Recession Company Strategies: How to Increase Customer Value
1. What fraction of customers choose you over the competition because of the low cost of your offering?
2. What, on a range from 1 (the worst) to 10 (the best), do you believe your customer was anticipating from you before they picked up the phone, walked through the door, or clicked on your website?
3. What metrics do customers use to determine the worth of your offering? How can you leverage this information to create a more compelling offering than the competition?
My thoughts and opinions on the matter:
What fraction of customers make their purchase decision based on the cost?
In my experience, most companies overestimate this figure. Even gas stores should not be so price-driven, but many are, instead of the value customers receive (more on this later). I estimate that even the lowest-income consumers regard price as the third or fourth most important factor. Take hotel accommodations as a case in point. If hotel guests were primarily concerned with cost, they wouldn’t choose to remain with friends and family, in their cars, or at “Bob’s Bargain Motel” next to the graffiti-covered train tracks. Even those earning the federal minimum salary make purchases based on the belief that they are worth more than they are. This blow dryer costs $1.50 more, but it has numerous speeds, is more stylish, and is built to last.
On a scale from 1 (the worst) to 10 (the best), what do you believe the average customer expects from you regarding service quality?
You probably thought it would be 8–9–10, but the number is much smaller. Why? I have polled 800 people on whether they believe service is improving or worsening in the United States. Nearly all of them (99.99999%) think it’s growing worse. And when I ask the same questions of people in other countries, I get the same responses. A 10 is the goal for most companies. Most customers hope for a 5, but a few will get a 10 in satisfaction. Why? Because first-time buyers tend to generalize all companies into the same category of subpar service providers. I have often requested the audience to raise their hands if they have ever experienced outstanding service at a restaurant,
shoe store, cable company, or AutoZone. It takes quite some time for most customers to break the silence, and when they do, they typically talk about how quickly they received their pay and how quickly they were brought water. This is what we were supposed to get, people. Our money’s worth! Incredibly, our satisfaction exceeded our expectations, but then again, we did get our money’s worth. But here’s the kicker: consumers are pleased when brands try to go above and beyond their expectations by the reality that they are even trying to do so. That’s how awful the service is across the board in the United States.
What metrics do customers use to determine the worth of your offering? How can you leverage this information to create a more compelling offering than the competition?
The customer’s perception of value is based on their initial anticipation (E) and their subsequent sensory experiences (S, N, O, and H) with your company (D). According to my algorithm, value is maximized when a customer who has never used your services before has their expectations lowered from a 9 (D) to a 5 (E). You and the customer both benefit from this situation. What do you think their expectations will be the second time they use you? A perfect 9! Despite the difficulty, companies must find ways to wow customers a second, third, fourth, etc., time. Cost reductions? Give out freebies? NEVER meet or exceed a customer’s inflated expectations. Never cease improving the customer service they receive.
Let me give you some concrete instances of the benefits to businesses and customers:
AutoZone boasted heavily on billboards, radio, and television that they would test your old battery free of charge to confirm that it was the source of the issue before investigating other possible causes. In a similar vein, the rest of the automobile. The problem was that very few AutoZone stores stocked the items they advertised. When it was first introduced, I thought it was a brilliant marketing strategy, but it lacked backing from training and encouragement. I, as a customer, had high hopes (#7) but was only given a mediocre (2nd) product. If their stores took the time to test customers’ batteries and other essential components while under the hood, I would have been blown away. Have you ever wondered if AutoZone regrets not offering this service to its customers?
One more anecdote: most of us are amazed if the gas station we frequent is spotless, the function of the pump, the washer fluid is refilled (with a brush!), the credit card reader reads cards, and the paper receipt prints out. W O W! Wow, that gas store is fantastic. Would you make the trip and spend the extra 2 cents per gallon? You never know. But what if the proprietor or manager personally thanked you for your business and asked if there was anything else they could do for you? That gas store seems like it would appeal to you. Companies wouldn’t have to spend much money on this, but the thoughtfulness would take their customers away. They’d be thinking, “I know the proprietor of a gas station!” and wondering how many people they could tell about it.
V=D/E is highly effective and should inform all aspects of a company’s customer and prospect communication approach.
Producer in Charge of New Funds.
Read also: How you can make Money In The Stock Market
Comments are closed.