5 Misconceptions About Customer Value
Many entrepreneurs claim they create value for customers. Few of them know what it means.
Strategy — map it out yourself
Many entrepreneurs claim they create value for customers. Few of them know what it means.
“There is no reason for any individual to have a computer in his home.” That was the phrase S Ken Olson, president and founder of Digital Equipment Corporation (DEC), said in 1977. Olson claimed that journalists took his words out of context. But it reflects his views on customer value, what the customers appreciate, and what not. It is an excellent example of a common mistake many businesspeople make, even as brilliant as Olson.
1. Customer needs ≠ customer value
A friend of mine childishly bought an expensive car — more costly than he could afford. What values did the car manufacturer create for him?
What is “customer value?”
There is no commonly accepted definition for this notion. Some authors believe, simply put, that “this is what customers want.” I’m afraid I have to disagree with this concept because there is another term for their wishes — customer needs.
I define both concepts as follows:
Needs are conscious and subconscious desires customers have (read more here).
Customer value is the subjectivity-evaluated outcome clients receive or believe they will receive by using a product or service.
We need to differentiate these things because there are many ways to fulfill the same need. For instance, most people crave public recognition. But some of them strive for the Nobel prize, whereas others post pictures of their bodies on Instagram.
My friend had a latent need to believe and make others believe that he was better than he thought. And the car manufacturer combined state-of-the-art design and cutting-edge technical solutions in a dizzyingly expensive device he can now boast.
2. Needs are in customers’ heads. Value is created by a company
Mother Nature created us, humans, complete with our basic needs, and there are sixteen of them. Nobody can change this list or influence it. They are like preloaded apps in a smartphone that cannot be deleted. So, customer need is inside a customer’s head.
Customer value is what an organization can offer a customer through its solutions.
For example, I need to share my thoughts with my subscribers. And a bunch of companies, from computer manufacturers and internet providers to Medium, Substack, and Twitter, created several products for me and others like me.
3. Value ≠ satisfaction
Many companies measure customer satisfaction, sometimes quite annoyingly. But this measurement reflects a company’s performance, not the value a company creates for a client.
In September 2011, there were 85 million BlackBerry subscribers worldwide, and I believe they were satisfied. But you know the end of the story — iOS and Android devices squeezed BB out of the market. New smartphones proposed new values for the users, and they, however satisfied they were, switched to alternative solutions.
4. Value is not a product feature
A car manufacturer needs years to modify its product or to launch a new one. But app developers can add new features to their products daily. As a result, sometimes they overload the apps by features, which several times was why I deleted some of them. Their developers confused the number of functions with the customer experience. They are related but not the same.
Customer value is not about functionality or even usability. It is subjectivity-evaluated outcome clients receive, or believe they will receive, by using a product or service. Customers don’t measure value in numbers or percentages. They simply like one product and dislike another one.
5. Value building is not (only) an act of creativity
Jeff Bezos once said: “Market research doesn’t help. If you had gone to a customer in 2013 and said, ‘Would you like a black, always-on cylinder in your kitchen about the size of a Pringles can that you can talk to and ask questions, that also turns on your lights and plays music?’ I guarantee you they’d have looked at you strangely and said, ‘No, thank you.”
Bezos is a great entrepreneur, but I do not always agree with his thoughts.
Amazon Prime service appeared when an Amazon engineer Charlie Ward pitched the idea in a digital employee-suggestion box. When the company introduced the idea publicly, many analytics criticized it. “Skeptics thought we were crazy,” said Amazon Vice President Greg Greeley, who ran the service. But today Amazon Prime has more than 200 million subscribers worldwide.
Many have heard of Amazon Fire Phone failure. But there were several other projects by the company that failed. Jeff Bezos doesn’t make a tragedy out of it. He believes that failure is a true companion of development. But we need to remember that Amazon is a huge company beloved by investors, so they can afford what many businesses can not.
I have already written that you can’t ask customers direct questions like “What do you want?” and expect a clear and valuable answer. But there are many ways to identify customer needs by asking indirect questions and observing their daily routine.
Your odds of creating exceptional customer value are higher if you base your ideas on deep insights into customers.
Conclusion
1. Don’t confuse customer needs and customer value
2. Do not forget that the needs are in customers’ heads, but creating value is a company’s job
3. Remember that if your clients are satisfied it is good news, but don’t relax
4. Do not add a feature to your product without making sure that it will increase a a subjectivity evaluated outcome in customers’ eyes
5. Don’t make decisions for your consumers, as Olson did. Collect deep insights into your customers and use them to make critical strategic decisions
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