The most popular article on this site is the comparison of different customer experience strategies with examples from the Ritz-Carlton Hotels and IKEA. The essence of the article also reflects my personal understanding and believes about customer experience: A remarkable customer experience is the result of an unexpectedly high customer value.

Customer experience management can not just focus on customer service or branding because a company’s products and (core) services are ultimately the drivers of customer value and therefore essential for the customers experience.

When flying with a low-cost airline it is accepted to take the bus to get on the plane. Yet when you are booked on a business class ticket with a traditional carrier everybody expects to use the jet bridge to enter the plane. Customers can indeed have a great experience even though they have to take the bus because the price of their ticket is so much lower.

"The Good Enough Revolution: When Cheap and Simple Is Just Fine" is an article in Wired Magazine that applies a similar understanding of the elements that constitute a great customer experience.

Even though the business model was not successful, the founders of Pure Digital and creators of the now famous Flip Camera found out something interesting about customer expectations:

"Customers would sacrifice lots of quality for a cheap, convenient device. To keep the price down, Pure Digital had made significant trade-offs. It used inexpensive lenses and other components and limited the number of image-processing chips. The pictures were OK but not great. Yet Pure Digital sold 3 million cameras anyway."

The article continues and describes the success of the company’s next product, the Flip Ultra:

After some trial and error, Pure Digital released what it called the Flip Ultra in 2007. The stripped-down camcorder—like the Single Use Digital Camera—had lots of downsides. It captured relatively low-quality 640 x 480 footage. It had a minuscule viewing screen, no color-adjustment features, and only the most rudimentary controls. But it was small , inexpensive , and so simple to operate that pretty much anyone could figure it out in roughly 6.7 seconds.

The success speaks for itself:

Today—just two years later—the Flip Ultra and its subsequent revisions are the best-selling video cameras in the US, commanding 17 percent of the camcorder market. Sony and Canon are now scrambling to catch up.

The article presents some additional examples ranging from MP3, to unmanned aircraft to healthcare and closes with a statement from Pure Digital founder why Flip knockoffs from the likes of Sony have failed:

"I think it’s because we have a better product." What’s odd is that executives at Sony and Canon would likely say the same thing—after all, their models have far more features and often produce sharper images. But Fleming-Wood is using a different definition of "better." He now defines quality entirely in terms of ease of use—how easy it is to shoot and share the video.

So what is the essence of a great customer experience? It is not about the number of features and it is not about providing always more and more functionality and amenities (like in a Ritz-Carlton Hotel or with a Sony DSL camera).

A great customer experience can also be the result of a product that offers the core functionality in a way that is easy to use and in a quality that is just good enough and a prices that creates a remarkable value offer for the customer.

Read the full article in Wired magazine.

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In the following article I want to focus especially on the area of ecological sustainability and sustainability is used synonymously for economic sustainability.

Sustainability has received a lot of attention in recent years and the role of sustainability in business and design is a heavily discussed topic. While I certainly agree that it is the right thing to follow principles that ensure economic, social and ecological sustainability, I am less convinced about the value “sustainable products” offer to customers.

But if sustainability doesn’t offer value, why is there a need for electronic cars? And why do consumers pay organizations to offset their carbon footprint? I think this has nothing to do with the value that “sustainability” offers but is instead motivated by other reasons. I would like to discuss a few observations that I have made and the consequences these observations have for marketers.

In search of substitutes

The recent interest in electric cars is not driven by an increased demand for sustainable, electric cars but actually because of souring prices for oil. Consumers are looking for cars that use something else than oil and found it in hybrid and electric cars.

The same holds true for other products where paper packaging is used instead of plastic packaging as well as the so called cradle-to-cradle design, where you focus on designing your products with the whole product lifecycle (including  recycling) in mind.

All these decisions are driven by consumers (and designers) who are looking for substitutes to reduce the high costs of current solutions.

Your peace of mind

Another driver for an increased demand for sustainable products is guilt. It has become en vogue to look down on people who drive a SUV and to feel guilty whenever you do something that is not environmentally friendly. This has gone so far that people have started not only to calculate their carbon footprint, but also pay someone to offset their carbon footprint through investments in economically friendly initiatives.

Whenever I book a flight on a German travel site it induces guilt by telling me how much carbon dioxide I will create with this flight. Luckily I have an option to pay someone to make up for my environmentally unfriendliness which so far I have chosen not to use due to my personal concerns about this “donation schemes”. These donation systems are already the reason for official warnings from the U.S. government about scams to offset your carbon footprint but this is whole different story.

Certainly there is nothing wrong with using guilt to stimulate a certain consumer behavior and make people buy your products. Yet at the end of the day, it is guilt and the corresponding need for having “peace of mind” that is driving the decision of consumers and not the intrinsic need for a “sustainable product”.

Sustainability becomes a hygienic factor, but not a differentiating factor

If sustainability does not provide any (functional) value to consumers itself, one might ask why more and more companies are changing their marketing message to incorporate aspects of sustainability? There are certain interest groups that use the current environment to push their interest and their messages and they pick rather popular targets. Apple has created a special section on its homepage about the ecological aspects of its products as a result of a public criticism from Greenpeace in 2006 about toxic materials in its products.

This is also the reason that it becomes a necessity for companies in the current zeitgeist to ensure and communicate all aspects of their sustainability initiatives in order to prevent to become a publicly criticized for unsustainable practices. But just when every product and company is “sustainable”, sustainability itself becomes a commodity, a hygienic factor and is not a differentiating factor anymore.

The role of sustainability to create customer value

With sustainability not being a differentiator itself and due to the lack of customer value that is created through sustainability, one might ask what the role of sustainability can be in product and service design? From a theoretical perspective the task is to turn the value of sustainability from a symbolic, emotional value created by ecological aspects into functional value of the core product. IDEO’s Diego Rodriguez calls it “turning green into red”, designing green cars so they full of passion and delight.

I have written about the Tesla Roadster, a fully electric car that is a great example about this. Tesla has continued this “process of turning green into red” with their latest car, the Tesla S Sedan, which has received praise all over the media for it’s revolutionary design that doesn’t reflect that the car is an electric car. Here is one picture, you can find more pictures online.

 

The implications for your business?

So is design for sustainability the wrong approach? Not, it isn’t and designers and engineers should indeed focus on it. But one has to remember that the value proposition to the customer is essential and business should not focus on product characteristics that leave the customer’s needs and motivation out of the equation. A “sustainable product” alone doesn’t solve a customer problem, except that it make him feel less guilty and could help him save costs.

If businesses are serious about designing sustainable products, they need to translate sustainability into features that offer customer value and are not just providing peace of mind. And if you are designing a substitute product, then position it as substitute product and help consumer safe money.

The goal should be to design a product that sells not because consumers want a sustainable product, but because consumers want the product and don’t care that it is sustainable. Only then we have achieved a true change towards an ecologically sustainable society.

Images courtesy of [xotoko], [vgm8383] and Jalopnik

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Remarkable customer experiences are the result of delivering greater than expected value to your customers. Every kind of organization – from start-ups to multinationals – have to continuously create and deliver value propositions that not only exceed the customers’ expectations but which are also greater than that of the competition.

When designing for remarkable customer experiences designers are often confronted with countless innovative ideas that need to be synthesized and bundled into dedicated value propositions. While the concepts of customer value and value propositions are admittedly a bit abstract (see “A Framework for Creating Customer Value”), the NABC (Need, Approach, Benefit, Competition) framework can help to better understand and sharpen the value proposition of your product or service. The framework has been developed by Curtis Carlson and William Wilmot and has been summarized in their book “Innovation – The Five Disciplines for Creating What Customers Want”.

To sharpen your value proposition they suggest to answer the following four questions:

1. What is the important customer and market Need?

2. What is the unique Approach for addressing this need?

3. What are the specific Benefits per costs that result from this approach?

4. How are the benefits per costs superior to the Competition’s and the alternatives?

Here is an example how to apply the framework to describe the value proposition of a video-on-demand system.

Need: Movie rentals represent a $5 billion business opportunity that you currently cannot access. The only parts of rentals that people really dislike are the obligation to return the tapes plus late fees. Customers find that it is inconvenient and wastes time.

Approach: We have developed a system that allows you to provide videos on demand to your customers using your cable system, with access to all the movies of Blockbuster. Our approach makes use of one of your currently unused channels, with no changes to your system. In addition, you do not need to invest any capital. Each movie costs your customers $6.99, the same cost as a rental at a video store.

Benefits per costs: You will receive $5 of new revenue per movie rented, with a margin of 20% after paying for the movie costs. Your customers will have all the pause and fast forward functions of a VCR when watching the movie, and they do not have to return the movie when done. Late fees are gone. We estimate you could capture a market share of 20%.

Competition: Our system is patented, and it is the only one to include all of these features. Online rentals represent new competition for both you and us, but they have a handling-cost disadvantage of 75 cents per tape. Sending videos back is inconvenient, plus they cannot provide spontaneous purchases.

To improve your own value proposition, use these sentences as a starter to describe it.

Need: My customer’s needs are …

Approach: My approach to satisfy that need is ….

Benefit: The Benefits per costs of my approach are …

Competition: My benefits per costs are superior to the competition and alternatives because …

More information about the discipline “Value Creation” and the other four disciplines “Important Needs”, “Innovation Champions”, “Innovation Teams” and “Organizational Alignment” can be found in the book “Innovation – The 5 Disciplines for Creating What Customers Want”.

Image courtesy of mandolux

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One common practice when testing the marketing potential of a product is to ask customers if they are satisfied with a product or service. Focus groups are the favorite method to invite customers to provide feedback. One should think customers will buy your products or services because they are satisfied with them, right? Well, not really.

I have already written about the challenge of asking customers if they are satisfied with your products or services. But asking customers whether they are satisfied or not is not really helpful either. Everyone using a five blade shaver is probably satisfied with the results compared to a four blade shaver but how many would really buy a five blade shaver?

What questions do we need to ask in order to get an answer that predicts the probability that customers will buy? In order to predict whether anyone will buy your products, you have to find out if your products or services provide any value to the customer. If they do provide value, is this value unique and you are not facing other competitors?

Buying is an exchange of value and a customer is only willing to buy your product if you are providing value. So even though customers might be satisfied with your products or services, they still might not be interested in buying it because they do not provide value.

Why do I blog this? A quick reminder that customer satisfaction is a valuable tool to answer the right set of questions. But one has to understand more aspects than just customer satisfaction to fully describe the success of a new product or service. Of course we can extend the meaning of the word “satisfaction” but at the end you will always end up referring to (perceived) customer value.

Photo courtesy of lyricsboy

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One essential task in new product and service development is to create superior value for the customer and exceed customer’s expectations. The question what creates value for a customer is a difficult one and can certainly not be answered easily. The framework presented in the paper “Customer Value Creation: A Practical Framework” written by J. Brock Smith and Mark Colgate seems like a valuable tool to answer these questions.

Creation of value for customers is a critical task for marketers, particularly when developing new products and services or starting new businesses. This paper presents a new conceptual framework for marketers to ponder when exploring ways to distinguish themselves, in the eyes of the customer, from others in the marketplace. This framework is built on the strengths of existing frameworks. Possible applications of the framework in designing marketing strategy, recognizing new product opportunities, and enhancing product concept specifications are discussed.

They have developed a framework that includes several dimensions of customer value that adopts a strategic orientation in that the focus is on identifying categories of value that could differentiate offerings and not on identifying all of the specific benefits and sacrifices that may be perceived by consumers or customers. The framework is applicable to consumer and business contexts, and goods as well as services.

The four types of value that have been identified are

Functional/instrumental
Functional/instrumental value is concerned with the extent to which a product (good or service) has desired characteristics, is useful, or performs a desired function.

Experiential/hedonic
Experiential/hedonic value is concerned with the extent to which a product creates appropriate experiences, feelings, and emotions for the customer.

Symbolic/expressive
Symbolic/expressive value is concerned with the extent to which customers attach or associate psychological meaning to a product.

Cost/sacrifice value
Consumers and customers also try to minimize the costs and other sacrifices that may be involved in the purchase, ownership, and use of a product. Cost/sacrifice value is concerned with these transaction costs.

In the next step they identify five sources of customer value information, products, interactions, environment, ownership/possession transfer and identify possible value aspects for each type and source of customer value. The result are four pages of value aspects.

I have been looking for such a comprehensive framework already for quite a while because such a framework is indeed helpful in identifying the value of new products and services in order to derive their chances of becoming a successful new product or service. And I completely agree with the authors conclusion:

The customer value creation strategy framework developed in this paper offers a useful tool for specifying and illustrating value creation strategies, illustrating brand and organization positioning, identifying opportunities for new value creation propositions, and suggesting enhancements to the value propositions of existing products.

Download the full article here.

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