By John Morgan, Director at Catalyst Consulting
Even in the fairly recent past, the idea of measuring your customers’ perception of value was a fairly simple one and was based, almost entirely, on the cost of the goods or service being provided, with the emphasis, for the business concerned, falling on reducing costs to the lowest practicable level and therefore boosting profit. This, however, was a process which took place in a completely different consumer landscape, with the choice for the average consumer severely limited when compared to the plethora of options on offer today.
Armed with as little as an internet connection and a smartphone, the average customer or prospective customer can access markets, goods and services from around the world, and is therefore in a position to measure value in a more sophisticated, complex and nuanced manner. If you wish to structure your business so that the most efficient delivery of customer satisfaction possible lies at the heart of every process you undertake, then it is vital that you take the time to discover, evaluate and utilise an understanding of what precisely it is about your business that your customers value.
The fragmentation of virtually every market place - up to and including those without geographical flexibility, such as energy suppliers – has created a situation in which the customer has the vast majority of the power in the customer/business relationship, meaning that you, as a business, have to deliver value through every part of the process of provision, and not merely the end price. This value, what’s more, needs to be firmly attuned to whatever aspects of your offer the customer regards as providing value, which makes grasping this perception of value vitally important if you are to seek out, confirm and retain a customer base willing to exhibit a strong degree of brand loyalty.
Every part of your process needs to be aware of the needs and desires of your customer, and not just those which might be felt to have either direct contact with them or a direct impact upon them. High quality items, excellent customer service and ease of provision will be the first things which most businesses think of when asked to analyse the value they offer to their customers, but every link in the chain, from your own procurement processes, through the HR department, the practice of shaping and delivering the goods or services and the way in which it is marketed will, together with everything else you do, play a part in adding value to what you are delivering.
A simple formula for calculating your customers’ perception of value is that the perceived value you provide is equal to the benefits your business supplies in relation to the costs. If you manage to increase the benefits being offered to your customers then the cost charged can stay the same or even rise without the perceived value falling any lower. The price, therefore, is only one part of what determines your customers’ perception of value, and must always be set in the context of what else you are doing to increase the perception of the benefits being offered.
Of the different factors which come to bear upon your customers’ perception of value, as decided via the formula set out above, there are some which lie outside your control, some which may be open to influence if not direct control and some which rest completely in your hands. Whilst each customer will bring with them a different set of ideas, experiences and even principles which play a part in their concept of what represents good value to them, the key to meeting this mark is to completely control, streamline and maximise those factors which rest squarely in your hands. Thus factors such as quality, customer service, delivery, price and product or service ‘manufacture’ have to be broken down and reassembled with the emphasis placed on removing anything which is not required to increase your customers’ perception of value. The same principle applies to marketing and branding, both of which, initially, may seem harder to quantify than more tangible metrics, but which can be evaluated via the opening up of communication between your business and its’ customers.
Not only will this communication prove invaluable when it comes to harnessing vital information regarding the way your customers regard your business (the only opinion which really matters), but it will also, if handled with sufficient skill and flexibility, play a vital part in creating a brand image via the forming of a genuine ‘relationship’.
Of course, every customer will be different, with a unique set of values and views, which means that it is vital that you truly know your market and the individuals constituting that market well enough to be able to segment it and understand how each segment will respond to different points of your offer. The advantage of looking at the way you deliver your goods and services from top to bottom means that you’re likely to be able to introduce new processes, or improve existing ones, in a manner which will be able to appeal to separate and numerous segments of your market.
For some, the removal of waste in the manufacturing process, leading to a slightly lower price, might be the factor which persuades them of your value, whilst others might appreciate a streamlined ordering and delivery service and the convenience this offers when they liaise with your business. In all cases, the core principle is to listen to what your customers tell you – via survey feedback, market research, communication on social media and every other channel available now and in the future. The dialogue will create a virtuous circle in which you explain your offer to your customers, they tell you what they like or dislike about it and you then alter your offer to meet their perception of value, before beginning the process all over again. The gathering of this information should be built naturally and easily within the ordering, purchasing and customer service process, thus reducing the risk of customers feeling that they are being nagged and harried for their input and therefore meeting the principle which states that feedback given on a basis other than voluntary is hardly worth listening to.