Delivering Value

Why should you shift your business model to a customer value delivery system?

Posted by Sumit Kumar Uzir, Certified CSM

The current market scenario - a market with a lot of “me-toos”. The million-dollar question here is, how to deliver value and create a loyal set of customers?

Currently, there are many companies with a similar value proposition, how long do you think would customers stick to one? Similar value propositions in the long term will pave the way for a troubled future, which is why companies try so hard to deliver value in multiple dimensions.

Woodruff’s definition of customer value is one of my personal favourite. Woodruff defines customer value as, “a customer perceived preference for and evaluation of those products attributes, attribute performances, and consequences arising from use that facilitate (or block) achieving the customer’s goals and purposes in use situations”.

To simplify the statement, customer value has two dimensions. The first is the “perceived value” and the second is the “desired value” from your product or service. “Desired value” refers to what your customer's “desire” from your product or service and “perceived value” is the benefit that your customer believes he or she received from the product or service after it was purchased.

With most of the brands, today lies a huge gap between their value proposition and customer perception. I have come across many such instances myself, where our prospects have communicated their unhappiness with their previous vendors. There are marketers who would emphasize their own “features for value” concept and they start flooding the list of features. Without any prior research, they have no idea how to create value for their consumers and they end up decorating their list of features. So, plenty of features and no benefits and no value addition. Think about it. In truest of sense, people do not buy a product or service rather he or she buys its “utility”.

So, please ask yourself, would you rather be a part of a sale or a part of the solution?

I feel at the very outset, the primary task is to check if your product is providing a solution to your clients, if not then, you might have to reconsider your strategy before things start falling like dominoes. Say you are an IT company that provides ERP solutions. Your clients do not actually buy ERPs from you rather they buy the “utility” of the product. If there isn’t any, how would you recruit new customers, how would you charge a premium, how would you retain your existing customers?

“ ……. Giving discounts to retain customers is one of the worst attempts to deliver value to customers”- overheard in one meeting room!

Michael Porter teaches there are three basic ways firms create value for their clients:

1. By helping to increase revenues

2. By helping to lower costs

3. By helping to reduce risks

Marketers today spend a lot of money trying to push their value propositions to customers through novel IMC strategies for more sales but the results are no different. Clearly, your value proposition and value perception have got a mismatch which calls for a change in your strategy to close this gap.

The value proposition of any company should not be a marketing term but it should be the mission and then build your strategies around it. Marketing is a war of perceptions, it is not about convincing your customers that you have a better product or a service.

"A satisfied customer is the best business strategy of all." - Michael LeBoeuf, Business author and former management professor