But no amount of analytic power or big data can get inside customers’ heads to find out their real motivations. And this approach is the problem with quantitative research when it is done in isolation: without really understanding what is behind a problem, you can end up asking the wrong questions. And if you do this, you will never get the right answer.
Qualitative research answers the ‘why’ questions
Qualitative research is by definition exploratory. It is used when we don’t know what to expect, to help define the problem or develop an approach to resolving it. It is also used to go deeper into issues of interest and explore nuances related to the problem at hand. Common data collection methods used in qualitative research include in-depth interviews, uninterrupted observation and ethnographic participation/observation.
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Quantitative research answers the ‘what’ questions
Quantitative research is conclusive in its purpose as it tries to quantify the problem and understand how prevalent it is by looking for results that can be projected to a larger population. Here we collect data through surveys (online, phone, paper), audits, points of purchase (purchase transactions) and click-streams.
TABLE 3.1 Where to use qualitative and quantitative research
Qualitative research – used to:
Uncover what is really happening with a particular issue
Explore the range of feelings and thoughts about that issue
Look for patterns and perspectives between stakeholders
Identify ‘why’: look for motivations, behaviours and other factors that influence why these stakeholders do what they do
Provide the basis for a traditional quantitative survey