Organizations in today’s ever-changing business environment face challenges that include downsizing/de-layering, global competition, mergers and acquisitions, new competitors, off-shoring, new regulations and advancing technology, among others. In this environment, successful organizations must build relationships by providing value and exceptional customer service in order to acquire, and even more importantly, retain customers and constituents. A recent Forbes survey of CEO’s and CMO’s suggests that their top three marketing priorities are customer retention, customer acquisition and customer profitability.
Value Strategy and Value Proposition
What is value? Definitions include “a fair return or equivalent in goods, services, or money for something exchanged,” “the monetary worth of something: marketable price” and “relative worth, utility or importance: degree of excellence.” There is no right answer. What you offer must meet the customer’s stated needs, fulfill the customer’s time requirements and meet the customer’s budget target. Value considerations include the importance of your offer to internal/external customers, cost reduction, increased revenue potential, improved time frames and anticipating needs.
Some of the actions valued by customers are:
- Consistent experiences and quality
- Good attitudes, behaviors and manners
A value strategy creates a linkage between your customer’s business needs, goals and strategies with your capabilities to ensure joint success. A value proposition is a statement of the worth of your product/service that provides direct linkage to the business goals of the customer. It provides the substance on which the future relationship is built.
There are criteria necessary for an effective value proposition:
- The target customer must be clearly identified.
- The benefits must be explicit, clear and meaningful to the customer.
- There must be price/quality orientation.
- There must be adequate demand and acceptable return.
- The proposition must be achievable.
Can other providers offer the same value? Can other providers change their value proposition to meet yours? Will your customer agree that your value proposition is valid? How will you demonstrate that you can deliver on the proposition? What other issues or concerns are there in making your value proposition a reality in the eyes of the customer?
There are various ways an organization can demonstrate the value of their offering. These can revolve around physical attributes, such as durability (batteries), serviceability (appliances), aesthetics (beauty products and their packaging), performance (automobiles), features (electronics), reliability and/or conformance. Or they can involve service attributes, including reliability, assurance (warranties), empathy (healthcare), responsiveness (insurance) and innovation (technology). Other demonstrations of value surround image (the ability to make a positive personal or social statement), or relationship (establishing a long-term basis for mutual understanding, respect and benefit).
Southwest Airlines has created a comprehensive value proposition over the years which is accepted by a large and loyal customer base. This “value pricing” strategy provides the customer with assurance that they are getting a good deal coupled with great service.
Walmart provides a low price guarantee as part of their value proposition. In recent years, this has been met by other competitors (Dollar Store and others) which forces them to compete on different experiences and larger selections.
Delivering Great Customer Service
Developing and maintaining customer relationships begins and ends with great customer service. We can all point to a few outstanding moments of customer service that we have personally experienced or witnessed.
Here are some important customer service tips:
- Ground Zero: the company is you
- Remember your own experiences
- Use Home on the Range motto: no discouraging words
- Let them think you have all the time in the world
- Give them a chance to change their minds
- Cherish the customer who complains
- Take first-person responsibility
- Don’t rely on that old standby: I’ve never heard of that
- Find out how you are doing – ask
- Make sure happy endings really happen
- Laurels are for yesterday, not today
- End every interaction with a thank you
Nordstrom’s is famous for its anything goes policy of returns. Urban myths have been told about what they will accept from a customer to maintain relationships. American Express has a legion of loyal customers who gladly pay large annual fees for membership knowing that if something goes wrong, AMEX will be there to help.
Customer service can grow customer loyalty. What’s the magic of customer loyalty? You gain repeat sales and referrals, revenues and share grow, costs fall and profits rise.
Loyalty Marketing is a school of thought used in marketing and strategic management in which a company focuses on growing and retaining existing customers through outstanding quality, great customer service and incentives. To be effective it must have management’s attention, a tracking system that drives action linked to achievable results, makes loyalty a part of the planning process and constantly searching for new processes, procedures and improving competencies that are tied to customer loyalty.
In building customer loyalty you sell more than a product and become a partner, not just a vendor. To understand your customers, you have to walk in their shoes. And many times, to retain customers, it is important to retain employees. Serving existing customers can be easier and more effective than serving new ones. Increased customer retention can lead to improved employee job satisfaction and higher productivity.
Even in bankruptcy, American Airlines maintains a dedicated following because of its AAdvantage Program. Being the first loyalty program in the airline industry, it set the trend for all others to follow and with billions of miles outstanding, customers are still drawn to the magic of free flights, no matter what conditions are placed in front of them, including the demise of the airline itself.
Hotels, car rental companies and now even restaurants are providing loyalty programs to maintain customer share, reward the largest users of the company’s services and capture new business by challenging individuals to use their product more often. Hotel programs such as those from Hyatt, Starwood and Marriott have all tiered their programs to encourage individuals to greater loyalty by providing more perks to higher value customers. These premier level customers are the most valuable to a company and the loyalty programs lavish them with upgrades, faster free nights, meals and spa services.
The combination of a solid value proposition, outstanding customer service and a customer loyalty initiative can lead to long-lasting customer relationships that can help organizations build and improve profitability and sustainability in an increasingly challenging business environment.