Tag Archives: value proposition

Customer Centricity – Now is the Opportunity to know your Customers Better

Customer centricity means that retailers should align products and services with the needs of their most valuable customers 1. Said Peter Drucker more than 50 years ago: “it is the customer who determines what a business is, what it produces, and whether it will prosper.”

Although Drucker’s rationale was spot-on, until recently, adopting customer centricity was a step too far for most companies.  Historically, firms have tended to be product-centric.  As a result, firms were more internally oriented, with their attention focused on selling superior products rather than on being oriented toward the purchasers and users of those products 3.

However, the advent of the internet and Web 2.0 all changed that.

The digital disruption provides an opportunity to focus on  customer centricity

The impact that digitization has on the retail industry is recognized by most commentators as “disrupting”. In fact, retailers have to reconsider the impact of technology on their usual business strategy and aim at implementing digital transformation; otherwise, chances to succeed are miserable, according to ELEKS writing in Medium.com.

The digital disruption is however not always bad news for the retail industry. Digital technology has made it easier to remove the friction points customers have with your business. As a result, the processes are more seamless, straight-through transaction path agnostic of the engagement medium, says Grant Pattison, Senior Manager, Marketing & Sales Technology, IAG.

Retail shoppers are treated with digital surprises when visiting their favorite stores. They ‘re overwhelmed by all the new gadgets and retail technologies such as touch screens, smart fitting rooms and augmented reality that make their shopping experience better. Indeed, data collected via IoT devices and sensors inside the store will help retailers track shopper movement, predict behavior and develop more interactive experiences that appeal to all the senses, concurs Alison Wiltshire, guest author in Internet Retailing.

However, the customers are paying for their experiences. Every time they enjoy the technology, they give something away about themselves to the retailer. The data that the retailer gathers is like gold dust. In fact, retailers are now using predictive analytics and other technologies, along with new organizational structures, to both anticipate and influence customer behavior 4.

So retailers that adopted digital technology have all the means to achieve customer centricity. Not really…

Moving from a culture of product centricity to one of customer centricity

It doesn’t make sense for retailers to use the latest technology to improve their customer’s shopping experiences when everything they are doing is centered round their products. It’s not the products that are important; it’s the customers that are most important!

The true essence of the customer centricity paradigm lies not in how to sell products but rather on creating value for the customer and, in the process, creating value for the firm 3. In other words, customer centricity is concerned with the process of dual value creation.

Your customers rather want to learn that your products add value for them instead of being suffocated about the benefits of the products. Therefore retailers need to communicate their value proposition in the omnichannel; through their websites and in social media networks and in store, suggests Douw G Steyn, Bricks2Clicks.co.za.

So how do you get your company to focus on customer centricity? Ehssan Abdallah article in Heidrick & Struggles’ blog mentioned five essentials of customer centric cultures:

  1. A customer-centric talent agenda. Executives need to determine how to build and sustain their company’s capacity to deliver customer service aligned with the company’s purpose.
  2. Meaningful customer service values. Retailers should ask the following questions to frame and define the organization’s customer service values but also better ensure that employees at all levels can understand and articulate how their actions contribute to success:
    1. What are our customers telling us they need?
    2. How can we harness analytics to drive day-to-day behaviors and processes?
    3. How can we connect customer service values to our organization’s purpose?
  3. Empowered employees. Employees should be encouraged to use their authority wisely, and thereby sending a strong signal to all the stakeholders of the company’s “whatever-it-takes” philosophy to delight its customers.
  4. A strong sense of accountability. In moving toward an empowered customer-centric culture that leverages talent effectively, leaders must select indicators to gauge performance and track progress for both behaviors and outcomes.
  5. Leaders who “walk the talk”. When executives promote customer service values, it sends a strong signal throughout the organization that management recognizes the customer as central to its existence.

Strong, customer-centric cultures offer organizations an organic, and sustainable, avenue to better results. Not according to some commentators.

Reasons why customer centricity may not be working (a different opinion…)

Jack Springman, a director at Digital Springboard didn’t make customer centricity part of his objectives this year. Here are his reasons:

  1. Customer-centricity is too vague a term to be useful. What does customer-centricity mean, specifically? How do you define it? How do you know when an organization is genuinely customer-centric?
  2. Customer-centricity is not measurable. If you can’t measure it, you can’t deliver it. So how do you measure centricity? You can’t.
  3. It’s a means, not an end (and one that could be counterproductive). Improving the customer experience is an end; customer-centricity is a means. So even if you could measure centricity, which should be subsidiary to what you are trying to achieve.
  4. Staff-centricity versus customer-centricity. There is a relationship between staff satisfaction and customer satisfaction. Unhappy employees may battle to be customer centric.
  5. Customer value requires all stakeholders to be looked after. Of course, no business can exist without customers, but nor can any but the very smallest survive without staff or suppliers or perhaps partners.
  6. Reduced prioritization in the strategic agenda. Think about the impact in other parts of the organization, especially as customer centricity is supposed to be an organization-wide commitment.

Jack suggests that in place of customer centricity, firms should create value for customers in a way that also creates value for the business.

Concluding

After all of this, it’s not about the company. It’s about the customer. Jack Springman rightfully said that no company can exist without customers. So, if you want to keep your customers and get some more, you must know what their needs, wants and demands are. Of course, if you add value for your customers, then they will return the complement.

And yes, with aid of digital technology unsurmountable bits of data are collected from our customers for us to utilize.  After all, customer’s first point of interaction is mostly nowadays a machine or robot…

Shouldn’t we rather have a customer/ robot focus from now on?

Read also: The Value Proposition for Bricks and Clicks Retailers

Image: Flickr.com

 

Notes:

1 Lemon, K.N. and Verhoef, P.C., 2016, Understanding customer experience throughout the customer journey, Journal of Marketing: AMA/MSI Special Issue, 80:69–96.

2 Drucker, P.F, 1954. The practice of management: A study of the most important function in America society, Harper & Brothers.

3 Shah, D., Rust, R.T., Parasuraman, A., Staelin, R. and Day, G.S. 2006. The path to customer centricity. Journal of service research, 9(2):113-124.

4 Van den Driest, F., Sthanunathan, S. and Weed, K. 2016. Building an insights engine, Harvard Business Review, 94(9):64-74.

The Value Proposition for Bricks and Clicks Retailers

I’m not aware of one retailer that does his/her business without customers. Indeed, retailers that have plenty of loyal customers enjoy a competitive advantage and are doing well. So, how do they do it?  Retailers with a clear and effective value proposition at least know who their customers are, what they want and need and why are they coming back. Above all, retail customers can also be found online…

With the advent of the internet and subsequent social media networks, the way that retail customers interact with retailers, products, and patrons has changed. In fact, in today’s tech savvy society, shoppers have access to brands 24/7, from websites to mobile apps to storefronts. Therefore Bricks and Clicks retailers (retailers that use both the physical and online retail channels) need to develop a value proposition for their store and online customers.

What is a value proposition?

A value proposition is an entire set of experiences, including value for money that an organization brings to customers 1. Importantly, customers may perceive this set or combination of experiences to be “superior, equal or inferior to alternatives”.

The customer value proposition can also be explained by this equation: value = benefits less (-) costs. The equation suggests that customer value comprises positive consequences (benefits) and negative consequences (costs). When customers perceive greater benefits than sacrifices, customer value is created 2. Perceived benefits and costs for retail customers are shown in the Table below.

Customer perceived benefits Customer perceived costs
Transactional – lower prices, lower interest rates; Monetary – maintenance costs, running costs, disposal costs;
Relational – product quality, service support, delivery, personal interaction Learning costs – time and money needed to learn how to use a product;
Functional – finding the right products, convenient shopping hours. Logistics costs – delivery costs, time to deliver.

How do customers perceive value?

Customers perceive value on the benefits of the product or service they receive. Consequently, as the environment changes, and the customer experience and their needs change, the value they seek also changes. Before the advent of the internet, retailers that had the most knowledgeable sales persons were valued by customers, especially when they shopped for specialty products. However, nowadays, in the digital era, customers can not only get comprehensive product information online, but they also can read product reviews and compare prices.

Retailers need therefore to communicate their value proposition also in the online channel, through their websites and in social media networks.

The value proposition for online customers

Retail customers are rapidly engaging in the online channel. Indeed, there are, according to Dr Dave Chaffey, Smart Insights, 27 Apr, 2017, 2.8 billion active social media users. With these billions of social media users, retailers are no longer in control of customer relationships. Instead, customers and their highly influential virtual networks are now driving the conversation, which can trump a retailer’s marketing, sales and service efforts with their unprecedented immediacy and reach 3.

Kumar and Reinartz 4, 2016 said the following about how customers perceive value online:

For many online services (e.g., Google Maps, Facebook), customers are not expected to pay in monetary terms. The core benefit is free of monetary charge from the end user’s perspective. The monetization comes mainly from advertising revenues, with ads targeted at narrow segments or personal individual profiles. However, in the context of digitization, a new cost related aspect has been emerging.

“Customers now have to understand the value of the personal information that they will give up in this exchange. Thus, customers pay in terms of less privacy instead of monetary outlays. In fact, some customers value privacy of personal information privacy so much that they would be willing to pay to preserve privacy – this then creates a market for privacy” concluded Kumar and Reinartz 4.

What if you don’t have a value proposition yet?

The purpose of retailers is to create value for their customers. Therefore a value proposition equates to a positioning statement because it defines “who is the target customer?” as well as “why should the customer buy it?” and “what are we selling?” 2. According to Rintamäki, Kuusela and Mitronen, 2007, a value proposition should:

  • Increase the benefits and/or decrease the sacrifices that the customer perceives as relevant;
  • Build on competencies and resources that the company is able to utilize more effectively than its competitors;
  • Be recognizably different (unique) from competition; and
  • Result in competitive advantage.

GetToGrow mentioned the following advantages of a value proposition

  1. Gives direction. A value proposition gives you direction by defining your ideal target audience right up-front, and then identifying and understanding a core need that you look to satisfy with your planned solution.
  2. Creates focus. A robust value proposition gives you and your team focus by identifying the fundamental initiatives, activities and aspects of your business that will have the greatest impact on meeting your defined target audience’s needs.
  3. Breeds confidence. Confidence comes from knowing that you’re making a difference to the people that you’re serving, that you’re doing so in a way that’s meaningful to them, and that your actions are aligned to delivering an overall remarkable experience.
  4. Improves customer understanding and engagement. By grounding your solution in an understanding of your audience and their specific need, you can engage with them in a much more compelling and effective manner.
  5. Provides clarity of messaging. The value proposition frames not only how you’re creating value for your audience by addressing a core need, but critically why your solution is better than what they are currently doing or using, or versus whatever else is potentially out there that could do so.
  6. Increases effectiveness of marketing. By truly understanding your desired customers and their core need that you’re solving for, you’re able to focus on the channels and vehicles that are most relevant, and will effectively communicate the benefits and advantages of your solution.

Concluding

Retailers that know and understand their customer’s needs, want and wishes the best can communicate a superior value proposition to them. By using ‘big data’ or your internal sources of customer data, your firm’s value proposition can be customized and personalized. However, care should be taken not to infringe on the individual’s privacy.

Further reading:

Implementing Social Customer Relationship Management in Retail

Video: Value Propositions and Positioning

 

Notes:

1 Hassan, A. 2012. The value proposition concept in marketing: How customers perceive the value delivered by firms–A study of customer perspectives on supermarkets in Southampton in the United Kingdom, International journal of marketing studies, 4(3):68.

2 Rintamäki, T., Kuusela, H. and Mitronen, L. 2007. Identifying competitive customer value propositions in retailing, Managing Service Quality: An International Journal, 17(6):621-634.

3 Heller Baird, C. and Parasnis, G. 2011. From social media to social customer relationship management, Strategy & Leadership, 39(5):30-37.

4 Kumar, V. and Reinartz, W. 2016. Creating enduring customer value, Journal of Marketing, 80(6):36-68.

Image:

Flickr.com

Bricks and Clicks Retailers – the Best of Both Worlds

The way forward for retail is Bricks and Clicks. In an article earlier this year Justin Taylor head of EMEA retail trying to console Bricks and Mortar retailers said: “despite the impact of e-commerce, physical stores remain a cornerstone of consumer engagement”.

The question that remains to be answered is:  Why is online retail growing worldwide and, at the same time, Bricks and Mortar retailers that are not engaging their customers online are closing down?

Why do Bricks and Mortar retail customers shop online?

If Bricks and Mortar retailers are the cornerstone of customer engagement, then where have their customers gone to? The customers of Bricks and Mortar retailers probably left because they find online shopping to be more convenient:

  • They can shop 24/7 from anywhere;
  • They can get more information about products and services online;
  • They can go online to search for specific products and where to find them;
  • They can compare the prices of products online; and
  • They can share their experience online with friends, family and social communities.

In spite of the fast growth of online shopping, many retailers that are doing their business only online (Pure Clicks) are now starting to look for physical retail space.

Why are Pure Clicks retailers looking for Bricks and Mortar retail space?

It is not a simple matter of Bricks versus Clicks says Justin Taylor. Physical stores remain a hugely important part of the retailing mix as they offer the ability to interact with merchandise, instant gratification for consumers, personal service and professional guidance.

We have seen the migration from bricks to clicks, and the pattern in some instances is now heading the other way as brands born online are now seeking physical space. The answer is Bricks and Clicks retail shops that have both physical and online space. Bricks and Clicks retailers have the best of both worlds.

Integrating the physical with the online may pose a challenge for most retailers. eBizplan, a management consulting business can help retailers to run the physical and online business as one.

Offering Value to Your Customers

Many companies still believe that their customers exchange money for products that they offer. You rather should offer value to your customers…

What value means to your customers

Customers want value before they spend their money on your products or services. The common definition of value relies on the price-quality ratio of a product or the difference between perceived benefits and perceived costs.

To put it practically – if your competitor can offer the same value for a product or service as you do, but at a lower price, you’re going to lose customers.

What do customers perceive as value?

Perceived value comprises two complementary concepts, namely perceived benefits and perceived costs.

In today’s digital market place, there are numerous identical products on offer (e.g. cosmetics), with many at the same price. What will make a customer to buy from you instead of the others? Your products or services should provide superior benefits to the customers.

Customers may perceive benefits in the following ways:

  • Product features,
  • Product design,
  • Timing,
  • Location,
  • Reputation, and
  • Service and support.

Value is created when the perceived benefits that a company offers meets the needs of its customers.

Planning to deliver superior value to your customers

Companies that strive to survive and grow should know what the value offer of their competitors are to customers in the market as well as what the customer’s needs are.

A differentiation strategy with a customer focus will go long way to ensure that the company enjoy a competitive advantage in the marketplace.

Visit www.ebizplan.co.za for more information as well as help with business plans and marketing plans.

Image: eBizplan