Charles Howden

January 19, 2007

I have been conducting some further research on “Customer Value Creation” this week.

Filed under: Uncategorized — Charles @ 10:16 pm

I have been conducting some further research on “Customer Value Creation” this week. I need to have some more evidence to support an academic article, which I am hoping to have published this spring.

I like doing this work because it involves me in talking to customers and unpicking how a particular product (or in my case, a service) supports a person’s whole system of personal values. In short, customers buy products and services (especially complex ones) to help them to achieve what they value in life. In a systematic way, customers buy, say, toothpaste, to support their belief and values about who they are as unique individuals. Sound complicated? It’s easier than it sounds, and discovers amazing marketing information to inform future product design.

This research goes to the heart of the difference between the study of customer value and the recording of customer satisfaction. Customer satisfaction, at best, is a report card on how customers perceive their experience of using a business’ product (stated in the past). Customer value is a study of what it is that customers expect and want to receive from using a particular product in the future.

Why should anyone care? Product design based on measurement of customer satisfaction is like designing future products based on what the customer used to want. It does not elicit information about what it is that will drive a customer’s future purchasing decisions.

I may love my Bang and Olufsen sound system which I bought in a fit of indulgence four years ago. It’s looks beautiful and sounds OK. If B&O rang me up and asked how satisfied I was with my purchase I would wax lyrical about the whole experience. At every level, I am satisfied with my purchase. So, if I should happen to be in the market to buy another sound system, would I buy one from B&O? Absolutely not.

If B&O undertook a customer perceived value survey with me, they would know this already. “If you were buying a sound system in the next month, what would it need to have to for you to be happy with it?” (Big open question, allowing me to go in any direction with my answer, from “purple speakers” to “iPod hook-up’’). Further questions would drill down to elicit more detail from my answers. After half an hour of this needs elicitation process, B&O would know that my need for super wireless connectivity, so that I could position speakers anywhere in my house, with the flexibility to move them around at will, would prevent them from selling their existing range of hardware to me. Is this important to them? If I should happen to represent a section of their target market, then I would suggest, yes.

Customer value studies examine current and future purchasing motivation. Not just in terms of product features but also in use, and in desired end states. This is the information that businesses need if they are going to create the customer satisfaction of the future. Satisfaction they can measure should they need to, giving them an indicator of how well they are delivering value to their existing customers. Arguably, the sales figures will tell management everything they need to know about how successful they were in hitting the mark).

Customers’ expectations change through time. The little gizmos and extras that once had us spellbound and were features on premium goods, quickly become passé and normal features on standard models. A bit like air conditioning in cars from exclusivity to ubiquity in fifteen years of design improvement, which is a tribute to the innovation of manufacturing industry processes.

Which leaves me wondering what it is that holds the service sector back from so rapidly improving their product offer. Let me guess at one of the reasons. The quality of service delivery is generally created by the relationship between a business’ staff and it’s customers, and enabled by efficient and flexible systems. Improving the quality of this relationship requires investment in training and individual performance coaching, an investment, which is not shown on a conventional balance sheet, and an investment which walks out of the door every night, and may not come back in the morning.

You won’t be surprised to learn that when I elicit value drivers from customers of insurance businesses, the top three all relate to the quality of the relationship with the individuals at that business. I’ll leave you to guess at the balance between the investment in staff training, and investment in more tangible assets.

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