With less money to go around, customers are more discerning than
ever before, demanding value for money. Inevitably, they are
challenging today's marketers to re-think their company's customer
value proposition.
Our client work has highlighted which successful companies can
out-deliver in this environment and how? Interestingly, while these
companies are flexible enough to adjust to changing mood of the
market, the truth is they are often well prepared in advance
through their deep understanding of what really matters to their
customers, and how they can continue to be relevant in the current
context and conditions.
They know how to deliver value.
The 'Value' Trap
The term 'value' in terms of marketing strategy appears to be
often misunderstood. Too often it is translated to mean 'price off'
with the consequences of a lower net margin position not being
offset by sufficient volume growth, and wider problems for the
company as a whole.
Regular discounting tactics can also have a more insidious effect.
Used frequently, consumers are trained to form shopping habits to
defer discretionary spend, as they wait for 'sales time'.
Just look at how beds, fashion and electronics are now habitually
bought at 'sale time'. And this is true also of non-discretionary
purchases. Branded consumer good staples have become victims of
their retail customers' every day low price propositions, and
business to business markets are often the servant of price focused
negotiations centered around commoditized products or
services.
A better way is often within easy reach
The busy demands of running the business, often mean executives
have limited 'time' and 'space' to consider alternatives to pure
'price off' when under pressure to remain competitive and deliver
sales.
Our work often creates this 'time' and 'space' for clients. We
operate continually in the 'customer's world' and probe to
understand what really motivates them. In particular, we often help
them understand how their offer fits into the usage or purchase
context of their customers. We find out what their customers really
value.
By probing for what value the business brings to customers, the
organisation can ratify priorities and resource allocation
decisions to strengthen their 'customer value add', and as a
consequence, grow their brand and bottom line.
Clayton Christensen from Harvard Business school calls this
understanding 'the customer job to be done'.
By focusing your company to deliver on this need, competitive
advantage can be achieved. We call it 'the X factor' - the people
driven insight that brings focus and clarity to the organisation,
and delivery of value to customers.
The Road to Customer driven advantage: Some questions to
think about
- Do you understand the current purchase context of your
customers and their perceptions of value?
- How does your offer fit into their lives?
- What is your customer's 'job to be done'?
- How are you performing in delivering against this need? Where
are the gaps? What opportunities present?
- How might you use this insight to deliver more value and get
ahead of your competitors?
- What innovation opportunities can be identified?
- What immediate actions can deliver results?
- Are you mobilising around customer driven outcomes?
Consider the three examples below. Each is from a very different
sector but each is grounded in a superior understanding of
customers' context circumstances.
Cement's X Factor = Cement 'aint just cement
Who would have thought a commodity such as cement is not a purely
price driven purchase?
When one understands the context of its use, more important
factors come into play that define the true customer 'value'
expected of a cement company.
Consider the importance of product composition and the time
sensitive nature of the product. A late delivery or product
consistency not to specification, means an expensive labour force
being forced to wait on site for the pour, or worse, costly rework.
This 'wasted labour cost' or the risk of poor standards far
outweigh any price difference in the material costs.
With this simple insight, the cement company can focus on a more
relevant competitive claim than just price ... A timely delivery,
'to spec' every time, can provide significant 'assurance value' to
their customers.
The Myer X Factor = A customer driven
turnaround
Since new private ownership, the Myer senior management team
declared their goal to be 'shopper centric' as a key ingredient
toward their turnaround objective. They have invested continually
in understanding their shoppers and using this knowledge to
re-focus the business on what matters to their shoppers in driving
their turnaround program of 3 years.
We have been privileged to work with the senior team through this
time providing a continual flow of consumer insights to management.
This feedback is actively used to prioritise transformation program
initiatives, each aimed at improving the fundamental drivers of
shopping experience - range, service and environment.
Furthermore, the fabulous MyerOne card asset has enabled a
complete shift to a more effective marketing and promotional
spend.
Before private ownership, Myer stores were continually promoted as
in 'sale' mode. 'Across the board' discounting was a feature of
most promotions, with margin and profit performance suffering as a
result.
MyerOne has provided the 'X factor', data to understand its most
engaged and loyal shoppers, the MyerOne members. This has presented
many opportunities to promote more targeted and relevant 'value
based' offers which are matched and directly communicated to reward
MyerOne members. Win - win.
And the story continues - the Myer Board announced early August it
will look to proceeding with the public float ahead of plan.
NAB's X Factor = From insight to confidence to
leadership
It is early days yet, but NAB might just have rediscovered its
mojo! Its starting to look and act like a market leader
again.
Despite being reported as a potential $100m fee loss, the removal
of NAB's overdrawn fee could be a masterstroke of insight and
action.
NAB is reclaiming a market leader stance by demonstrating that it
understands the frustration that these fees have on their domestic
customers, and their business base. More than likely, most
customers do not overdraw accounts on purpose and quickly rectify
this situation. Why penalise the masses for the few serial
offenders?
It is likely the other banks will now follow, but a bold move like
this indicates an understanding of their customer base, and a
confidence of being prepared to improve value by removing 'dumb'
rules, and developing innovative product that creates value.
If you are interested in discussing any of the ideas
presented, please call Graeme Chipp on (03) 9670 4700.