What is the biggest barrier to coming up with a customer-based marketing strategy?

Most of my work over the latter years has been around helping organisations to generate profitable revenues by doing a better job of addressing customer needs.  In the course of my work I spend a lot of time with the folks responsible for marketing and sales.

One of the exercises that I do is to get the right people from customer touching functions such as marketing, sales and customer services in a workshop.  And then I guide the folks through a structured SWOT type process for each significant customer segment.

The process starts of by asking the people in the room to identify what matters to the people in that customer segment.  What are the jobs that these people are hiring the company’s ‘products’ to do for them?  And what are the key outcomes that matter to the customers.  This is terminology that is not typically familiar to the people in the room so there is some tension in the room. At some point someone in the marketing function will say “Aha, you are talking about customer needs!” and everyone relaxes.

Then the answers come. Almost always the top five tend to be: brand, product, quality, price, and service.   Not particularly useful and I have learnt not to challenge people at this stage. So, I ask the people around the room to allocate 100 points between these five needs.  This is where the fun starts .  First, people really struggle to allocate weights to these five needs. And second, there tends to a lot of predictable disagreement.  Marketers rate brand and quality highly.  The Sales folks rate product and price highly.  The folks from Customer Services tend to rate quality and service highly. And if there is senior, dominant, person in the room then slowly the people in the room come around to his/her way of thinking and weighting these top five needs.  Notice something?  How confident would you be that the people in the room are providing you with an accurate picture of what matters to customers?

Next, I ask the folks sitting around the large conference table to identify their key competitors. And once they have done so I create a grid.  The columns are the company and its key competitors.  The rows are the top five needs usually brand, product, quality, price and service.  Now I ask the people in the room to evaluate how each of the competitors is doing in terms of meeting these five customer needs by giving marks out of 10. Once again the fun starts.  People really struggle to come up with weighted answers.  And there is considerable disagreement between people.

By the time we get to this stage the people around the room sigh a collective relief as if to say “Wow, that was hard work.  We are so relieved that this is over and done with.”

At this stage I am hoping for someone to say “Going through that exercise has made me realise that I/we know so little about what matters to our customers.  And how we compare to our competitors on what matters to our customers, as seen through the eyes of our customers.  So we should go and get better answers by conducting research, talking with customers, talking with the people on the front line who actually are in touch with customers on a daily basis.”  This rarely happens.

Instead, the people around the room have an air of assurance.  They are visibly convinced that they know what matters to their customers. And how they compare to their competitors. It is as if the hard work of the exercise that I have taken them through hypnotises them into believing that the answers they have conjured up have to be true, are true.

So the biggest barrier to coming up with a powerful customer based strategy is simply this: ignorance and prejudice masquerading as knowledge/understanding of customers.  The failure of people to say “We don’t know what really matters – jobs, outcomes, needs – to our customers.  We don’t know how customers prioritise these jobs-outcomes-needs.  We don’t know how our customers see us in comparison with our competitors.  Let’s go and find out.”

Are we asking too much of marketers and the Marketing function?

The implications for Marketing when the company|customer ‘relationship’ is viewed through SD Logic

I have been reading this deck that has been posted on Slideshare by Wim Rampen.  In this presentation Wim is making the case for looking at the business|customer ‘relationship’ through Service Dominant Logic.  In a nutshell SD logic states that service is the fundamental basis of exchange between the company and the customer; products are services in disguise – you go and buy a drill to get access to the service of drilling a hole/s, there is no intrinsic value in the drill itself.

Looking at the business|customer relationship Wim makes the following point (I have modified his language to make certain concepts clearer):

If value for the Customer is dominantly created after the value exchange (buy/sell when goods are transferred from producer to the consumer), ie. IN USE, both the scope and content of MARKETING STRATEGIES SHOULD SHIFT from dominantly focused on creating momentum for value exchange (promotion /selling) to a continuum of interactions aimed at supporting the customer’s value creation process.

Do you get it?  Wim is asking marketers and the Marketing function to shift from doing what they current do to designing and orchestrating the Customer Experience – across all interactions and touchpoints along the customer’s journey from research through to ownership and usage.    This is how Wim puts it:

Marketing  has to shift “from campaign and communication design to service experience design, end to end..”

Accepting this as the ground, the context, out of which Marketing operates, Wim goes on to spell out the key jobs that marketers and the Marketing function should be doing.

Wim Rampen: The 7 jobs that fall to the Marketing function

1. Understand customers’ value creation process (= jobs & desired outcomes) and where in the process customers fail to meet their desired outcomes;

2. Build relationships in communities of people with similar desired outcomes and behaviour;

3. Support customer’s value creation process;

4. Design experiences that stimulate engagement through interactions in networks of relationships;

5. Engage employees and partners in supporting customers in their process of value creation;

6. Extract actionable insights from 360-degree feedback to foster innovations and to turn them into value propositions that attract new customers; and

7. Redesign metrics to capture the engagement value for the firm and ensure there is high correlations between these metrics and customers value created.

Is Wim is asking too much of marketers and the Marketing function?

Lets assume that these are the jobs that need to be performed when it comes to the customer|customer relationship.  Now the question is do marketers (and the Marketing function) have the required skills to do these jobs?  Many of us would say that they do not.  Yet, that is not an issue because people who do have the skills can be brought into the Marketing function.  Do marketers have the required mindset and attitude?  That is debatable – people, as groups, are loathe to let go of their mindset, values and attitudes.  Yet, it is doable so let’s assume that marketers and the Marketing function can make that shift.

Now we come up with the more interesting question: does the Marketing function have the influence, the clout, to design and orchestrate end to end Customer Experience / “service experience design”?  Before you answer this question get present to what is being asked of the Marketing function.  The Marketing function is being asked to orchestrate the mindset, metrics and behaviour of all the functions and people in the enterprise: product development, sales, customer services, logistics, finance, human resources, information technology….  Is that realistic?  And if that task falls to the Marketing function then why have a CEO or the Board of Directors?

Look into what is so (reality) and you are likely to find that the Marketing function is simply one piece on the corporate chessboard and its mandate / role is limited to using advertising and spin to stimulate demand for the products that the corporation makes and needs to sell.   That is all that is expected of the Marketing function.  Sit with marketers and you are likely to find that they feel boxed in, limited, by the space that they are given to play in.  Only a few Marketing functions control the 4Ps – most only control one P, Promotion.  What I am pointing at is the gulf between marketing theory and the reality on the ground.

We are looking at organisational transformation and Marketing cannot lead that

Continue looking into reality and you are likely to find that the Marketing function that has little respect in the Boardroom or within the organisation in many if not the majority of companies.  If that is so then how is the Marketing function going to take the lead an, in effect, transform the organisation: product development, sales, customer services, logistics, finance, human resources, IT etc – they all have to play together to provide the kind of end to end service experience that Wim is talking about.

The role of organisational renewal and transformation belongs to the Tops (the CEO and the senior leadership team) and not the Marketing function.  Collectively the Tops need to: buy into the services dominant logic way of looking at the business; articulate an inspiring vision of the future and convert this into a blueprint; have the guts to requisition and deploy the right resources to convert that blueprint into reality; roll their sleeves up and help in turning the blueprint into reality; see it through to the end – be committed to the end goal; and be flexible and patient in going around obstacles on the path – there will be many obstacles.

If you are still in doubt over the point that I am making then ponder this: how likely is it that one of the States in the United States is in a position to influence and orchestrate the agenda / priorities / behaviour or all of the States in the United States so as to create harmony across all?  Then ask yourself if you did want that kind of harmony – say in the laws that apply – across the States then who is best placed to lead that task?  Is it really one of the States?  And if it is, which one is best placed, has the most credibility, the most influence, to bring about that kind of change?  Then ask yourself how long this process is likely to take?

The importance of the 3V’s to customer-based strategy

How do you go about developing a customer-based strategy?

If you are a strategist you will have come across all kinds of frameworks including: 5 Forces(Porter); Core Competencies (Hamel & Prahalad); Ansoff’s Matrix; BCG’s Growth-Share Matrix; 7S McKinsey Model; GE-McKinsey Matrix; 3Cs (Kenichi Ohmae); PEST(LE) model; SWOT analysis; IDIC (Peppers & Rogers)…..   Each was developed in a particular era, for a particular problem and represents a particular point of view about what matters in shaping success.

In addition to these frameworks, I’d like to suggest the 3V’s – Vision, Values and the Value Proposition.

Vision

Valeria Maltoni at the Conversation Agent has spelled out the value of having a Vision Statement.  I am going to take her lead and explore the Virgin Group especially as I had the good fortune to provide digital marketing services to the Virgin brand some years ago and walked away impressed at the culture, the customer orientation and how we (the supplier) were treated.  If you take a look at the Virgin website you find the following statements:

  • “We have always succeeded in business by offering consumers another way, a better way and being willing to fight their corner.”
  • “Our lifestyle is the way that we choose to live our lives – the things we buy, the things we believe – it is who we are. As global citizens we want to provide people with products and services that will help them to embrace a more sustainable lifestyle.”
  • “Our vision is to contribute to creating happy and fulfilling lives which are also sustainable – surely a vision worth aspiring to?”
  • “We believe that we have a part to play in making this a reality and so our vision for sustainability within the Virgin Group is: “to make a credible contribution towards sustainable lifestyles whilst meeting or exceeding the expectations of our staff, customers and other stakeholders”.”
  • “We want our Virgin companies to provide responsibly produced, sustainable, low carbon services and products that are desirable, easy to use and good value above all else so that our customers can enjoy their lifestyles safe in the knowledge that Virgin is acting responsibly on their behalf.”

What is the point of putting forth a Vision Statement?  Let me say that is no point in a Vision Statement if it is just a PR exercise or a desperate attempt to revive flagging fortunes.  The power of a Vision Statement lies in its ability to enroll a diversity of actors (Tops, Middles, Bottoms, Customers, Suppliers…) in an inspiring point of view on the future such that they co-operate in moving towards and creating that future.  This means that first and foremost the Vision Statement has to be authentic for the leader who crafts, speaks and lives it.  Notice the last point:  the Vision Statement lives to the extent that it is lived.  The more people that live it the more likely it is that the vision will become reality.

Values

You and I might craft the same Vision Statement and yet go about it very differently.  Why? Because our values (and beliefs) are very different.  For example, in the ‘struggle’ for independence from British rule in India several leading figures wanted the same thing – to bring an end to British rule and rule themselves as a people – yet some leaders valued taking up arms, others valued pleasing the British and Gandhi valued non-violent resistance.

Here is what Virgin says about values:

“The Virgin brand values have remained unchanged for 40 years. They aren’t just an image but a reflection of our very essence and the way we do business. Virgin has always stood for value for money, quality, innovation, fun and a sense of competitive challenge. But now our brand values have gone three dimensional; we no longer have a list of brand values but a brand cube to which we have added the Wellbeing & Happiness of People and Sustainability of the Planet. “

Made up values are cooked up to brainwash the intended audience and in that sense are simply the lipstick that hides the pig.  They are an either an attempt to hoodwink the gullible, a good sounding slogan or simply a desperate attempt to turn an also ran into a contender (think back to the highly successful Avis campaign “We try harder”).   Which makes me ponder about British Airways suddenly finding its core values: “To fly, to serve”.  Is it authentic?  I don’t know.  Will it lift its fortunes?  Possibly.

Real – authentic – values act both as guides and as constraints on what you will and will not do and how you will conduct yourself. One of the essential aspects of strategy is choosing what courses of action you will take and what courses of action you will not take.  Real values also have another advantage they allow you find / attract value chain partners – it is simply easier to do business with those that hold the same values as yourself and arguably it is more fun as well.

Value Proposition

In my way of thinking the Value Proposition is where you spell out your promise to your target customers.  It is where you take all of your insights about yourself, your target customers, your competitors and the world at large and spell out what your customers can count on you for. If you get the Value Proposition right then you will attract hordes of customers.  If you actually deliver on the Value Proposition – the customer experience delivers the value proposition – then you will keep customers and they will get more customers for you through word of mouth.

Let’s take a look at the Value Propositions for Richer Sounds (award-winning high street electronics retailer); TED (one of my favourite sites); and John Lewis (renowned for customer service):

Richer Sounds:  “Biggest Brands, Best Prices, Expert Advice…and take it home today!“;

TED: “Riveting talks by remarkable people, free to the world”; and

John Lewis:  “Free Standard UK Delivery on Orders Over £30”; “Click and Collect From Our Shops”; “International Delivery”; and “Never Knowingly Undersold.

Conclusion

It is worth thinking about what you stand for in the world (Vision, Values) and clearly articulating the promise that you are making / the bargain that you are striking with your target customers (Value Proposition).  Why? Because these are fundamental strands of a customer-based strategy.  What do you think?

 


Thinking strategically about customer experience: the 5 components of customer value

How do you think about Customer Experience?

In my view too many people are thinking about Customer Experience tactically.  Or put simply: too many people are thinking of Customer Experience in terms of making changes to the interaction channels.

Being a strategist, I prefer to think strategically and have been looking for a way that helps me to do that when it comes to:

  • Attracting and keeping customers; and
  • Thinking about, organising and executing Customer Experience.

So how do you attract and keep customers?  And how should you think about (frame) your customer experience efforts?  I assert that the answer to both of these questions is the same: create superior value for your customers and keep doing it continuously.

Which begs the question: what is ‘value’ from a customer perspective?

Fifield: customer value equation

One of the most useful frameworks that I have come across is the one developed by Paul Fifield (by building on some work done by Osterwalder and Pigneur) in his book Marketing Strategy Masterclass.

  • Value = Benefit – Effort – Risk – Price

Maz Iqbal: customer value equation

If it was OK for Newton to stand on the ‘shoulders of giants’ I am more than happy to steal from Professor Fifield.  Yet, I believe that Prof. Fifield’s equation neglects a critical piece of the puzzle.  So I have added it in and thus my equation is:

  • Value = Benefit – Effort – Risk – Price +/- Treatment

Let’s take a closer at the six elements of this equation.

Value

The first point to make is that value does not reside in the product or service that you offer.  Value is in mind of the customer.  Put differently, customer value is the value that each individual customer perceives in:

  • what you are offering including any implied or explicit promises; and
  • getting the job done in the way that you are proposing in your offer.

This means that ‘value’ will occur differently to different customers.  So a customer who is housebound is likely to value the home delivery of their weekly groceries very differently to another customer who is able to and enjoys visiting her local supermarket.

Finally, it is worth stressing that ‘value’ from a customer perspective is much more than price.  And it certainly is not about being cheap.  Recent wine tests have shown that in blind taste tests customers rate the same wine differently: if the wine is priced cheaply then the wine is rated as being of an inferior quality even though it is exactly the same wine in the same bottle!

Benefit

Your offer must promise and deliver the benefits that the customer is looking for.  One way of thinking about this is in terms of the job that the customer wants done and the outcomes he desires.  The closer you offer is to the perfect solution for the job and the desired outcomes, the more benefit it deliver and the more value that you create for your customer.

Clearly, each customer will have a different perception of the importance of the job, the perfect solution and the value of that solution. To make this manageable you must segment your customer base into distinct customer segments.

Effort

Customers have been conditioned to want ease and convenience.   I would go further and say that ease and experience are so important to us that once we have found a supplier that delivers this we stop looking for other suppliers.

The desire for ease and convenience spans the process of finding, evaluating, buying, taking receipt of and using the product or service. This means that the organisation needs to pay attention to more than the product or service.  It needs to pay as much attention to interaction and distribution channels as it does to the product or service.

It is worth noting that real value, from the customer’s perspective, is only created in the usage process.  Too many suppliers neglect to pay sufficient attention to the customer’s actual usage process.  So they fail to come up with solutions that minimise the effort of using these product or service.  This is an area in which Apple has excelled and made its fortune.  Now compare Apples attention to detail (as regards the user experience) to this: How “wrap rage is hurting the customer experience”

As Fifield says “Generally, there will be greater customer value attached to those offerings, where the organisation has spent time, research, effort and insight into finding new ways of making the old jobs easier.”

Risk

The greater the level of risk that the customer sees in you the vendor and your offer, the lower the perceived value of your offer.

The perceived risk is much higher when the customer has a lack of knowledge and prior experience in how best to get his job done.  And in particular how to judge the expertise of the supplier and the quality of the offer.

It is worth noting that risk is always present: usually at a subconscious level.  Customer are particularly sensitive to things that can go wrong and which make them look stupid in their own eyes (self-esteem issue) or in the eyes of others (social standing).  It is the reason that advertising is not dead, will not die and why established brands do well despite doing poorly on other elements of the customer value equation.  We are risk averse and stick with the devil we know;  brand recognition matters – ask anyone who does not have an established brand.

Price

In some ways this is one of the more complex components of the customer value equation.  Why  Because it is not as simple as the price being too high.  From a customer perspective, it cover the following aspects:

  • Price being too low (wine example under Value heading) and thus leading the customer to think that the offer is of inferior quality or not fit for purpose (increasing the Risk component of the Value equation);
  • Price being too high;
  • Seeing the same product cheaper somewhere else;
  • Depreciation in value – how fast the resale value of the product will fall;
  • The time/effort trade-off in searching for the lowest price;
  • Buy now or buy later when price falls etc

Treatment

Treatment recognises that customers are people and as such the place a value in how they are treated as human beings.  Put differently, customers put a high value on ‘service.  In particular, they prefer to do business with organisations that leave them feeling ‘valued’.

I have placed a +/- in front of the Treatment component because if customers are treated well (especially by the employees of the company) then it make a positive contribution to customer value as perceived by the customer.  If the company fails to do that then the Treatment component becomes negative and decreases the value of the rest of the offer.

Two companies that excel in the Treatment component are Amazon and Zappos. Here is an example of the kind of impact this has on the customer:  “Great Customer Service Build your Revenue and Brand: My Amazon Experience”