Did you ever really wonder why global businesses are spending billions of dollars annually to improve customer experiences? Well, it’s not because they want to remove stress from their customers’ lives. Actually, it may be for that reason but their ultimate objective is to make more money.
Think about this – improving experiences helps businesses make more money! This can happen if the business reduces expenses, increases prices, or sell more products and services. If they do all three, they hit the jackpot. Let’s put the cost reduction aside since the businesses always try to save money. Let us just focus on increasing prices or growing sales. The place to start is with a discussion of value.
Defining Value
According to the Oxford English Dictionary, value is “the worth of something compared to the price paid or asked for it.- According to Wikipedia, “value (economics) is a measure of the benefit that may be gained from goods or service” and value (marketing) is “the difference between a customer’s evaluation of benefits and costs.”
- Middlesex Consulting defines value as “the tangible and/or experiential (emotional) net improvements (benefits minus costs) to customer outcomes resulting from using or owning the supplier’s products and/or services, compared to all alternatives”
So, regardless of which definition you like, value is measured in terms of benefits and selling price (customer costs).
According to many studies, customers will pay as much as a 7% premium to buy from an organization that provides above average experiences. Other studies show a clear linkage between overall customer satisfaction and their propensity to repurchase and/or recommend. This means that satisfied customers equate the quality of their experiences with a business and the value the business delivers. In the B2B world, as well as the B2C, this is a very big deal.
B2B capital equipment purchase decision-making
A committee makes most “key” capital equipment purchasing decisions. The committee is usually lead by a professional purchasing person and consists of users, maintenance people, finance, plant and facilities, and possibly others with valid special interests. For example, in hospitals the buying committee includes materials management (purchasing), clinical (doctors and nursing), biomedical engineering, and finance. Each constituency has its own vision of the value being offered (expressed in dollars and patient outcomes) and costs for each area. When these numbers are tallied, the hospital knows how much overall value will flow to the hospital and what total costs will be generated every year the equipment is in service. This means that the sales team or sales person can no longer only sell to an influential person and be comfortable that the order will come your way. It also means that the value must be as large as possible and the operating costs as low as possible to ensure your product meets the purchasing criteria.
For strategic purchases, with lower annual spend than key products, the end user more heavily influences the purchasing decision. In this case, there is less need to quantify the value of above average experiences but still a great need to set expectations of above average experiences.
In both cases, customer experience is a value generator. While you are calculating the value-added for each prospect you should consider how much monetary value you can ascribe to your frictionless customer facing processes. For example, if you are selling technical products and your support organization has an on-line knowledge base that can be used by the buyer’s technical people, then you can collect estimates of savings from your existing customers and adjust the value to consider the size of the current offer compared to your other customers. May not sound elegant but enlightened buyers will understand your point and will include the proposed value in their evaluation.
So, at the end of the day, good experiences really do generate quantifiable benefits. Unfortunately, sometimes your business causes more trouble than it solves. In that case, please click here to read a post about value destroyers.
About Middlesex Consulting
Middlesex Consulting is an experienced team of professionals with the primary goal of helping capital equipment companies create more value for their clients and stakeholders. Middlesex Consulting continues to provide superior solutions to meet the needs of their clients by focusing on our strengths in Services, Manufacturing, Customer Experience, and Engineering. If you want to learn more about how we can help your organization minimize the measure and improve yoour customer’s experiences please contact us or check out some of our free articles and white papers here.