How Creating Customer Value Makes You a Great Executive

Gautam Mahajan

• Publisher: Business Expert Press
• Year: 2017
• Print ISBN: 9781631579882
• eBook ISBN: 9781631579899
• Topic: Business
• Subtopic: Service Industry
• Index: Business

Customer value is an overused and mis-understood term. Chris Ross said, ÒThere's a strong argument for changing the term 'marketing' and renaming it 'value creation'.Ó Companies fail to create value as well as they could because tools of customer value are not known. The author corrects this in simple steps by defining customer value, how it builds loyalty, market share, and profitability; and how customer value can be measured and created. This book also addresses managing steps such as a customer strategy, breaking silos, inter-departmental focus on the customer, measuring customer value added, circle of promises, customer-centric circles, bill of rights, total customer value management. Remember, if you create value for others, they will create value for you!

CHAPTER 1

What Is and How to Use Customer Value

Customer Value measures and tells us why Customers buy, and why she^* rebuys or will buy more and from whom. It looks at the benefits a Customer gets versus what it costs her for the product or service she buys. If the Customer perceives she gets more benefits than what she paid (total cost in price and non-price terms), value is created for her. And when she goes to buy, she compares the value created by competing products or services, and buys from the company she perceives is creating the most value for her in this competitive world.

Companies are in business only because they have or can find Customers who buy from them. Companies get and retain Customers by creating value for them. The value we create depends on the Customer’s perception of the value. Companies try to evaluate the Customer’s perception. Often, this is done by measuring Customer satisfaction. It has been proved that satisfaction alone does not correlate to business outcomes such as market share (unless it creates competitive value). Customer Value goes beyond Customer satisfaction, and correlates to business results. This book tells you more about Customer Value, how to understand it, create it, measure it, use and manage it, and create value for yourself.

Customer Value is fundamental to business. Learn how to create Customer Value before you enter (sell, market, manage, price, service, or do other things) into the Customer marketplace (not just your business marketplace). The Customer marketplace may be different from yours. As an example, you maybe experts at physical selling, and the Customer prefers to buy digitally on the net.

Meaning of the Word Value

Value has many different meanings. To some, value means price (what is the value of this car?). To others, it means benefit (the value I get from this car). It also means the worth of something. That is, why you hear some people saying “Value for money” (meaning they are price sensitive); and others who prefer “money for Value” (meaning they are willing to pay for what they consider as higher benefits, as from a brand or a better product, or more convenience, etc.).

In business, we describe value to be the worth (benefits vs. cost) of a product or a service compared to competitive offers. We will define cost later.

The dictionary meaning of value includes:

The regard that something is held to deserve; the importance, worth, or usefulness of something. Synonyms are merit, worth, usefulness, use, utility, practicality, advantage, desirability, benefit, gain, profit, good, service, help, helpfulness, assistance, effectiveness, efficacy, avail, importance, significance, point, and sense.

You must also have come across the word values. Values are distinct from value (the plural of value as defined in the earlier paragraph is value). Values are what someone or a firm stands for honesty, morals, ethics, sustainability, integrity, trust, fairness, and so on.

Your company sets out to deliver value. This value remains potential value till the Customer perceives it, buys, and uses your service. These concepts are called Value-in-exchange and Value-in-use. Thus, the exchange process and the Customer’s use process are important to your company. In addition, the value the Customer perceives depends on her mood, attitude, her need, her emotions, her experience, her culture and background, and so on.

Customer Value Defined

No wonder, the reader is confused about the value word that she uses so often. When used in the vernacular, it does not matter; but when used as a technical term, like Customer Value, the meaning of value must be precise, so that everyone understands what it means, as shown in the following:

Customer Value is the perception of what a product or service is worth to a Customer versus the possible alternatives. Worth means whether the Customer feels she gets benefits and services over what it cost her, and versus competitive offers.

In a simplistic equation form, Customer Value is Benefits – Cost (CV = B − C ). It is what the Customer perceives, not what the company thinks.

What the Customer pays is not only price during the life of the product or service (cash, cheque, instalments, interest, payment during use and maintenance of a car such as fuel and servicing, and resale potential) but also non-price terms such as time, effort, energy, and inconvenience. In B2B and B2C, price justification is very important. Price and non-price together make up the cost of the product or the service. Most people mistakenly believe price and cost are the same. This is generally not true.

The benefits include the advantages or quality of the product, service, image and brand of the company or the brand of the product, the company’s values, experience, and success one gets in using the product or the association/relationship with it, its people, and so on. Other factors impacting value are emotional and psychological factors. Sometimes, we think of these as psychological or emotional benefits. An example is feeling good about the person serving you, or feeling happy when wearing a new dress or being complimented on it. This increases the value to you.

Consumers and Customers

Consumers are distinct from Customers. Consumers use the product or the service, but may not always buy the product or the service. The value the consumer perceives influences the buying evaluation and perception of the decision maker or the Customer. The Customer is someone who buys or makes the decision to buy. Often, the consumer and the Customer can be the same person.

Though in a wider sense you are a Customer if someone took you out for dinner to a restaurant, in the context of this book, you are a consumer. The person who invited you is the Customer of the restaurant. You might or might not have influenced the choice of the restaurant and what wine to buy.

A Non-Customer is someone who could buy from you or is a prospect, but is buying from someone else, or not buying now. She is also important to you for your future.

Sometimes Customers are known and sometimes unknown or anonymous. Many companies do not know how many Customers they have and who they are. This makes it difficult to reach the Customer or customize for them.

Meaning of B2B, B2C, and C2C

Sometimes, our Customers are businesses or business Customers in which case we sell Business-to-Business (B2B). If a business sells directly (or through third parties) to a Customer, then we call this Business-to-Customer (B2C). Note that B2C is not Business-to-Consumer, because the company sells to Customers and not to consumers who could be influencers. Also, when you are selling B2B, do not forget you are still selling to people within the organization, and they want to be treated like people and not as just someone in a company.

Take a food item on the shelf. In a generic sense, it is sold B2C. Actually, the food company sells sometimes to the dealer, and it becomes B2B, and she sells to the retailer (B2B) who sells to the Customer (B2C). Who is the food company’s Customer? All of these or just the final Customer or just the dealer? All are Customers, though the primary Customer is the dealer. Should this stop the food company in reaching out or advertising to the final Customer? These are all issues businesses have to manage.

Who is your Customer?

C2C is Customers talking to other customers, sometimes selling to each other, sometimes helping each other to buy, or recommending what to buy. Using C2C is a powerful way to reach anonymous Customers or at least in trying to understand them better (see my article on C2C¹). Often, the C2C medium is digital or word of mouth.

Is Value Created by Processes and Systems or by Mindset and Culture?

Value is created just as much by a focus on processes and systems as much as it is by mindset (and attitude) and culture. Actually, the mindset, attitude, and culture come first because they can influence the processes and the systems! Mindset and culture are much more difficult to change, and also difficult to emulate. It is easier to copy products, processes, and systems than to copy mindsets and culture. Therefore, for long-term success, a value creation mindset and an enduring Customer culture are important. These, along with properly Customer Value designed and applied systems, create great experience and value.

Are processes and systems more important than attitudes and mindset?

The perception of Customer Value changes during the use of a product or during the Customer journey and the dealings with the company’s Customer touch points. The Customer journey starts from the time the Customer has a need or thinks of purchasing through the actual purchase and finally the use experience. Value is perceived during the purchase intent, the shopping, the actual purchase or buying, the installation or start-up, the use, and even the resale. We sometimes call this the Waterfall of Needs. Needs change during the Customer journey.

Many companies focus on the Customer journey, which we want to minimize. If we study the Customer habits and journeys, we may sell differently. An example is for farmers, the best time to buy crop insurance is in the late evening after returning from the field. Savvy companies have sales people and products/services available at this time to coincide with the Customer’s lifestyle (and journey).

Selling in context is important. It is easier to sell me a chocolate bar when I am hungry or craving it, rather than when I am full. The Internet of Things and digital marketing can help you sell contextually more effectively. You should look at these platforms to add Customer Value. Irene Ng’s book Creating New Markets in the Digital Economy² gives you great insights. In addition, if you can empower others to deal with you, and use your offerings, you will be on the way to be a winner.

Context is important. Digital marketing helps in selling contextually

Any product or service has only latent or potential value when a Customer is unaware of it. So having a great new product has little value, till the Customer becomes aware of it and perceives value from the product. The value perception starts with awareness and information. How to create this awareness is important.

What Does Creating Customer Value Do?

Customer Value includes Customer satisfact...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright Page
• Dedication
• Contents
• Acknowledgments
• Introduction
• Chapter 1 What Is and How to Use Customer Value
• Chapter 2 Components of Customer Value
• Chapter 3 Measuring Value (Customer Value Added)
• Chapter 4 Meaning of Data and How to Use It
• Chapter 5 Using Customer Value Data Usefully
• Chapter 6 Customer Value Data and Business Results
• Chapter 7 Loyalty Curves and Value Maps
• Chapter 8 Customer Value and Loyalty
• Chapter 9 Total Customer Value Management and Customer Culture
• Chapter 10 Customer Strategy
• Chapter 11 Customer-Centric Circles
• Chapter 12 Customer’s Bill of Rights
• Chapter 13 Employee Value Added
• Chapter 14 Total Customer Value Management, Pricing and Preventing Commoditization
• Chapter 15 Customer Value Ideas for You
• Chapter 16 Discussion of What You Have Learned Earlier
• Chapter 17 Conclusion
• Appendix Short Guide to Customer Value Management
• Index