Note: Sam Klaidman and Art Drake wrote this post; both served as Customer Value Creation International Board of Directors members.
Introduction
During a recent telephone conversation, we discussed customer value creation, selling customer value, and what constituted value creation. This was not the first time we had this type of discussion. At the end of previous “debates,” we reached compromise agreements but then said, “so what?” It was a little different this time because we both felt we had achieved an important insight.
We started talking about the importance of customer value creation and followed our streams of consciousness until Art finally blurted out:
“When competing on value, your industry becomes very narrow. Few survive!”
Sam made Art stop talking (took some effort) and wrote down his quote because it was something Sam had never considered.
We talked about this concept for a few more minutes and then decided we would co-author this post.
Drucker on business
According to Peter Drucker, “the purpose of a business is to create and keep a customer.”
Today, more than ever, customer acquisition and retention are increasingly harder to do. Information is constantly shared on the web and through social media. Digitization and the internet of everything disrupt how knowledge is created and distributed. Customers and companies are forced to adapt to this disruption. But connecting with and keeping customers requires that companies define their winning ‘recipe’ for success, i.e., selling customer value.
Securing the recipe for your secret sauce is a serious challenge. Know-how and trade secrets are temporary. So many companies are working hard to improve the experiences their customers have with businesses that, in a relatively short time, CX will be table stakes and not a differentiator. For these reasons, we believe that Customer Value Creation is the only universal, sustainable differentiator.
Creating and selling customer value
In all our personnel and business endeavors, we all try to complete our jobs to be done. And completion means producing the output that meets our customer’s needs (external or internal).
For example, suppose your boss asks you to prepare a comparative analysis of your new product with the competitor’s current product and projected models by a specific date. In that case, delivering a well-thought-out report to her on or before the specified date is the only thing that matters.
Several things can be done to increase the report’s value, creating value for the customer. On the surface, if the report is delivered earlier than expected, then the more valuable it may be (e.g., speed of decision making). The more specific the information and its findings, the more valuable it may be (e.g., product design insights). However, unless you understand her needs, the report may or may not create any benefits. And, unless you keep in reasonably close contact with your boss, you may miss that her boss needs “something” quickly and will accept a general document early if there is a commitment to provide a more detailed version in a few days.
The lesson here is that value is “context-driven,” The only way to know the latest customer needs (context or outcomes) is to communicate frequently with her. This frequent, in-depth contact, combined with a good system of categorizing and sharing the information learned, is the input into the value-creation process. This process starts with outcomes that must be improved and end with products and services that help the customer achieve her needed results.
Once your business develops a self-sustaining customer value creation process, it can become a significant barrier to entry for new and existing competitors. After all, how many suppliers can develop close working relationships with any single person? When a customer trusts you, and you act on their information to their benefit, then you have a near-watertight lockout situation. Repeat with enough members of a market, and you dominate!
The beauty of this approach is that to be successful, the value created must improve customer outcomes compared to all other currently available methods. While your so-called competitors are working on trying and catch up to you, your team is working to improve customer outcomes further. They are constantly coming in second because your team has the insight into what outcomes irritate your customers. Or, as leisure clothing company Big Dog says:
A final thought about selling customer value to differentiate your business
“Any source of competitive advantage that is not based on doing something truly unique, wonderful, and imaginative for the customer, is simply going to disappear.”
⎯ Gary Hamel, was named as the world’s leading expert on business strategy by Fortune magazine
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 its 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 create more value for your customers, please contact us or check out some of our free articles and white papers here.