10 customer value essentials for creating effective value propositions

Create effective value propositions by deeply understanding the nature of customer value

  1. Always think ‘it depends’
  2. Put value at the heart of every marketing management conversation you have
  3. Make value the touchstone of every single marketing decision and action
  4. Cover all the value bases
  5. Don’t confuse Values with Value
  6. Ensure everyone in the team has the same take on value
  7. Avoid customer worship
  8. Deeply understand value in use and value co-creation
  9. Remember you are always aiming at moving target
  10. Become an expert in art and science of Value-ology

1. Always think ‘it depends’

How much do you think this car is worth?

vw-beetle-rusty

I bet one of the first things you would say is ‘well it depends’ and by saying that you are acknowledging something crucial and fundamental about this thing we call ‘customer value’. Saying ‘it depends’ means we recognise that value is unique to the person who decides the value and the circumstances in which they are making the decision.

So in the case of the rusty old Volkswagen Beetle like this one the scrapyard dealer might be thinking of the monetary value of the scrap metal, the VW owner who needs a scarce part might be thinking how their break down problem has been solved now that s/he has found a rare engine part, the car renovator might be thinking about how perfect the car shell is for their next custom car project, the grandson tracing his family history might over the moon that he has finally found his grandfather’s car that he drove around Europe in the early sixties and met the woman who was to become his wife. What we ‘get’ for our money is so much more than just the thing itself.

2.Put value at the heart of every marketing conversation you have

As a cornerstone of business activity in general and marketing management in particular understanding value is the primary commercial concern. Marketing shorthand for value is typically ‘the benefit’ or ‘the solution’. It is so fundamental that almost everybody in a firm from the tea boy to the CEO has a view about what the customer values. If you don’t deeply understand value as a concept and what value in particular means to your customers your chances of success are greatly impaired.

3.Make value the touchstone of every marketing decision and action 

Understanding value seems so obvious it hardly warrants further comment and so marketers often give more time and attention to marketing implementation rather than making sure actions are aligned to fundamental value drivers.  Marketers  can easily end up focussing on the interesting rather than the important. To paraphrase Peter Senge when they do this marketers run the risk of chasing the latest fads thinking they are being proactive when all they are doing is reacting and overlooking fundamentals.

4. Cover all the value bases

Over the years it’s become clear that the idea of value is a multi-dimensional constantly moving target. It is unique to each and every customer, it is relative to the competition and it is a weird mix of the monetary, functional and meaningful. For that reason it’s probably one of the most challenging topics in marketing.

Key thought leaders who have produced value definitions and frameworks include:

  • Park, Jawarski, and MacInnis (1986) from function to experience
  • Valerie Zeithaml (1988) from give to get
  • Robert Woodruff (1997) from product attributes to satisfaction
  • Sheth Newman and Gross (1991) from function to social
  • Morris Holbrook (1998) from efficiency to spirituality
  • Ulaga (2003) from attentiveness to expertise
  • Khalifa(2004) from trade off to means ends
  • Brock and Colgate (2007) from money to symbols

Value is a complex combination of different things.

Some are more important in b2c and others more relevant to b2b. The important thing to note is that it is a blend of these things, unique to each customer and each market situation. This means value is never fixed and constant.

Key value elements include:

  • Economic value – what is the asking price or utility of something
  • Perceived value – what you think something is worth
  • Relationship value – how much a long term and close trading worth
  • Experiential value – how interacting with your brand feels
  • Symbolic value – what something means
  • Knowledgable value – how helpful something is in improving life and business in general

These different facets of value engage the purchaser in both rational and emotional decision making simultaneously. The big debate in b2b is just how much purchases depend on objective financial factors and how much on subjective factors such as relational warmth. Is clarifying what value actually is on your marketing agenda.

5. Don’t confuse Values with Value

 There is a lot of contemporary talk in professional marketing circles about moving from attribute to values based marketing. The idea here is that if you tap into the psyche of customer by understanding their deeply held beliefs and life goals this is more relevant persuasive and influential than addressing economic, functional and perceived value. We claim that choosing either attributes or values presents a false dichotomy. In practice it’s not really the case of choosing either attribute or values based marketing. Also in a b2b context there might be a very clear need for specific technical expertise, or financial attributes that are deemed of immediate value rather than a more values based value view of purchase drivers such as loyalty or trust.

Value and values are of course closely related. The distinction needs to be made clear nevertheless. Frequently people hear the word value being mentioned and proceed to talk about their company values. Value is what is the customer gets (which might include resonating with personal values). Values on the other hand are the profound beliefs that people hold which guide how they act in the world. Value and values are not the same thing. Is distinguishing value and values on your marketing agenda?

6. Ensure everyone in the team has the same take on value

One of the most frequent problems we hear about when working with organisations is that there is a problem with communications. People don’t keep their colleagues informed, there is a lack of feedback or information is simply not shared.

These things obviously create communication challenges however there is something much more profound about how we communicate that is often overlooked. That thing is declaring your assumptions or explaining where you are coming from. We take our assumptions for granted and so we often don’t bother talking about them or revealing them to others. People tend to rush into selling and enthusing about their ideas and proposals without establishing a baseline of understanding. They assume they are talking about the same thing when often they are not. One person may be talking about economic value and the other about symbolic value; another may be referring to value and the other to values. Always be clear about ‘what’ you are talking about. Is understanding different internal value perspectives on your marketing agenda?

7. Avoid customer worship

The establishment of marketing philosophy and principles in the management psyche is probably one of the most successful selling jobs ever.

Marketing speak is everywhere, people who don’t even work in marketing talk of brands, positions, segments, targets, benefits, competition and differentiation. Where there is talk of customers instead of patients, where there is talk of customers rather than students, where there is talk of customers not citizens that’s marketing talking. Philip Kotler crystalised the idea that marketing touches every aspect of life from business, hospitals, schools and churches in his 1972 article The Generic Concept of Marketing. We can call this the marketisation of everything and the assumption that this is obviously a good thing, but is it?
Customer centricity is a key marketing idea.

Customer centricity is  epitomised by the idea that the ‘the customer is king’. If you are not careful this can lead to customer worship and the potential of going out of business. I worked many years in the gambling industry. When we researched players they always said they wanted  ‘the jackpot’ every time they played a slot machine. Did we give the customer what they wanted? Of course not! Value has to be created for all parties for the deal to work. The players were given a win chance and a run for their money and the slot operator got a profit per game played. Esteemed marketing expert Evert Gummesson recently called the pursuit of customer centricity a wild goose chase. Getting the balance right between the value the customer wants and the value the supplier needs is called  value appropriation.

back to top

8. Deeply understand value in use and value co-creation.

How many people in your firm actually know what co-creation of value means?

Do they really understand  the principles of The Service Dominant Logic of Marketing proposed by Robert Vargo and Stephen Lusch where the notion of co-creation was first presented?Many marketers use the term co-creation to mean working with the customer to develop new products and services. For sure an element of joint or co-creation takes place. Often this is called co-production too.

When talking co-creation of value  Vargo and Lusch mean something else entirely. They challenge the very basis modern marketing management by claiming that the whole profession is built on focussing on just one, very particular,  idea that philosopher and economist Adam Smith had about value. This idea was the exchange of value which he set out in his book Wealth of Nations. In this treatise Smith made the case that for nations to grow their wealth in the global economy they needed to add value by the production of products which is then exchanged for money by exporting to international markets. The idea of value exchange has been the basis of marketing ever since.

Adam Smith was making a specific economic case in relation to exporting; as a philosopher Smith also understood that value was only really co-created at the point of consumption. So we have value in use rather than value in exchange.  Their point is subtle and important.

The claim that value can only ever be created in the moment of use means that value creation is reciprocal – in other words co-created for the supplier and the customer at the same time not passed from one to the other. Value therefore cannot be ‘added into’ anything and embedded by the supplier prior to purchase. Thinking about value in use ensures that firms don’t run away with a technological or product perspective and always focus on the value the customer will derive when the solution that is offered is used. Co-creation is not really about co-development.

9. Remember you are always aiming at moving target

Can we ever really know what the customer wants, needs or values at any point in time? Sure we can have broad idea of the sorts of problems and aspirations customers have and sure we can propose generic solutions to satisfy what the customer might be seeking. But can we actually know in advance what is driving a particular customer purchase? The context of every purchase is unique every time. Only the customer can decide what is relevant to their situation and so this means that businesses can only propose value. What this means is that being continuously tuned into what is relevant to your customers is vital. This is what makes face to face interactions in b2b marketing so important. Without relevance your marketing efforts run this risk of missing the target. Is solution and value proposition development for value in context on your marketing agenda?

10. Create, deliver and communicate differentiated customer value with Value-ology

If you want to learn more about the essential topic of customer value in business to business and more about methods of implementation and capabilities to make things happen discover further ideas and insights in our forthcoming book Value-ology – Aligning sales and marketing to shape and deliver profitable customer value propositions due for release by Palgrave Macmillan January  2017

Excellence In Practice Commendation Shows Co-Creation In Action

I was chuffed to bits to be part of the Sheffield Business School and Sheffield University course design and development team that have been commended by the internationally acclaimed European Foundation for Management Development following the roll out of an innovative leadership development programme to 65 participants in the Sheffield City Region Leaders Programme.

The aim was to develop a unique  leadership development programme emphasizing imaginative ways to co-create cross enterprise service design that delivered cost effective,  high value services to buyers and users. Participants have come from both public and private sectors and this combination is a key element of the programme going forward. In terms of empirical evidence of the principals inherent in Vargo and Lusch’s Service Dominant Logic the Sheffield City Leaders Programme is a clear example of value in use.

Lee Adams Steering Group Chair and Deputy Chief Executive of Sheffield City Council commented in The Local Government Chronicle. (subscription required) “The participants work together on practical projects. Examples include inter agency knowledge sharing on vulnerable people; delivering the city cohesion strategy more effectively; improving occupancy ratios in social housing; and consistency of provision in psychological therapies”.

The EFMD award placed the Sheffield team in the company of Microsoft, Apple, and ING and whilst we were not shortlisted amongst the five winners, we have been recognised as a “Highly Commended Case” and this is very prestigious.

The programme is accredited as a Professional Business Qualification that is designed for practicing managers who wish to underpin their experience with Masters degree academic qualification by the end of the full programme.

Good Morning Marketing This Is Your Wake Up Call

Emerging after recent months of recent blogging hibernation I’ve started re-pondering ‘my research question’. I know that, all sounds very academic and a seemingly very obvious thing that someone doing some university research should easily get a grip of. It isn’t. Surely I hear you think, if you want to find something out, it’s because you have an unanswered question and there must loads of those! For me though, 2010 was the year of the ‘unidentified research question’. I need to crack on.

In order to break the log jam (hibernating beaver metaphor alert!) I’ve been reading a variety of articles about current issues in marketing thinking and management. One stood out. Are We Nearly There Yet? On The Retro Dominant Logic Of Marketing. Written in 2007 by Stephen Brown of the University of Ulster, this is a great example of his insightful, bitingly humourous, and thought provoking style. In this article he uses the metaphors of cars and journeys to talk about the state of contemporary thinking and practice in Marketing. Here’s a flavour:

“Once or twice per decade, a radically new concept car makes an unheralded appearance. Souped -up, fully loaded and kitted out, inevitably, with a paradigm shift as standard, this go faster model is universally lauded as the next big scholarly thing, and, for a short time at least, become marketing’s conceptual vehicle of choice, the car that that’ll carry our discipline to its final destination, the fabled city of Scienceoplis.”

To mash up the metaphors. In a nutshell Marketing is a fad rich environment which is strewn with empty new bottles that had old wine in them. A world where practitioners regularly wake up with a splitting headache after over indulging in marketing nouveau and mutter…never again.

Stephen Brown writes from a Critical Marketing perspective which seeks to bring to our attention the problems created by the all pervading dominance of the Postivistic tone and aspirations in marketing management thinking, writing and practice. The unswerving aspiration, in some quarters of marketing, to become a natural science, to become the fig leaf that covers up any academic embarassment and provide the unequivocal facts and direct causes and effects that managers crave. This is not merely an academic reverie. He does point to a serious issue for marketing. He urges caution towards management notions such as the ‘hot new’ Service Dominant Logic concept (the prime target of his article). He cautions us that such ideas merely serve as what he describes as a “conceptual comfort blanket, something that helps marketers face the reality of mounting marginalization and ever increasing irrelevance”

Now we start to get close to some questions. What is marketing capability? Where is it kept? Why would anyone want it? How critically aware are marketing practitioners? How do practitioners judge the value of new marketing concepts? What are the mechanisms that generate the tendencies towards the various forms of marketing deployment? Why does post modern marketing scare me? What is marketing realism?

Marketing has now gone Service Dominant, or has it? I don’t believe you can change reality by just changing how you talk about it (see Critical Realism and Bhaskar, Collier et al) Maybe that’s why marketing is marginalised by many because ‘marketing mystics and gurus’ believe you can and that doesn’t wash with everyday people like you and me because it isn’t ‘real’! Skunks aren’t pungently challenged…they stink!

Because it seems so many senior executives agree with Matthew Parris (writing in the Times on the 25th Novemeber 2010) that marketing is just communications, PR and word games. An after dinner game to played with nuances and innuendos, a bit of in the dark fumbling (Ambler) it is trivialised as a business ‘entertainment’ exercise. The marketing job can be dropped when times are tough because we know its all just flannel really.

Is it any wonder marketing is burdening under ‘ever increasing irrelevance’ (Brown ibid ). Parris wrote, “when hired to advise on improving the ‘brand’ of an organisation marketing professionals will usually find that clients already know and promote their strengths but shrink from confronting their weaknesses. Therefore the client will be professionally advised to identify and remedy brand weaknesses…the corporate image consultant is not hired to rethink the product itself.”

Question. Can there be a singular definition of marketing? How are product and service solutions originated? Time to read more from Stephen Brown who also seems to like penguins.

A Case of Bad Hotel Service

finger-pointing1

You might think that providing good service came naturally in the modern hospitality business.

Judging by my recent experience at a small hotel in Stafford part of a local UK brewery chain I can tell you that any hope that the principles of Service Marketing and Service Dominant logic might have found their way into this establishment is a folorn hope.

For those of you who are looking for a micro case in Service Marketing please feel free to use the following and distribute widely.

The Occasion
Myself and half a dozen old friends had decided to have a Polytechnic re-union in Stafford. The first time some of us had seen each other for over 25 years. I was sharing a room with my old flat mate.

The Problem
When we returned late (1.00 a.m.) from our night out and a meal at Pizza Express my room mate and I found we couldn’t get our room key from reception. This meant we had to sleep ‘rough’ in the reception area until 7.30 a.m. when the manager arrived.

The Context
I booked in first in the middle of the afternoon and was given a key fob with the back door key and the room key by the manager. I went to the room to unpack, and then handed the key fob back to the manager who explained that the bar shut at 11.00p.m. and that the key would be needed to get in after that time.

I hooked up with my friends, and my room mate met us at the pub without checking in. This meant that our key was in the hotel. The other members of our party had their key sets with them and so we believed there would be no problem in getting into the hotel.

We all returned to the Hotel and we got in using one of my friends keys. It was at that point we realised the Hotel didn’t have a night porter, their was no way of summoning staff at reception and notices or signage to guide us as to what to do. I was certainly not informed of this possibility when I handed my key set back earlier in the day.

The only option was to sleep in the reception area. I slept roughly on the floor or sitting at the table. My friend slept on benches.

At half past seven the Hotel manager arrived and the situation went rapidly downhill on top of the previous six and half hours sleeping as best we could.

The Service Encounter
When the manageress arrived on duty I explained that I had been unable to get to our room. She was bemused and even a little amused at our situation. As you might expect we were not in the most amenable of temperaments. I asked why there was no system for getting our key if it had been handed back to reception. The manageress said that we were told that we needed a key to get in after 11.00 which was quite correct. By ‘get in’ I assumed get back into the hotel. I then started to explain why we didn’t have our key set with us.

Her response:
i) We were irresponsible for not taking our key sets with us.
ii) We lacked common sense.
iii) We were incapable of using ‘logic’ to solve our problem.
iii) Why didn’t we ring the back door bell to get attention.
iv) We were abnormal because this had never happened in her experience.

My response:
i) Her process for key management was at odds with common experience in hotels. I had travelled the world on business for many years and never experienced such a problem.
ii) There was no indication that the outside door bell was the way in which to summon night service at reception.
iii) It was a wrong assumption on her part to believe that once inside the building we would necessarily think there would be a problem getting our room key.
iv) There was no signage or information clearly visible on reception about who to contact with emergencies or problems.

The Experience
This was a terrible experience. A bad nights sleep and a complete lack of concern from the manager.

This was complete mismanagement of a ‘moment of truth’
There was no apology.
There wasn’t a sincere acknowledgement of our problem.
There was no sympathy for the uncomfortable night we had experienced
Her attitude was patronising and sarcastic.
She was unable to accept any part she and her management team might have played in the problem.
There no grasp of the customer journey and where problems might occur.
There was no value added atonement
She would not listen to alternative explanations
She was intellectually incapable of grasping ‘how’ the situation had arisen and ‘how’ her guest management process couldn’t account for the situation that happened.

Significantly this incident demonstrated the impact of interpersonal skills. As if the ‘content’ of of what the manageress said wasn’t galling enough, her body language and tone were not exactly placatory. The ‘meta message’ of her communication was essentially one of contempt, and you could speculate that her approach to customers was mirrored in her approach to her staff. This was clearly someone used to having it her way and not tolerating different view points to her own.

The Outcome
The manageress was contacted later that day on my return. She was asked for the name of the person she was accountable to and replied by saying that she wasn’t accountable to anybody.

My room mate checked out after me. She offered 20% of the bill because he apologised to her for our part in the problem. We regard this as unnacceptable.

A formal complaint to the retail chain is being made.

What do you make of this?

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to Ma.gnoliaAdd to TechnoratiAdd to FurlAdd to Newsvine

Does Business School Thinking Affect Marketing Action?

service dominant logic-service theory-marketing theoryDoes business school thinking change the way that marketing executives do their job? Or do business schools simply look at how marketing done in the ‘real world’ and school business students in what already takes place?

I’m pretty sure that most marketing executives are unaware (and probably disinterested) in alot of the very specific and arcane thinking and research work of the majority of marketing academics. This is a fact that worries some academics as they perceive an increasing gap developing between what academics find ‘interesting’ and what marketing practioners would like to know in order to be better at what they do. There are many journal articles on this theme such as:

Musings on Relevance and Rigor of Scholarly Research in Marketing. Varadarajan, P. Rajan. Journal of the Academy of Marketing Science, Fall2003, Vol. 31 Issue 4, p368-376

Beyond the one-dimensional marketing manager: The discourse of theory, practice and relevance. Brownlie, Douglas; Saren, Michael. International Journal of Research in Marketing, May97


The Academy and The Practice: In Principle, Theory and Practice Are Different. But, in Practice, They Never Are.
Pringle, Lewis C.. Marketing Science, Fall2001, Vol. 20 Issue 4

The concern in Business Schools is growing so much that the July 2009 edition of The Journal of Marketing leads with a guest editorial by David Reibstein, George Day and Jerry Wind called Is Marketing Academia Losing Its Way?

I’m not sure this is actually the case. At the moment there are two key interelated conversations taking place. One in Academic circles and the other in the digital Social Media space.

The mantra of the Social Media is all about connecting, collaboration, networks, open source, and influence. (At the extremes of course its about SEO or internet selling but the dominant theme is about the social dimension and serving your customers well.)

The hot topic in Business School marketing is Service Dominant Logic This is an idea put forward by Stephen Vargo and Robert Lusch in a 2004 Journal of Marketing article called Evolving to a New Dominant Logic for Marketing. In a nutshell it claims that a new ‘theory’ of marketing is necessary to explain how marketing is done in the 21st century. The authors emphasise its not simply making a case for the value of Service Marketing versus Goods Marketing its actually concerns a profound mind-set change that embraces, co-creation, collaboration, and networks.

So how much of what we read on blogs, airport lounge management books, marketing magazine articles and so on really comes from this original source? and how much is the work of Vargo and Lusch simply a reflection of what is happening ‘out there’ in the real world? Perhaps it becomes self referencing. Marketers seeking out ‘academic’ verification and a pat on the back for things they are up to. A sort of co-creation is good because Pine, Gilmour, Vargo and Lusch say it is and overlooking the possibility that these writers might be simply making sense of what they see not actually prescribing something marketers should do!

As for Academia the Vargo and Lusch article has ruffled feathers. Not everyone has bought into the appeal of a new marketing logic that replaces the old ‘wonky’ one of Levitt and Kotler. In particular John and Nicholas O’Shaughnessy have claimed in their January 2009 Vol 43 no.5/6 European Journal of Marketing article The Service Dominant Perspective:a backward step that the Vargo and Lusch approach is a crude attempt to provide the impossible. They imply that seeking on absolute theory of marketing is based on a ill-founded positivistic assumptions. The idea that ‘out there’ there is an ideal form of Marketing just waiting to be discovered. They favour a multi-perspective approach. There are many ways to explain marketing.

Now how relevent this debate is for every day marketing is a moot point. It seems on the one hand we have a desire to improve the decision making and problem solving capability of everyday marketers and the other we have curiosity in marketing as a social phenomenon.

Maybe just maybe the muti-persepective approach is what Marketing really needs because versatility of perspective encourges innovative thinking. So think again when you read blogs and tweets about the service dominant imperative. Are you un-thinkingly being forced done one channel of thought. Are you sure you really know which marketing school is influencing what you do!

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to Ma.gnoliaAdd to TechnoratiAdd to FurlAdd to Newsvine

%d bloggers like this: