How to Create Customer Value to Generate Big Profits

11 January, 2013

When we consider a companies customer value we can define it as:

Value = product or services + image +  the relationship
source Kaplan and Norton 1976: 74

We will review each of these elements to see how a company can position themselves in the marketplace to ensure maximum customer value is delivered to create maximum profits. This process is a great method to review with the sales people, find competitive advantages and to visit company mission statements.
Product/services attributes
This can be broken down into the following components; functionality, quality, price, and time have an interlocking relationship with each another.
Functionality:
This describes the product and or service being offered. Answering the questions who, what, where and when questions can help guide the business owner to define target markets. For example if your business is plumbing, we can answer who: – home owners, what, plumbing repair services which you could define these in more detail such as, leaks, toilet, and shower and drain repairs. Where – at their homes, when – 7 days a week, 24 hours per day. This can be expanded to other services.  In our example, we may also have another service offering that targets the renovation market, providing new installation of water heaters, tub and tile, etc or targeting industrial clients or condominium maintenance. If a product is being sold, then the main benefits of the product are also highlighted. The old adage, features tell and benefits sell is important to remember when defining the functionality. Saving time or money are too very attractive phrases to potential customers.
Quality:
Quality can be incorporated into the value proposition in a couple of ways. Quality can be part of the product offering and / or to support the attributes of the product. A quality product offering could be expressed in a promised response time, such as we respond within 2 hours. It could also be expressed in support of services such as a lifetime warranty. A quality attribute would be warranty on defects on physical products.
Many businesses offer extended warranty on physical products as part of an up sell strategy and to retain customer loyalty.
Price:

The price of the product or service must be aligned with the targeted marketplace, the required margins or profit goals of the business. Price can be a leading factor in the value proposition, or as a loss leader to allow for customer acquisition for up selling opportunities once trust and the relationship has been established.
 
Time: 
Time can be a powerful attribute in competitive markets. Service offerings such as we respond in one hour or you don’t pay or if you order a product before 12 noon and we will ship or delivery the same day.
In a competitive world where product margins are thin or competition is high, the elements of quality, price and time can be combined into very powerful sales proposals to satisfy various targeted customers.
Image:
The image of an organization or company is a factor in the overall value proposition. In the eyes of many customers the image will not necessarily be the deciding factor. Some customers will accept in a minimum standard in their minds of a company image. Depending upon the services offered, special education, or certification might be required, such as Certified or trained technicians. This may be a minimum standard that a customer requires. The important thing to remember is to review the different areas of image, such as customers, social proof (testimonials) and technical skills. Other areas that can affect a company’s image are how your people behave when they interact with customers. How the main business line phone was answered? Did the plumber leave a mess or did they remove their shoes when entering the home? Did the service person show up with clear company identification? Did they explain in detail the work being conducted and why? Was the person helpful? All of these customer touch points affect the company image.
Relationship:
The relationship with the customer is a well known attribute to the customer value proposition. The positive and trusting relationship generated with the customer can help generate repeat business and new business referrals. A solid business relationship creates trust and allows for businesses to generate mutually beneficial outcomes. In many cases it is the business relationship that can overcome any shortcomings in delivery of products or services or any other attributes in the value proposition that may occur.
Successful companies have a well defined customer value proposition. The business owner and their employees know the value they bring to customers and keep focused on delivering that value. This allows for long term relationships that deliver ever growing revenue opportunities. Call us at numbersplus today. We can conduct a customer profitability analysis to make sure you are maximizing the revenue for your business and putting more money in your pocket. Check out our youtube channel


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1 Comment

  • 05 March, 2013 seo tools

    What’s up, just wanted to tell you, I enjoyed this post. It was practical. Keep on posting!