Interaction, interdependence and relationships : creating small business customer value. 


Last week myself and some colleagues from Sheffield Business School attended the IMP Conference on business to business marketing at Poznan University of Economics in Poland.

For over forty years the ideas of IMP research and thinking have influenced business study. In particular the IMP perspective explains how business works from a network perspective rather than a strategic management perspective. Central to this view is that business is all about interactions between different companies (and their people), interdependence between various businesses that bring products and services to customers and relationships that endure over the long term rather than one off transactions. When such networks work well value is created for all participants in the network 

So does any of this stuff really really happen in the practice of even the smallest of businesses I asked myself. To find an answer I looked at my son Alex’s Interior Design and Development business AJ Interior Developers Plymouth UK.

I was inspired to think about his business after viewing his Instagram pages and thinking how social media has shaped customer interactions and relationship building. It also helps with an idea from Service Dominant Logic which states that people like Alex can only propose the value of their service. The customer creates value afterwards through the use of the new home spaces he creates. The use of pictures of not only his finished work but work in progress too conveys to customers his skill and professionalism before they have experienced it for themselves. Instagram helps overcome the problem of service intangibility and invisibility.

His use of a Short Instagram video adds a different dimension to interaction as well because it brings some personality into play and stimulates the imagination of the customer to the possibilities for their own home.

In order for the customer to have a smart new home space Alex is plugged into a whole network of other people and businesses. Kitchen design companies like Wickes and Homebase, a referral network, specialist co-workers like gas engineers and building regulations, parts and raw material suppliers and so on. Everyone in the network is interdependent on the others. The situation is a lot more sophisticated than just ‘supplier – customer’.

The customer value that is created encompasses all of the dimensions of value that we talk about in our new book Value-ology. There is economic value regarding the price of the new space, perceived value regarding how the customer sees the new space such as their attitude to colours and fittings, then there is relational value regarding the service given by Alex and then there is experiential value that relates to how the customer feels about the installation experience and eventually living in and using the newly created space. 

So does the sophisticated thinking of IMP academics work in practice? For sure and that should hardly be surprising as the academics who form the IMP community are deeply interested in the everyday world of business and not just speculative theorising. Without real world business there would be no IMP.  For me Alex’s business is a classic demonstration of the IMP principals that underpin value creation for sure.

TEF Times: 2nd Reading of the HE Bill

Academic Irregularities

In July 2016 we are contemplating a new period of instability for universities in the UK, and with the passing of the 2nd reading of HE Bill, things could quickly get a lot worse. The EU Referendum result has already created uncertainty regarding the future of much of our research funding. It seems there is much uncertainty at the top of UKHE: Universities UK (‘the definitive voice of UK universities’) has asked for the government to press the pause button on HE reform , Meanwhile, the vice-chancellors of Nottingham Trent and Exeter Universities argue for forging ahead with reform and the implementation of the Teaching Excellence Framework (TEF).

Maddalaine Ansell, CEO of the University Alliance, appears to agree with the latter in her prediction that the HE Bill will take the sector to calmer waters.  Ansell’s premise is that there will be a benefit from having all legislation relating…

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Bureaucracy kills customer value creation 

Do you have energy vampires in your organisation?

When I read this recent article from the HBR blog How to stop people who bring things down with bureaucracy I couldn’t believe how it totally nailed many of the more motivation sapping experiences of academic and commercial life.

Author James Allen describes ‘energy vampires’ who create diversionary none value add activities.

These activities however well intentioned adversely diminish the energy and action that should be devoted to the creation of customer value.

Of course most organisations need some systems and processes to function. Sociologist Max Weber pointed this out years ago. The problem occurs when bureaucracy becomes self serving and self perpetuating. Bureacracy can be characterised by mindless demands for information, defensive records of decisions and actions – ‘just in case’ something bad happens, a form for this a form for that, multiple sign off forms, lots of data creation and little insight and information agility.

One of foremost writers and researchers on Bureacracy is David Graeber author of The Utopia of Rules. He recently wrote an article for Times Higher titled Why Won’t Academics Break Their Paper Chains.

I would recommend any business person to read his work to see what can happen in large organisations when the value creating imperative of the business is smothered by bureaucracy.

One on the central themes in our forthcoming book Value:ology is about the value creating and proposing capability of people in your company. With Co-authors Simon Kelly of Sheffield Business School and Stacey Danheiser of Shake Marketing we emphasise that without a dedicated focus on value creating activity you will waste time, money and energy on irrelevancies.

So can you spot the tell tale sales of value smothering in your business? James Allen gives a clue when he says watch out for people that:

‘….fire off lots of missives that force your people to stop serving the customer and instead respond to yet another information request’

 

Creating brand love means being tough on value 

Brand Love
One of the big ideas in brand management is the creation of brand love.  This is where the solutions you sell and the customer relationships and experiences you create result in customers who are passionate and committed to your brand.

But have you stopped to really think through what generates this passion and commitment in the first place?

The only way customers will love your brand is if it delivers value in a way that matters to them. True value resonates with your customers. This means you need to be tough on value in your organisation to prevent it being treated as ‘taken for granted’ or ‘glossy rhetoric’.

Adding value and creating customer value are often snappy sound bites that are very easy for people to buy into.When this happens you could have a serious problem when it comes to establishing what value means for your business. Ask yourself honestly; does everyone in the organisation have an aligned view on what are people talking about when they talk about value in general and customer value in particular?

Get tough on value conversations in your organisation by doing three things.

  • Don’t confuse it with satisfaction because that is only about after the purchase. It says a lot about wants and little about real needs.
  • Don’t confuse it with quality because that is about technical standards.
  • Don’t confuse it with your values because they are about you and not the customer.

Are you sure your team knows the difference?

Organization psychologist Kurt Lewin said there is nothing more practical than a good theory. He said this to make managers realise that an assumption has a direct influence on practice. Mistaken assumptions about ‘what’ value is results in irrelevant marketing implementation.

You can think of defining value in your business as just as important as NASA getting the trajectory calculations right for a space exploration vehicle such as the Mars Curiosity Rover. Even a small miscalculation on launch could have resulted in Curiosity missing big the red planet by thousands of miles.

Let’s say you assume that the primary benefit your customer is seeking is the best price. This might seem reasonable because the customer always mentions the price in conversations. Acting on this assumption could lead you to being way off target. Deeper understanding of the customer through careful unpacking of what is going on in their business world reveals that they value your detailed expertise and network of suppliers which means the relationship they have with you helps them compete in their market more effectively. The real value is in the supplier relationship not in the price.

If you don’t ask tough questions about what people mean by value then there is a very real risk your plans, product developments and campaigns will be off target. Worse still you’ll get locked into a cycle of repetitive problem solving as one thing after another is tried in the elusive hunt for customer value.

Barbara Caroll and Aaron Ahuvia in their article Some antecedents and outcomes of brand love – Market Lett (2006) 17: 79–89 define  brand love as “the degree of passionate emotional attachment that a person has for a particular trade name.”. A definition such as this is helpful in focusing attention key brand love attributes.

The challenge for the professional marketer of course lies in creating specific actions that predispose the customer to fall  and stay in love with your brand. It’s issues like this that are at the heart of the work my publishing colleagues Simon Kelly of Sheffield Business School UK and Stacey Danheiser of Shake Marketing USA address when they talk of the need to create resonant value propositions and ensure that sales and marketing activities are aligned.

Brand love needs a bit of tough love too.

If you are interested in the academic research into brand love then the following might be of interest:

Fournier, Susan (1998), “Consumers and Their Brands: Developing Relationship Theory in Consumer Research,” Journal of Consumer Research, 24 (4), 343–73.

Albert, Noel, Dwight Merunka, and Pierre Valette-Florence (2008), “When Consumers Love Their Brands: Exploring the Concept and its Dimensions,” Journal of Business Research, 61 (10), 1062–75

 

 

UK Politics not governed by advertising standards


Given the controversy of claim and counterclaim during the UK referendum on membership of the EU it’s interesting to see the difference between selling products and services and selling political ideas.

Aldi recently fell foul of the Advertising Standards Authority on an issue about claims they made about potential customer savings. 

However:

The Advertising standards authority state in their codex under section 7.1 that.

Claims in marketing communications, whenever published or distributed, whose principal function is to influence voters in a local, regional, national or international election or referendum are exempt from the Code.

Regardless of any ruling like 7.1 above that might be modified the ASA states its mission is to provide marketing communication rules that mean:

advertising must be responsible, must not mislead, or offend 

What do you make of that?

The limitations of personality tests for advertisers

Sheffield Business School Student shows just how to create blog on serious topics engaging

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Gray (2015) states that the personality testing industry is worth $2 billion. Whoever invented the initial personality test would now be like

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When it comes to advertising and targeting potential customers, personality tests may have several limitations. As I explained in my previous blog, personality tests sometimes do not always prove to be accurate. Giang (2013) implies that the test results can sometimes be flawed because respondents may answer how they think you want them to, so you do not have a true representation of their personality. This not only wastes time, it wastes a LOT of an advertiser’s money if they are advertising a product towards someone how would not dream of buying it, but said they would in a test.

If this is the case, an advertiser might as well just do a Leonardo and throw their money away!

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Another limitation according to Burnett (2013) is the limited answer…

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Don’t confuse customer value with customer satisfaction 

  

I’ve been watching the channel 4 documentary series British Army Girls which follows the lives and experiences of young women during their initial military training. 

There have been a few documentaries of this type and watching how people transform over the weeks is captivating. 

An incident in last nights episode got me thinking. The recruits were on a three day field training exercise towards the end of the first phase of becoming professional soldiers. The women were tired, cold, and fed up. They had been subject to mock attacks on their patrol and were being pushed to their limits by their officers.

Stop. 

At this point if we were market researchers and we wanted to know how good the service experience was we would do a satisfaction survey. Guess what the results would be pretty dire. Just listening to the girls in the documentary is enough to tell you ‘at that point’ they were very very unsatisfied. 

Start.

Now fast forward to the end of the exercise and imminent passing out parade. The girls expressed how amazing they felt at being challenged, how they had faced and overcome things they didn’t expect and how a great sense of professional pride and self esteem had been created. The recruits had clearly derived immense value from the experience. Value that would serve them well time and time again in the future. 

In modern management and particularly in the public sector it is fashionable to be obsessed with satisfaction metrics. Doing this is meant give commercial teeth to soft public service delivery. The problem with this approach is that it is underpinned by a simplistic assumption that we are all customers and displays an impoverished understanding of the latest marketing thinking. This satisfaction metric approach is at least twenty years out of date.

The argument runs that because services are ‘paid for’ via taxes, student loans etc we are thus ‘customers’. Satisfied customers come back and tell others how good the service is and so their satisfaction matters. 

This whole customer centricity argument has been a main plank of marketing management thinking for decades. Hence a fixation on customer satisfaction. 

Current academic marketing research on real world commercial businesses challenges this view. Measuring satisfaction does not give you a fix on the value created. Evert Gummesson suggests that customer centricity is a wild goose chase that ignores the real complexities of value creation and delivery for all stakeholders involved and that includes the service provider as well as the customer.

In our forthcoming book provisionally titled Unlocking Customer Value (Simon Kelly, Paul Johnston and Stacey Danheiser) to be published by Palgrave Macmillan we explain that there is a crucial difference between quality, satisfaction and value

Academic Robert Woodruff says that a problem with value is that it is often used with other hard to define terms like utility, worth quality, satisfaction and benefits. 

Let me share a couple of everyday business examples to illustrate the distinction between the two concepts. I worked for two decades in the gambling industry. In the long run most players lose. So if you ask satisfaction questions then most players are disatsified. Probe on value and you get a different perspective. Players will talk about the value they get from trying to beat the slots, the social value of passing the time and the buzz and excitement of playing etc. 

Budget airlines often get complaints from disatsified customers annoyed at pay as you use services. However the value of cheap tickets and efficient boarding and disembarkation often trumps the dissatisfaction. 

For sure customer satisfaction is one very common and in the right place a worthwhile measure of marketing effectiveness. The problem with satisfaction measurement is that it can only be measured after the customer has used or experienced the product or service at a specific point in time. This might be ok for a product. It worked well or it didn’t. Service value on the other hand works through time and can be derived way after its initial delivery. Measuring the satisfaction you get from something is always immediately after the event. Measuring satisfaction is not measuring value. Ultimately it is value we pay for. As Warren Buffet said:

“Price is what you pay. Value is what you get”

Value is different and can be judged before, during and after the experience. It is the worth of something regardless of how satisfying the experience seemed at the time. 

Value also emerges out of the difference between expectation and experience. Professor Sam Ham in his book Interpretation: Making a difference on purpose. Explains that setting out clear expectations affects our sense of value. 

The army girls were told continually to expect challenge and hardship, pain and fear – hardly things you would associate with satisfaction. The expectations were clear. Surpassing expectations delivered value.

Here’s one final example. The Century Egg. A highly valued Chinese delicacy. Highly valued and yet:

‘the yolk becomes a dark green to grey color, with a creamy consistency and strong flavor due to the hydrogen sulfide and ammonia present, while the white becomes a dark brown, translucent jelly with a salty flavor.’ 

How satisfying to eat must that be! 

So watch out. Don’t confuse satisfaction with value. 

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