On the journey to achieving customer obsession, creating value for customers is essential. Yet many business leaders get it wrong. They believe they’re delivering customer value, when in reality, they are operating under a false illusion of what value really means. They focus inward, neglecting the desires and needs of their customers.
To truly deliver customer value, businesses must shift their perspective, actively listen to their customers, and align their offerings with their customers’ desires and needs. Only then can they effectively meet customer expectations and thrive in a competitive market.
Are you delivering value to customers or extracting it?
Customers who get value from their relationship with a business exhibit a greater propensity to spend and remain loyal to the brand. Despite this fundamental truth, many businesses don’t prioritize customer value.
We don’t have to look too far for an example: In 2020 during the COVID-19 pandemic, a multinational financial services company collected over $1.5 billion in overdraft fees from customers at a time when many households were facing significant financial hardships. They prioritized profits over customer needs. At the same time, Ally Bank waived fees in an effort to reduce stress and simplify its offering for customers. Ally delivered value to its customers while the other company extracted it.
To fuel loyalty and, ultimately, growth, businesses need to focus on meeting customers’ needs along four dimensions of customer value:
- Economic: money gained, not wasted
- Functional: task easily completed
- Experiential: pleasant interactions and sensations
- Symbolic: status, self-worth, belonging
With any purchasing decision, customers make trade-offs across those dimensions. For example, a customer might be willing to pay more (lower economic value) for a high-touch, white-glove service (higher experiential value). The key is knowing which values are most important to which customers. Their perception of value will vary based on their worldview (beliefs about what’s important in life), situation (the circumstances that led them to interact with a brand in the first place), and comparison (how the product or service stacks up against other brands or past experiences).
Value of the customer vs. value for the customer — there’s a difference.
Changing one small word can have a ripple effect that reverberates throughout your entire business. Do you focus on the value of your customers to your business or the value that your business delivers for your customers? In other words, are your customers merely a means to an end, represented by dollar signs on a balance sheet, or do you consider their needs and desires as essential elements of your business approach?
By focusing on the value of the customer, many businesses have lost sight of the reason why they are in business at all: to deliver value to customers. And customers have taken notice. They know when their needs are being met and when they are not — and they will stick with the brand that knows them best. By prioritizing your customers’ needs, desires, and overall experience, you set the foundation for loyalty and growth.
Creating customer value in three steps.
With an intrinsic understanding of what it means to deliver value through a customer-focused lens, all that’s left to do is do it. Here are three steps to get you started:
- Define the value: Pinpoint the core customers you want to focus on, then identify the value drivers that are important to them. To do this, look at your most loyal customers, then conduct qualitative and quantitative research to determine the key factors that drive value for them. What are the economic, functional, experiential, and symbolic value needs as they relate to the goal that your customers are trying to achieve? Understanding the nuanced interplay between customers’ value needs across the four dimensions is essential to defining and delivering value effectively.
- Establish a metrics framework: Implement a system of complementary metrics that tracks value behaviors (actions taken by the company to create value) and value outcomes (the effectiveness of balancing value for customers and of customers throughout the customer journey and overall). With a metrics framework that blends values and behaviors with value outcomes, you can achieve a harmonious equilibrium between delivering value to customers and reaping the rewards that they offer to your business.
- Adopt a long-term view to maintain the balance: Embrace a holistic viewpoint that factors the short-term trade-offs against the long-term benefits. Take the Ally example: It gave up the income that it would have received through fees to achieve a more loyal customer base. The short-term sacrifice resulted in long-term loyalty and profitability. And because the fees that it gave up only represented 1% of its revenue, Ally recognized that the potential gains from establishing trust and loyalty with its customers far outweighed the immediate financial loss.
Your employees play an important role.
Creating consistent, long-term customer value requires buy-in across the business. If your organization as a whole isn’t prioritizing value with a customer-focused mindset, your customers won’t buy it.
By implementing a customer-centric approach, you can tailor your offerings, improve product or service quality, and enhance the overall customer experience. This not only boosts customer confidence but also gives you a competitive advantage in the market. But this values-based customer focus must permeate every aspect of your organization, aligning leadership, strategy, and operations with customers’ value drivers. It requires a cultural shift in which everyone at the company recognizes the importance of customer value and is empowered to contribute to its delivery.
Delivering customer value has never been more important.
Customers have more leverage today than ever before. Their expectations are higher, their options are abundant, and competition is fierce. Delivering value has never been more important than it is today — and this trend will continue to grow over time. Yet many businesses have a limited understanding of what that means and which value drivers matter most. Flawed metrics that focus on usage or engagement without factoring in the actual value that customers derive are sending businesses in the wrong direction. Additionally, the fragmented collection of data about customer value across different parts of the organization and varying time frames creates a disjointed view of customer satisfaction and hampers the ability to make informed strategic decisions.
Delivering customer value requires a commitment to understanding your customers’ needs, preferences, and the drivers that contribute to their overall satisfaction. By actively listening to your customers, gathering and analyzing relevant data, and consistently refining your offerings, your business will be poised to deliver — not extract — value.
Now is the time to rethink your operating principles to ensure that you are not only meeting these growing expectations but also continually providing exceptional value that sets your business apart in this competitive landscape. By focusing on delivering long-term customer value and implementing strategies that put the customer at the forefront, you can build a strong foundation for sustainable growth and success.
Forrester can help you build a customer-obsessed enterprise.
Customer obsession is an easy concept to get behind but can be difficult to put into action. At Forrester, customer obsession is at the core of everything we do. We can help you achieve customer obsession to fuel sustained growth.
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