Principle 3: Customer Perception of Value (Item 1)
Providing what your customers value – now and in the future –
must be a key influence in your organization's direction, strategy and
action.
Your money comes from your customers – so provide what they think
is of value to them. It sounds obvious, yet very few businesses do it
well.
This is about making money by getting more sales. You can do this by
providing what your customers value – what the customers really
want and need, and think is value for money. Most businesses only provide
what they think their customers want, need and value. They try to sell
what is convenient for them – which may not be what the customers
want, need or value.
You can make huge gains by more closely aligning your products and
services more exactly with what your customers want, need and value.
Do not mistake this for altruism. In the end, you are not doing this
for your customer's benefit. You are doing it for your own benefit.
Unless you work for your customer's benefit, your ex-customer
will find someone who will. When you provide better service, you get
more money through sales by retaining your existing customers and getting
more customers.
Research shows that there is strong correlation between providing what
customers perceive to be of value and KPI improvement. The implication
is that the more you provide what the customers value, the more you
can improve the performance of your KPIs – provided of course you
also work on the other Principles.
Companies have come to realize that their customers – implicitly
or explicitly — create a `value index' by matching the value they
think they will receive against the price you charge and the overall
cost to them. Your customer's `value index' includes everything about
your product and service as well as things you might not consider part
of your product or service but which your customers do. (For example,
payment terms, delivery and additional costs due to inconvenience or
modification.)
The value your customers place on your
product is based on the benefit they believe they will get from using
the product.
Most businesses have a paternal, "father knows best" approach
to customer needs. "We have been doing this for a long time. Of
course we know what our customers want. We are the experts!" You
should ask yourself "Do we really understand what our customers
value" and to begin a process of asking the customers what they
value.
We are not suggesting that you are not the expert in your product.
However, the expert can and must adapt the product to meet more closely
what the customer needs and perceives is of value. The first step is
to admit that the customer may see your product and services differently
from the way you do and may value things about it that you do not. After
that shift in your thinking, the real trick is to find out what the
customer really wants and perceives is of value.
Most organizations that think about this at all use a survey to find
out what their customers need. This approach is not valid. Unfortunately,
this means that most market research questionnaire tools do not do what
they say they do. A questionnaire does not give you the information
you need.
Because you design it, the survey is designed around your belief
system about your products. A survey will only give you confirmation
that your customer shares these phpects of your beliefs. It gives a
measurement of how well your customers like what you do provide. A survey
will not tell you what your customer wants. It does not tell you what
to fix so you can do better. A survey does not lead to action.
Surveys also miss the non-customers completely.
Telephone surveys do not appear to work either. Many people refuse
to cooperate and many lie.
So how do you find out what your customers want and do not want? Ask
them. Either one on one or use focus groups. You need to listen to what
they say about your products and similar products. Watch how they use
your products and similar products, and learn from the difficulties
they have. A variety of tools are commonly used. What you use will depend
upon the type and size of your business. For example:
- work closely with your important customers
- field trial your products and services during your research, development
and design steps
- keep a very close eye on changes in technology and what your competitors
offer because these will impact on your customer's expectations, requirements
and preferences
- try to understand your customers' value chains in detail and the
impact your product has on their costs
- conduct focus groups with major customers and early adopter customers
- watch what customers do with products – how they use them
- train customer-contact employees in how to listen to customers
- use complaints to understand your products and services from the
perspective of customers and customer-contact employees
- interview lost customers to determine the reasons they are no longer
using you
A Japanese car manufacturer gained considerable knowledge about customer's
needs by watching people loading shopping in a car park. Customers don't
like hatch doors that whack them in the head. Customers don't like to
hurt their back when loading shopping over a lip into the trunk. Customers
often have their shopping in plastic bags, and don't like it sliding
around in the trunk. Well, who would have thought it!
Businesses often use the daily contact of their salespeople to find
out what customers need and want. This is an excellent first step. Their
input is vital to the process of product design. However, it must be
enabled. Usually, your sales staff are flat out just dealing with the
daily demands caused by the current design. Your customer contact staff
can be so swamped in trying to solve the problems of today that they
cannot bear to think about the problems of tomorrow.
You need to provide processes so their knowledge and experience is
included in product and service design.
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