Understanding the True Nature of ‘Value’.

There may have been a time when organisations could afford to think of customers as a unified, single entity.  The bill-payers who took the product or service and paid for it.  Perhaps little thought was given to any differences the customers might exhibit from one another.  Sellers described their products or services based on Features, advantages and benefits (all of which were assumed) and there was little or no differentiation or customisation as to how the products was presented to the market.

Those days, if they ever existed, are long gone, today’s customer is overwhelmed with options, spoilt for choice and fully aware that. He is only ever a couple of mouse-clicks away from a plethora or price comparison, peer-review or even auto-switching websites that have completed eroded nearly all of the different points of differentiation.  As a consequence, the old ‘one-size-fits-all approach is gone and all organisations realise that there is a lot to be gained from segmenting their markets into smaller sub-groups and that this would make it easier to pitch products and services to these sub-groups, rather than to an amorphous whole.  

It seems then, that the last surviving point of marketing differentiation is the Customer Experience (Cx).  Not only has Cx survived the onslaught if the internet, but it has actually boomed in the digital world.  Social Media has given customers the tools and platforms to share their experiences globally and in real-time.  Whether manufacturers or service companies like it or not, Cx is not just part of the mix any more, it is the mix.  Customers can (and do) share their good and bad experiences more and more and readers seem less sceptical of reviews from people they have never met before than at any time previously.

Delivering world-class Customer Experiences requires organisations to do almost everything right.  The entire Value chain needs to be aligned and friction-less and set up to deliver real and lasting value for customers.   Clearly there is a lot of work that needs to go into improving ‘hard’ end-points and data should always inform every decision, however;

We know that customers want value and will give their business to whatever provider provides best value (as long as service levels meets certain standards), so the key to success is surely the generation of peerless value.

That all customers are looking for best value is not exactly a stunning insight. The tricky question though is, what, precisely is value?

Consider the three motor car brands in Figure 1.

Which car represents the best Value?

Figure 1  Which car is the best Value?

Which of the three is the best value?  Tricky question.  If we accept that value is a relationship between the price paid to acquire a product or service and Quality is a measure of the utility or benefit that the customer receives in exchange for the price paid then, as long as the price paid and the Quality received are in balance, then we could say that all three of the above cars are of equal value.  The trouble with this neat little definition is that we know what ‘price’ means to two decimal places.  What, however, do we mean by quality?

The short answer is that quality, is whatever the customer wants it to be.  Quality is an entirely personal and subjective thing that exists only in the mind of the customer.  Consequently, organisations need to understand the mind of the customer as well as humanly possible, in order to demonstrate their quality and so receive their price.

Because many organisations have thousands, perhaps even millions of customers, this is not a practicable tactic, so we group customers together into market segments so as to make more sense of the market, and then align resources to meet their particular measures of quality.  Only by knowing the minds of our customers as well as we possibly can  can we hope to deliver great Customer Experiences and actual lasting quality