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Jun 14 2012

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Better Customer Experience Delivers Better Value to the Customers

Long ago, when I was interviewing for a consulting job, I had to learn the consulting speak. And one of the cliché in that consulting speak was “delivering value to clients”, which when used would signal to my potential employer that I am “client ready” and ready for the job.

“Delivering Value to Clients” is part of the core strategy for many consulting companies, it was the core theme of most meetings, it was even part of employee evaluations.

But what does it really mean? Can we measure it easily and consistently? Is there a metric that indicates if we have delivered value?

In my opinion, the value delivered to a client is always subjective, as it varies by the situation and by the client. In some cases, clients realize immediate ROI from all the work done by the consultants, and hence value is delivered. In others, it takes years to realize the value and by then everyone has forgotten the consultants. So it is not easy to find value in consulting assignments, even though clients and consultants spend weeks together solving a problem.

Similarly, “Delivering Value to a Customer” seems to have become the cliché within product and service companies. Measuring the value delivered is even more difficult when the company and customers do not interact face to face. Because value is not a simple variable that can be measured easily, but a result from a complex equation that include many variables.

Let me share an example from my experience to show the complexity related to delivering value. I was analyzing the reasons for customer attrition with one of my products, and found that “Price Value match” was often stated as a reason for customers cancellations. To understand this better, I called those customers to discuss the reasons for cancellation. I would also call some of the happy customers to understand the value they got from the product. Below are my findings on “Delivering Value” to the customers:

1) Value is a complex equation: It has Price on one side and other aspects of the product (like functionality, ease of use, quality, service/support, warranty) on the other side. It is never easy to objectively measure the value delivered to a customer, but there are ways to subjectively decide if the customer is getting enough value from the product (such as, by measuring Net Promoter Score).

2) Even free products need to deliver value: For free products, Time is used in place of price to measure value. Only those products that justify the use of customer’s time deliver good value.

3) Factors that contribute value vary by customer and by situation: Every customer values different aspects of the product differently. Some customers value customer support more than any other aspects of the product. While others value ease of use or quality more. Every customers uses the product in different situations and in different environments, and the value a product delivers to the customer in those different situations is different. Hence traditional customer segmentation methods (those based on size or geography) do not apply when trying to measure value. Rather companies should focus on the job that the customer is trying to do and see if the product improves their ability in doing the job (i.e. delivers value)

4) Mental Calculations of value: There are no systems to help the customer objectively measure the value they get from a product, so most customers do these calculations in their heads. After buying a product, customer place a value per use and mentally try to figure out how many times they need to use the product to recover the price they paid. If this mental calculation is reasonable, they continue to use the product. This mental calculation is tough on subscription model businesses, where customers pay a fee every month for using the product or service. This is because the customer is comparing what they got every month for the fee they pay that month. If they feel that they are getting  enough value, they continue with the subscription if not they cancel their subscription.

5) Customer experience is key to delivering value: The customer experience delivered by the product helps in determining the value of the product. Functionality of the product, ease of use, quality, reliability and support all play a vital part in delivering value to the customer. All these factors are not equally valued by the customer, hence it is important to understand what the customers value and deliver that customer experience.

In summary, delivering value is a complex undertaking and companies that focus on this as a strategy find it challenging to measure or deliver value. They should rather focus on tangible aspects of customer experience as it will make sure that the customer gets what they need, i.e. good experience. This will help the company in winning more customers and market share in the long run.

Permanent link to this article: http://www.jagannemani.com/2012/06/14/better-customer-experience-delivers-better-value/