Here at Habit5 we believe that the brands and businesses that understand their customers best, demonstrate this understanding by creating mutual value and are in turn understood by their customers, will do best in their markets. We know that it sounds like common sense but, as we’re sure you’ll have experienced, it is far from easy to achieve consistently over time.
To help you take on the challenge of creating mutual value with and for your customers, we’ve pulled together five key questions that you should ask of your brand or business. Answer each of them as well as you possibly can and then keep asking, to constantly improve what you do and how you do it.
But before we launch into our battery of questions – why are we focusing upon ‘creating mutual value’? Well firstly, because nearly all of the decisions we each take every day involve some assessment of value – the benefit we gain, set against the cost incurred, relative to other alternatives. The benefit can be tangible, emotional or psychological. The cost can be in time, money or opportunity. Your decision to read this far was based upon an assessment of the utility and worth of doing so. We hope you don’t feel short changed!
Understanding what consumers and business decision makers value at any given moment is getting harder and harder to predict. Nearly a decade ago in 2006 Michael J. Silverstein, a senior vice president at Boston Consulting Group (BCG) wrote, “Consumers’ value calculations are much less predictable today than even a decade ago, because they don’t seem to line up with the consumer’s income or demographics the way they used to.” It has only got harder since then.
The mid-market in particular, is really struggling with constant shifts in consumer value equations. The middle class is both larger, more fickle and promiscuous in its shopping behaviour than it was back in 2006. Long established retail brands are finding the going really tough. This is the Tesco share price since 2010.
Caught by consumers trading down to the discounters – Aldi, Lidl, etc or trading up to Waitrose and M&S. A symbol of just how confused and warped perceptions of value have got – in November last year, Aldi started selling what, initially at least, it called Beluga Caviar for £9.99 a tin!
You may still be left wondering why we are focusing upon ‘creating mutual value’. Well simply because we think it’s the only kind that is sustainable over the medium to long term. Brands can’t con and rip off consumers and expect loyalty in return.
So, what are our five key questions…
Question 1 – Who is my customer?
Sounds a bit basic. A bit obvious maybe. But it’s vitally important. You should keep striving to understand who your customer is and know more about them. I would encourage you to be inclusive here, think about all of the different customers that your business or brand serves:- Purchaser, Booker, User, Consumer, Influencer, Introducer, Audience. They are all people. All individuals. What do they have in common? How are they different from each other? Opportunities to create value can be stimulated by thinking of your customers more holistically. Could my product be any easier for purchasers to buy? Or consumers to consume? What might prompt recommendation? What would make it easier for intermediaries to explain? Value can take many forms for different folk.
Alongside this make sure you understand where the value is for your business and where it could be. Understand the current actual value of customer relationships – sales revenues achieved, referrals made. Just as important but harder to assess – understand the potential value. Correlate the two – using high, medium, and low categories for both, creating a nine box matrix – which will be more than adequate for most businesses.
Do Calculate Lifetime Value (LTV) if that is practical for you, but don’t get mired in doing so. Develop marketing strategies to grow and realise value by offering it in return. A great way to go about this is by collaborating with your customers. Customers decide what represents value for them. You decide what delivers value for your business. So why not collaborate on it by running Co-creation Sessions.
Co-create a new or improved product or service working alongside your customers in a workshop or maybe a secret online group on social media, as we did working with teenagers for The Woodland Trust.
Work outwards from your customers’ lives and experiences wherever possible, rather than starting with your product or service. People usually understand their lives and hassles much better than they understand your product or your market. They may not know the answer or solution but they understand their need, particularly if you get them to access it in unusual ways like drawing, role play, etc. Bounce ideas off each other.
It may well be valuable to make collaboration any ongoing part of how your business does things, by creating and managing a Customer Panel. A broadly representative group of maybe 100-5,000 customers who are happy to answer questions, participate in discussions or get involved in research, on a regular basis over an extended period of time. Great for getting quick reactions to changing circumstances or feedback on communications concepts. Research turnaround times can be accelerated, overall costs reduced and you can build up increasingly smart selections to future research studies based upon past answers given.
Question 2 – What do my customers buy, and why?
I would emphasise that this is NOT necessarily about what you SELL. As Seth Kahan of Fast Company wrote recently, “Value isn’t fixed or tangible; it rests in perceived benefit. In other words, value is in the mind of the beholder.” Customers buy a capability – the ability to reliably deliver a result, consequence or outcome. I know that sounds very rational but it may be the capability to relax, be entertained, remember, grow, live, or avoid pain. What customers buy – isn’t a drill or even a hole in the wall, it isn’t shelves, it might be the desire to be perceived by others as knowledgeable or well-read, or to clear space or to find things more easily and save time. Understand what your customers place importance on? What is relevant to them and what isn’t?
How do customers go about deciding what to buy? – Lots of research suggests that at least 5 factors often play some kind of role in the purchase decision.
Technical Value – what are the technical differences between similar products or services? The stuff of comparison tables and large detailed price tickets and tick lists, etc. But could also relate to raw materials, design or packaging differences.
Functional Value – Performance expectations. Will it do what is says? – RONSEAL’s WYSIWYG. Will it work reliably? Will it last? Will it deliver consistently? Zero defects? Will it be easy to use? Brand equity, reputation, past and peer experiences, ratings, scores, gradings, awards all play in to this.
Emotional Value – What thoughts, feelings and attitudes will buying and using this product or service inspire in me and others? Will I feel extravagant, indulged, thrifty, in-the-know, youthful, sexy, comfortable, safe, secure? Increasingly intuitive or instinctive triggers from the limbic brain are felt to drive, or at least underlie, human behaviours.
Purchase Experience – What might, or is, the process of buying the item like – stimulating, engaging, hard work, time-consuming or fun? (We’ll return to the experience in a bit).
Price – How does the price compare with the cheapest or most expensive alternatives that I know of? If there is a significant difference – why is that? Am I being given any reasons for the difference?
There is some merit in asking your customers direct questions in market research – what they value in your product or service? what is important and relevant to them? But don’t make this the only way that you seek to understand them, as you will only be seeing just the tip of the iceberg. Customers may over process their answer,s or may want you to have a particular perception of them that differs from reality.They may not really know how to express their answer.
Real value comes from understanding why your customers behave as they do. Their deeper motivations.
Use more lateral ways and often non-verbal ways to access this understanding – through projection exercises maybe (e.g. In an ideal world…. If this happened…) or by using metaphor-elicitation – for example, encouraging consumers to bring to a one-to-one depth interview an object that expresses a particular desirable product characteristic or brand trait. 121 depth interviews carry less social risk than focus groups and can easily be conducted in the participant’s home or place of work. A familiar location where they are more likely to be prepared to open up with less fear of losing face or being exposed.
We’ve touched already upon the Purchase Experience but what about the wider Customer Experience…
Question 3 – What is the Customer Experience?
Let’s start by answering what it is not. It is NOT just or simply ‘Customer Service’ that is facet of it, but it is not the whole. Some businesses become fixated upon customer service and fail to see opportunities to create value in other areas of the experience that may be less costly and deliver more impact. It is all of the interactions people have with, or about, a solution: messages, people, processes, policies, price, products, and services. Collectively, these things are intertwined in a customer’s experience. The customer experience is no longer funnel-shaped (if it ever was?) – it is NOT linear and sequential, narrowing down from brand awareness to loyalty. This is too simplistic and again misses opportunities to create mutual value.
McKinsey’s double loop model of the purchase decision experience, as depicted above, gets closer to how things are now in a heavily digital world.
There are potential opportunities to create value all the way through this from initial trigger right through to post purchase. I’ll mention just three examples that I have worked on with clients:-
Understand what circumstances or needs can trigger purchase? Are there identifiable events or situations that you can respond to early, or at least earlier than your competitors. Can you even trigger the need yourself – I once worked with the Royal Institution of Chartered Surveyors (RICS) to define and originate a ‘Guide to making the most of your commercial premises’. This delivered value to business owners by giving them criteria and insights to use in judging how they made use of their office, factory or retail outlet. At the same time RICS gained value by raising awareness of their organisation at a key moment, possibly even putting a move or modification to premises on the agenda. It generated more leads from SMEs than anything else they were doing at the time, from contacts with a questioning mindset about their premises – perhaps ahead of an extension or a move – representing upstream opportunities for the Chartered Surveyors that RICS has as its member base.
Find ways to assist customers in arriving at a buying decision. Apps, web tools and calculators are great for this. Several years ago, the agency I was working with then, developed a Boiler Calculator for Glow worm – boilers by the way are usually the third most expensive thing that people buy after their house and car – running to several thousand pounds in many cases.
Domestic boilers are a low involvement product category – until you are freezing cold in January! Few consumers feel knowledgeable about boilers and defer to installers. The calculator helped them take control (which is a great way to create value) and specify the right type of boiler for their house and needs. Glow worm were credited with facilitating the calculation and benefitted from hundreds of thousands of boiler calculations being achieved printed off or downloaded, building a sizeable opted-in email database along the way.
Find ways to give value back to customers based upon the data you hold. Six months after a new customer had joined banking brand first direct they could generate a credit score for them based upon actual account behaviour, rather than prediction. Whilst I was working there as Head of Communications, we managed to translate this into a ‘Credit Signpost’ for recent customers, indicating on the basis of the information held what borrowing facilities could be extended to the customer by: loan, overdraft or credit card. This delivered value to the customer by largely removing any perceived risk of their application being rejected and appropriately set customer expectations for what might be possible. Functional and emotional value for customers in spades then, and a higher average number of cross sales achieved than any other UK bank.
A good place to start in Creating Mutual Value through the customer experience is by mapping the Customer Journey to and through purchase. The current actual journey and the ideal. Spotting opportunities to add value, gather new information and set expectations as you go. We’ve run client workshops to map customer journeys in: banking, cruise holidays, hotels, pharmaceuticals, housebuilding and more. The process never fails to turn up unexpected gaps, disconnects, poorly written communications and opportunities to add value.
Question 4 – How is my product or service actually used?
Almost always, your product or service is consumed in concert with other products, services, people, technologies, or processes. Understanding this context is necessary to create optimal mutual value with customers. For example, car manufacturers go well beyond the basics, to create new value by: making it easy to add accessories for biking or off-roading, making it possible to open the boot or park without using your hands, entertaining people sitting in the rear seats, making it easy to trade-in and finance a new car. Think about the augmented or auxillary product or service here: add-ons, options, aftercare, education in use, demos, etc.
Think too about what James McQuivey of Forrester Research, in his 2013 book ‘Digital Disruption’ calls ‘innovating the adjacent possible’ – harnessing low cost or no cost technological developments in neighbouring but otherwise unrelated spaces to create new value in your own.
Exploring how people actually use your product or service can deliver great insights from which to create value.
Why not try…
Observation – Accompanied shopping online or instore.
Digital observation – Eye-tracking analysis of web page views perhaps, a technique I’ve used in testing prototype software for HSBC with business managers across Europe.
Ethnography – Insights derived from how people live. How they organise their home or office environment. Even in my past experience how they leave their hotel room! Conducting in home depth interviews can often provide an opportunity for some ethnographic investigation.
So then, to the last of my five questions and by no means the least…
Question 5 – Where is the value for us?
Don’t pursue ideas or innovations that don’t deliver a net benefit to your business unless you are following a conscious loss leader strategy. Work out the relevant criteria for you to judge and evaluate long lists of potential ideas to arrive at your shortlist or final selection for implementation. The kind of mutual score model that I’ve shown here can assist this process greatly. If everything stacks up and fits, you are probably onto a winner in Creating Mutual Value.
Once you have implemented a significant change or modification to your product or service, alongside sales revenues, margins, and other commercial KPIs, be sure to track what might be regarded as ‘soft’ outcomes. Impacts upon customer satisfaction, recommendation, or as with our Mutual Understanding Measure(TM) shown below – customer perceptions on whether their current or future needs, preferences and attitudes to price, are well understood by the brand or business.
If you successfully answer the five key questions I am sure that you will equally successfully Create Mutual Value for your customers and your business. If you need any help with answering any of the questions or acting upon the answers you come up with, do get in touch. I’m sure that we can add value – that word again!
What’s new and news from us at Habit5 and the wider world of human understanding