My marketing class this semester has been focused on Customer Value. While this should not be a surprising concept, it never ceases to amaze me how many companies pay this concept lip service. However, I think our recent recession and the continued explosion of Social Media Marketing is putting a new spin on the concept.
Marketing defines customer value as the amount over the cost of product the consumer is willing to pay. In Economics – the additional amount the customer would be willing to pay is called the customer surplus. The difference between what the consumer actually pays and the amount they are willing to pay is where companies are trying to squeeze their profits.
This answer seems almost too simple. Find out what your customers really want. If a company will talk to their customer and find out why they are buying from them and in turn, understand what else or additional the customers want, they can not only shorten the gap in customer surplus, but build loyal customers.
Companies often find this key when they are struggling – ie: Harley-Davidson in the early 80’s, IBM in the early 90’s and many more. Despite the overwhelming success stories, companies overwhelming still seem to think they have the answers internally. I have been involved with companies both on the Fortune 24 list and on the Inc 500 list. The biggest similarities I have seen with these companies are they both determine their “go-forward” strategies by sitting around the conference table and deciding amongst themselves. Unfortunately, one very important person was not invited to the table – the customer.
American Airlines is the latest company I have seen who is asking the customer what they can do better. They have started and online method for customers to register their complaints and give suggestions on how to make the Airline better. My hope is American Airlines not only responds to the complaints/suggestions of their customers, but finds much success, both financial and through customer loyalty, for this program.
Perhaps this latest recession we are both struggling and surviving through, will cause a change in how businesses attack the marketplace – currently they are fighting a one sided battle. Once businesses realize their profits are not only depended on what they supply, but what customers are truly willing to and want to purchase. The marketplace is a partnership, when both parties come to the table together, all can realize the benefits.
Something I learned about quite a while ago comes from a book titled “Moments of Truth” by Jan Carlzon, who, at the time he wrote it was president of Scandinavian Airlines Systems.
He took a failing airline and asked what the moments of truth were that SAS was missing or failing at. A ‘moment of truth’ defined as ‘any contact you customer has with your company that gives them an impression of the quality of service’ – impression being part of the operative definition.
It’s quite interesting when companies look at these – my experience being internally they’re defined one way and when run by the customer, don’t necessarily mesh.
It’s a conversation worth having.