Seducing your ideal customers

By Jennifer Kirkby, business analyst and consulting editor

The failure rate for new product development is high, whilst consumers are surrounded by a cacophony of ‘me too’ products. Company managers constantly ask each other ‘what do customers want?’ whilst board room executives tell McKinsey researchers that they must know more about consumer preferences. So how do you create a customer proposition that customers will value? Some would answer ‘outside-in’, a catchy phrase, but what does it mean?

What is a customer value proposition?

If you utter the words ‘customer value proposition’ in a business performance meeting, you will notice people shuffling their feet and wondering what on earth you are talking about, before getting back to their sales figures!

Why is the heart of a profitable business such a mystery? Every day ills befall customers that are the direct result of poorly thought-through propositions – trying to choose between two whiz-bang mobile phones that look the same; an advertised train fare of £7 that is only available on the most unused route at the dead of night; the refusal of a credit card at point of purchase for a high-value customer because of a computerised rule...the list goes on.

So the first task is to enlighten the ‘foot shufflers’ about the meaning of customer value proposition (CVP). Perhaps a whiff of sex will bring home the message!

A CVP is the seductive ‘come to me’ promise you make to customers that differs from other suitors – and that you have the skills to live up to! It is the succinct articulation to both staff and customer of the company’s unique vision and brand values - that you are ready and waiting to deliver. It is your own special mixture of functional, emotional and psychological customer benefits.

• From the customer’s perspective, it sets expectation (so important for customer experience) of why they personally would benefit from using your company rather than any other.
• From the organisation’s external perspective it is its chief weapon for competitive advantage and a vital company asset.
• From the organisation’s internal perspective it is the rallying point that focuses effective resource allocation and staff motivation.

Let's look at some examples:

BMW functionally promises good engineering, driving ‘pleasure, and psychologically the reassurance of reliability and status. Its ‘chat line’ – "the ultimate driving machine".

Guinness functionally promises a nutritious drink, a feeling of being a little different, and psychologically the knowledge that this has been produced with care. Its ‘chat line’ – "good things come to those who wait".

Intel functionally promises a technically sound microprocessor, emotionally a feel good factor of quality, and psychologically the trust that your computer will not break down and mess up your ‘life’. Its‘chat line’ – "Intel inside".

Research leads to co-creation

CVPs are important, but how do you build one that is compelling? A clue can be found in questions from CRM capability assessments which grade companies on the effectiveness of their proposition development:

• Do you target specific groups of consumers?
• Do you carry out in-depth research activity to ensure that you focus on real target customer needs, rather than what the company thinks customers want?
• Does the research reflect different needs of customers in different market segments, and at different lifecycle changes?
• Do you understand the main drivers of loyalty for each customer segment?
• Has the proposition been constructed to reflect the identified needs areas from research activity?
• Has the proposition included formal input from staff, customers, and business partners?
• Is the proposition fully aligned with the values and positioning of the brand?
• Has each element of the proposition been interpreted as a benefit, and has that been communicated to staff?
• Do you test customer expectation from the proposition?

How would you answer these questions for your organisation?

The CMAT assessment from QCi has found that:

• Only around 25 percent of companies carry out true consumer ‘needs’ research for the proposition, whilst many look at customer satisfaction with current products.
• Around 50 percent of companies have no real idea of the drivers of loyalty – I suspect that is probably higher.
• Fewer than half of companies have a clearly defined proposition that can be well articulated by employees and partners.
• Fewer than 1 in 10 companies consult with all departments, let alone business partners - about the building and delivering of the proposition.

From these questions it is obvious that customer research and analysis capabilities play a major part in building a proposition. This is where outside-in thinking kicks in - far too many companies build propositions from inside out, making assumptions about customer needs, looking at capabilities and building accordingly and/or, worse still, just copying competitors.

Research and techniques for outside-in proposition development include:

• Strategic needs and attitudes studies on the whole market, whose results can be analysed to give market positioning, segmentation and customer loyalty driver information. Some research companies offer services where research data can be combined with market trend data and used in scenario planning.
• Ethnographic research which looks at how consumers behave and use products and services in their own environment – often done by anthropologists.
• Conjoint analysis which seeks to quantify the trade-offs customers are willing to make for a bundled product/service set.

As companies realise the power of outside-in thinking, customer co-creation looms into view. Techniques that don’t just go out and gather research but let down the walls of ‘fortress company’ and ask enthusiastic customers to work collaboratively on propositions. Boeing recently had 120,000 customers signing up to help design a new aircraft. Apple has its iLounge for customers to make suggestions about product improvements they would then work on. Proctor and Gamble have calculated they can reduce R&D costs by 30 percent through co-creation. (We will cover this in depth in future monthly features.)

The customer’s benchmark

Before rushing off to design a CVP, research or customer in hand, it can be enlightening to map consumer needs in a particular industry back to their roots in social, political, economic and technology trends (PEST). It creates both a context for the need and an idea of where and how it might develop – a rich vein of information for innovation. Today’s differentiating ‘if you brought this you might like this’ proposition response to the need for a reduction in product complexity, may be tomorrow’s standard service – or hygiene factor. Knowing the major trends in consumer need (see here and here) can also ensure that you look for their manifestations in the research – a customer’s benchmark is a telescope for spotting emerging or hidden opportunities.

To illustrate , take two major consumer trends: reducing complexity – which is partly the result of unfocussed CVPs in the first place; and improving returns – which is indicating a shift in need from functional to emotional and psychological proposition benefits.

Reducing complexity

Giving people the information they want to make a product decision easily. How does your company meet this need? Here are some examples of how others across a range of industries do it.

Travel – Expedia’s Tripadvisor community, personal reviews of hotels;
Retail – M&S ‘Look behind the label campaign’, to open up operations to customer scrutiny;
Banks – Regularly updated house price guides;
Online – Products brought by other similar customer;
Supermarkets – Food source codes and even the names of local farm suppliers;
Estate agents – Right move website which makes house hunting in one area infinitely easier;
Shazam - Out in a pub and hear some music you cannot remember the name of? Point your mobile phone to the sound and text 2580, the Shazam service will return the name and artist to you phone;
Telecommunications – Vodafone live! Information delivered to a mobile;
Entertainment – Barcode look-alikes on film posters that can be read by a mobile phone and downloads local showing dates and times;
Manufacturers – Client specific extranets that allow a client to pick up personalised information and track such things as orders;

Helping customers improve their returns

Helping customers get more for their money, and achieve their goals and dreams. Again, how does your company do this?

Banks – Financial planning services;
Land Rover – Off-road driving lessons with 4x4 car purchase;
Data providers – Assigned account analysts to help client make the most of the data in their situation;
Ebay – My account facility;
Travel – Assigned travel advisors who have been to the area you are planning to visit;
Retail – personal shoppers who keep records of a client’s purchases;
Betty’s Café – Popular Yorkshire café that offers to teach you how to make the food in a ‘state of the art’ cookery school;
Grand Marnier – Bartender events where customer learn to make cocktails;

Loyalty drivers and hygiene factors

Once consumer needs are mapped into the customer’s benchmark, a fest of analysis can begin: market positioning, behavioural analysis and various forms of needs and value segmentation – all fixed on finding the seductive promise for your CVP, the drivers of loyalty for your company and the people it should be aimed at.

The output should be a chart akin to figure one, where the aspects of proposition customers say they value are crossed with the aspects driving their behaviour – the ones of real relevance. Customers themselves do not always know what they value or what drives their behaviour – there comes a time when the outside does have to move inside – inside the consumers mind.

The chart divides elements of need into four groups:

• Motivators of customer loyalty – the key parts for your CVP; the ones where you should concentrate resources on delivering the WOW factor.

• Hygiene factors – here you must at least achieve parity with competitors to stay in the game, but you do not need to exceed customer expectations, that would not be profitable.

• Hidden opportunities – the customer trends you were not aware of, which hold competitive opportunities if you can build responses into your proposition.

• Potential savers – areas of your or competitors' current proposition that no one really values, and where costs can be cut.

Fig one – separating loyalty drivers from hygiene factors; opportunities from cost savers

On an everyday level, loyalty cards - those frequently misnamed discount schemes - can be an outside-in vehicle for finding personal loyalty drivers – if the information from the card is used to tailor individual customer proposition. For example, bar codes on Tesco products tell the retailer if a customer buys more convenience products, ‘green’ products or adventurous products, this information can then be used to tailor a proposition for the customer’s benefit – very seductive.

It is not quite co-creating, as the customer is not fully aware of the information they are providing, but it is a step on the path to customers authoring their own propositions. In Carlson Marketing’s Relationship Builder, research which tracks the use of loyalty schemes, an increasing number of people either don’t take them up at all, or if they do, do so because they are expecting preferential treatment – so make them feel special.

Cut costs or innovate

According to Chris Miller of Innovation Focus, companies today would rather cut costs and promote 'yesterday's products' than invest in processes to understand customer needs and innovate new solutions. Of the 100m companies in the world, he believes only five percent have what is required to produce and maintain a valuable CVP. Companies would rather acquire than do research, control rather than experiment.

The search for a compelling CVP does indeed start on the outside of a company, moving in slowly to include working with staff, collaborating with partners, ensuring what is promised is delivered, whilst keeping up with market trends – CVP’s are dynamic. We’ll cover all these areas in future MyCustomer monthly features.

Recommendations for further reading
• Eating the Big Fish – Adam Morgan (Book)
• Market Research Society papers for information on research techniques
• Value Creation Process – Adrian Payne (CMC paper)View
• Creation Nets – (McKinsey premium paper)
• Creating customer value in the not for profit sector – Gary Warnaby & Jill Finney (published by Wiley Interscience)

For some views by experts go to In my view .....

This month's stories:

What do customers value most - part one

What do customers value most - part two

Loyalty drivers

Keeping loyalty alive: Researching your customers

As they like it: Acting on loyalty drivers

How to capture loyalty: the consumer's view

Customer trends

How to be a trendspotter

Word of mouse

Seven consumer trends you need to know about

Reducing complexity

Reducing online customer complexity

Help your customers help themselves

Finding the balance: infolust v info overload

Improving customer returns

The extra mile high club

Driving customer ROI

Are you experienced: the evolving consumer

jennifer.kirkby@mycustomer.com
Find out more about Jennifer Kirkby