The one who knows the customer wins the world

RēVO is a company specializing in the production of high-quality sunglasses, founded by some former NASA scientists. These scientists have been involved in the development of a specialized technology for glass used on the surfaces of spacecraft to protect highly sensitive instruments exposed to the sun's glare in outer space. A rookie in the industry, Lovol has created a new line of premium, high-priced sunglasses priced at $150 to $300 per pair. The company grew rapidly and was eventually bought by Bausch & Lomb. In 2002, Lovol was resold to Luxottica Group, a global leader in the eyewear industry.

Lovol could have used vivid advertising to emphasize the high-tech content of the product - 100% UV and IR protection without distorting the lenses. In fact, Revo took a different approach, starting with skiing, fishing and boating fields, observing and talking to those who wore sunglasses, trying to understand how these potential customers felt when they were skiing, fishing and boating. For example, when a skier descends a "cat jump track", will sunglasses obstruct the view and prevent the skier from choosing the route that will have the most fun? Or, could anglers catch more fish if they could see better? Lovol pays particular attention to customers who are innovative in their fields—who are so passionate about their hobbies that they must equip themselves with the latest and greatest gear.

In order to maximize customer value, Lovol has come to realize that customers need more than just quality Lovol sunglass lenses—so that they can slide more smoothly when skiing, or be able to see when fishing More fish, they also need matching frames that are comfortable and stylish. Lovol also found that its target customers generally have long-term interests in their hobbies. Therefore, if the frame is not suitable and the customer feels uncomfortable to wear for a long time, the technical content of the lens is in vain.

The Key to Success: Customer Value

Many companies have some understanding of customer needs, the company's operating costs, the benefits of a product or service, and investor expectations. However, most companies don't really understand what is the cause and what is the effect of improving performance.

The most important aspect of a company's long-term success is to provide and continuously enhance customer value. This is evidenced by the success of many companies, often the leaders in their respective industries, such as Nike, The Home Depot, Starbucks Coffee, BMW, Dell Computer, and Toyota Motor Corporation, to name a few.

Related to this are competitors and the playing field. With increasing competition to operate globally, for some companies, beating competitors has become a major strategic driver. Competition, of course, should not be sloppy, but it should not be the basis for a company's strategic driving force. What you need to consider is the essence of competition: do your customers think that your competitors can or will bring them higher value? ?

As a company, the purpose of your existence should not be to defeat competitors, but to create and continuously improve customer value for the target customer group you have selected, so that customers can bring higher profit margins to the company , thereby making the company profitable. And in doing all this, you do it better than your competition.

Improving customer value means analyzing and evaluating customer value segments to determine their marketing effectiveness and profitability. That said, maintaining leadership in customer value requires a keen eye for future trends to anticipate customers' changing needs and expectations. Finally, you must also update and enrich your customer value promise. Achieving this requires continuous improvement of the customer value process, segmentation of target customer groups, and improvement of the infrastructure to support them.

Improving customer value involves the following four specific steps: measuring current business and performance; gaining insight into customer needs and expectations; redefining the customer value commitment; and enhancing customer value.

1. Measuring current business and performance

There are two main reasons for measuring a company's business. First, the information provided by business measurement can be used to improve or correct some of the practices the company is taking to achieve its goals. With this data, you can see where the company is successful — delivering significant value to customers, and where it isn't. It is important to continue to work on what is doing well, but what is not doing so well, that is, where there is a gap from the target, requires re-examining the company's basic segmentation strategy or redefining customer commitment.

Second, business measurement provides an assessment of how well a company is accomplishing its goals, that is, how well the company is progressing at a given time relative to a given goal. Considering that your customer commitment must be balanced against the cost and profit of serving your target customers, you may sometimes have to make a choice. But no matter what, you have to develop an action plan to improve customer satisfaction, and at the same time, you have to set measurable goals and timelines. All that's left to do is to constantly review your plan and make adjustments if necessary. Dig through data and results to uncover immediate problems that need to be solved, or those that, if solved, will bring immediate results. These are short-term motivators in the pursuit of long-term interests.

To measure business effectiveness, it is necessary to assess how a company interacts with customers at each touch point and how the company operates its business processes to effectively deliver on the value promise. If a company frequently fails to achieve its goals, it is not because it is not measuring, but because of the following:

● When measuring customer information, the wrong measurement element is selected

● The selected measurement element only matters The operating efficiency of the company, not the customer

●Use the competitor as a reference to measure its own products

When it comes to customers, companies often measure some wrong elements. The reason is that the company has of customers have misconceptions. For example, companies will think that customers need a better product, and sometimes customers really want a better price, and the existing product can satisfy them. What to do at this point is to ask yourself, "In another way, what would I do if I were a customer?" Stop thinking about the best, best product. The key is to figure out what customers want most, why, and how to best achieve them.

Another common mistake is measuring factors that appear to be important, but are not necessarily so to the customer. The company sets some measures that it sees as critical to its own success and makes assumptions about the needs of its customers. Then, based on this assumption, develop an action plan to meet your own success criteria. The next thing the company does is purely implement the plan, feverishly measuring it against the company's internal goals. At the same time, companies may find some whimsical reasons for the discrepancy between what the market actually is and what the company is aiming for.

The practice of evaluating a product or service and business performance against competitors is based on the false belief that a better product, service or business will win customers. It also works when customers are faced with very similar choices. However, once a company wakes up and adopts a new value, technology, product or service to change the rules of the game, this practice has to be stopped. Businesses that excel at creating value have one thing in common—the ability to discover new value even in mature markets. To achieve this, it is often not necessary to study competitors, but to study customers.

Second, insight into customer needs and expectations

What customers perceive is the actual value they think they have obtained, and customer perception is constantly changing. This means that your understanding of your customers has to change accordingly. Judging by the data, are you segmenting the value of your customers correctly? Are new customer segments emerging? Are these customers, if any, developable, profitable target customers for the company?

A chemical company conducted an exhaustive study of its end-users, which resulted in four categories of customers based on their needs and behaviors: loyal customers, customers ready to "jump", undecided customers, and indifferent customers customer. The company has a clear value commitment to each segment of customers, and implements different strategies for different types of customers, specifically, "support loyal customers", "stop customers who are ready to switch jobs", "help undecided customers" "and" educate customers who don't care." This new strategy has been used with great success, the company has sharpened its focus, and profits have risen. But two or three years later, the problem came out—"deterring ready-to-ship customers" was clearly the least successful part of the company's strategy.

This finding prompted the company to re-evaluate its market segments and identify a new set of segment customers -- customers who have left. The needs of this new customer base have yet to be met. The so-called customers who have left are those who have been "jumping" customers that the company has not successfully prevented. A new customer value commitment was born, which is "regaining customers who have left".

When you deliver on the value expectations of one customer segment but fail to deliver on the promise of another, you have to challenge yourself to find the reasons for failure. Why are you strong in one area and weak in another? For the previous set of customers, what did you learn to be successful? For the latter group, what did you not understand that led to the failure? Are your commitments different for these two groups of customers? Why? What is your ability to create value? What do the differences in customer satisfaction indicate? Do you have sufficient or appropriate resources to support less satisfied customer groups?

3. Redefine Your Customer Value Promise

Challenge yourself to what you know about your customers. As a result, your customer value promise also needs to be redefined. Evolving customer needs and customer lifetime value mean last year's customer value promise has expired. Organizational structures may also be adjusted, hampering the firm's ability to deliver customer value. And your competitor may have changed its customer value promise.

The lesson about this is that when a product has reached maturity and has a high profit margin - what we commonly refer to as a "cash cow", "satisfying the customer" may no longer be available. It is a proper customer value promise. In this case, the customer value promise may have to be realigned around an exit strategy.

A few years ago, Dow Chemical's Epoxy Products Division conducted a study of its customer value commitments and found that there was a category of customers that were not being met. This group of customers regularly purchases standard epoxy products in large quantities, and their sourcing practices are pragmatic and require competitive prices. Dow Chemical Redefines its Customer Value Promise as a Company. The new promise is based on a new e-commerce solution, epoxy.com, and offers the following:

Customer Value Segments: Bulk and Vehicle Buyers of Epoxy Products

Customer Value: Ease of Purchasing; Price Transparency

Best Value: Lowest Prices; Easiest Transactions

Benefits to Dow: Low Costs, Clear Business Rules , no ambiguity

Banner headline: Buy epoxy products in bulk at the lowest cost, fastest, easy and pragmatic

John Everett, global head of epoxy.com, said: " Our success is obvious - we have added a large number of customers, and in the first year of the website, the sales brought by new customers accounted for 70% of the total sales."

Fourth, enhance customer value

The next step is to adjust organizational structure, personnel, and infrastructure in response to changes in your understanding of the customer and changes in your commitment to customer value. The root cause of each change must be identified, as well as those that may hinder improvement. Here are a few useful tips:

● Establish a research team composed of people from multiple functional departments. The team members should include all employees who can have an impact on customer satisfaction. Have team members review, understand, and analyze the data. In this way, they will truly "see the essence through the numbers" and understand what the data reveal.

● A better approach is to form a research team with representatives from multiple functional departments, the company and the customer company, to review, understand and analyze the data.

● Divide changes into three categories: short term (resolved by tomorrow), medium term (resolved by next month), long term (resolved by the end of the quarter).

●Use "brainstorming" to identify gaps or changes and propose various possible solutions accordingly. Brainstorming itself does not make any evaluation of the ideas presented, which means that no idea is considered "too whimsical" or "not feasible".

● Rate the solutions from "most likely to succeed" to "least likely to succeed".

●Set a measurable goal for each solution.

● Assign a person responsible for the implementation of a specific solution. The person in charge should be designated within the research group. In addition, there must be a person responsible for tracking and supervising the person in charge of the implementation of the program.

●Assign a timetable, important milestones, and review meetings.

It's also a reminder that you don't focus so much on change that you forget to add "the icing on the cake" to something that is already doing well. Where the data shows that the company is doing well—that is, where it provides satisfactory value to customers, one should strive to do better and better, while also anticipating possible changes.

Let's take a look at what the following case tells us. This is a company in the Internet business, and the company's customers have threatened to "defection" with another provider with a three-year contract. So the company arranged a joint meeting, and the meeting was held at the customer's place. Even the purchasing executive flew back to attend the meeting.

Nine representatives from each side were present, representing every touchpoint between suppliers and customers—from sales, procurement, technology, to manufacturing, to supply chain and marketing.

At the beginning of the meeting, the buyer's purchasing executive's position was clear - he demanded at least a 20% discount in the upcoming contract negotiations, or the contract for the next three years would be waived. But thankfully, the two sides eventually got over the topic and entered into serious negotiations.

After a day of meetings, the main outcome was the identification of ten key initiatives aimed at addressing unmet or barely met customer needs. For each of these ten measures, each company will assign one person to handle it and complete it jointly. Seven measures have been successfully completed before the conclusion of contract negotiations, and progress has been made on another three. The company eventually won the contract, and the price went up by 5%.

Identifying your company's future customer value commitments to deepen customer relationships is a job you can plan, control, and measure. In fact, this is a challenge for the company, prompting the company to actively change the customer relationship from the mere sale of goods to become part of the customer's business operations.

Original text with permission from The McGraw-Hill Companies, Inc., taken from Value-Based Marketing for Bottom-Line Success by J. Nicholas De Bonis, Eric Balinski, Phil Allen, The McGraw-Hill Companies (www.books.mcgraw-hill.com) Copyright 2003. Translated by Hu Jiong.

Professor J. Nicholas De Bonis is a business strategy consultant and co-author of the American Management Association (AMA) Handbook of B2B Communication Management. Eric Balinski is the founder and president of the consulting firm Synection, LLC. Phil Allen is the founder and president of Marketability, a global marketing company.