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

Posted in customer satisfaction, customer value | Permalink | No Comments »

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.

Posted in checklist, customer value | Permalink | No Comments »

In order to design and deliver great customer experiences it is necessary to understand customers in-depth. Traditional approaches to segmenting and capturing user requirements are not suitable because they all face on big challenge: in order to really surprise the customer one has to go beyond the obvious and explicit needs and focus on the latent needs of the customer.

In order to capture these latent needs, it is necessary to employ so called empathic research methods that help the designer or engineer of a new product or service understand the underlying motivation and goals of the customer. Usually market research budgets are not located for this.

One potential method to identifying latent customer needs is to deeply understand customer value and the customer process. With a suitable modeling language one is able to illustrate unmet needs and potential areas for improvement. If you want to read more about the empathic research have a look at the article “abstract truth“, written Alan South, Director of Service Design of IDEO, UK.

What is Customer Value?
Customer Value is the customer’s perception of what they want to have happen (i.e. the consequences) in a specific use situation, with the help of a product of service offering, in order to accomplish a desired purpose or goal.

What is a Customer Process?
A customer process is the sequence of activities that a customer has to perform to satisfy a need or to solve a specific problem, e.g., building a house. A customer process therefore determines the required products and services that a service provider has to offer to cover a customer process entirely.

With these two concepts in mind it is now possible to dive further into actual methods and tools to capture and describe customer value and customer processes.

Posted in customer experience, customer process, customer value | Permalink | No Comments »