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My definition of 'adding value' to your customers Here is a back issue of Marketing Booster, the email newsletter that Richard Groom writes and sends free every fortnight to subscribers. You can subscribe here or read over 60 back issues using the back issues index page. A phrase everybody seems to use these days is 'adding value'. You hear marketers and others talk about the way that a particular feature or extra level of service 'adds value' to their customers. Whenever I have heard this phrase I have had a nagging feeling that we need to be a bit more specific about what it means. I wasn't sure why I felt that way, until yesterday. Because yesterday, while reading a marketing text book, I was reminded of two basic points of marketing theory that gave me something to go on: The first was the simple standard description of what 'value' means: * "The difference between the value a customer gains from owning and using a product and the costs of obtaining the product." And the second was the description of customer satisfaction: * "Satisfaction depends on the product's perceived performance in delivering value, relative to expectations." So the point is that you only REALLY 'add value' if you increase the amount of satisfaction that the customer gets. The trouble is, when we talk about 'adding value' we aren't always doing that at all - because we aren't adding something that the customer really cares about. Or at best, we don't know if the customer cares. Here are a few examples of things that organisations might see as adding value, and a question about each one: * A local business networking organisation introduces a free legal helpline to its members, believing it will add value to membership. But most of its members already belong to other organisations that provide a helpline. So do customers really care about having access to another helpline? * A company gains the 'Investors in People' accreditation and plan a big event to announce it. But will its customers be more satisfied as a result of the accreditation? Will they feel any difference? * A software company introduces new features on its next product. But the cost of adding each new feature increases the retail price considerably. Will customers feel that the new features are worth the price increase? * A courier company introduces online tracking. Customers can see at a glance where their parcel is. But is that really want customers want and are they prepared to pay for? The answer to all three of the above could be yes or no. It depends on what the customer perceives as value. And you don't know that until you ask them, hence the need for good market research. Also, are we sometimes guilty of treating all customers the same? Some people might want to track their parcels via the internet, some might not care. Is it possible to break customers down into segments and offer different features to each segment? Finally, because Marketing Booster is usually concerned mainly with marketing communications, what is the implication of all this for marcomms? Again, it's the need to understand what customers really care about - and then focusing on those things in your promotional material. Your product development people might be telling you to focus on certain features, but that doesn't mean you should. If you have done some research to find out what customers are interested in then that should guide you in the right direction. So I make a pledge. From now on I won't just talk about 'adding value' without considering what it really means. And I'll ask anyone else who does it to check that that their customers will truly be more satisfied as a result of the change. Copyright 2004 Richard Groom |