Episode 33 - Understanding Customer Value Realisation

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📰 Top Story: Understanding Value Realisation

Many strategic thinkers, such as people like Alex H M Smith (who I respect massively), talk about how you need to shift from delivering products or services to providing value. 

And lots of companies do believe that they provide value rather than delivering a ‘thing’. 

The problem is that if you believe you provide value, you can feel your product or service is a gift bestowed upon customers. 

This can mean that customer initiatives become focused on managing the customer relationship for the benefit of the business rather than actually helping the customer achieve their desired outcomes. 

For example, it can result in actions like: 

• Forcing customers to adapt to your processes 

• Forcing customers to engage in your preferred channels 

• Forcing customers to do things that benefit only your business 

• Poor levels of customer support, e.g. poor chatbots or long wait times 

• Messaging focussed on what the businesses want from the customer vs what the customer needs (lacking personalisation or respect for customers desired frequency) 

The issue with this mindset is that customers are not obligated to follow your preferred actions. If you generate frustration or provide experiences that do not align with the outcomes desired by the customers, customer retention will suffer.

The reality is you do not create value; customers realise value. 

Only through using your product or service is value created for the customer. 

Let's take an example: 

Netflix has zero value as an unused app on your phone, TV or tablet. 

Customers realise value when they use Netflix for a romantic evening with their partner, to entertain the kids or for time alone to unwind. Value is realised on customers' terms. 

Once you make this organisational mindset shift, the way you handle customer relationships fundamentally alters because: 

• You focus on understanding HOW customers realise value with your product or service 

• You SUPPORT customers in achieving their desired outcomes as quickly and as regularly as possible 

• You make dealing with you EASY and DELIGHTFUL

• You ensure interactions are aligned to your customer's goals (hence why personalisation is so important - see episodes 32 and 23). 

Anyone who has ever had a customer support issue with Amazon where you end up in a phone conversation with a customer service agent will know how much focus they put on resolving customers' issues in just one call. 

Fred Riechheld in his book Winning on Purpose, shares an example of how his bank brought important papers to him while he sat in his car and waited during a snowstorm. 

Forrester shares an example where, for a firm buying HR software, the features don’t have inherent value; people across the organisation perceive value when that software lets them further their career or business. 

Once you make this mind shift, your entire approach to managing customer relationships transforms. 

In episode 20, I introduced the retention hierarchy of needs concept. At the base of the pyramid is the value proposition, what you offer and at what price to who. In the middle is who you attract; run a ton of $1 free trials; your customers are unlikely to be sticky. At the top of the hierarchy is how you manage customer relationships at moments of truth. 

Once you understand how customers realise value with your product, you can enhance your core value proposition. A gym might include tailored workouts and meal plans to achieve desired goals as part of their app, which comes free or as a bolt-on paid service with the actual gym membership. 

This understanding can also help you manage your acquisition messaging and offers. 

However, often, the key outcome of this mindset shift is altering how you handle customer relationships at moments of truth. 

If you recognise customers realise value and you don't create it, you can recognise that in moments of truth, you must be there for the customer in ways they need you. To be there for customers in ways they need you, you must first understand the customer's value realisation journey.  Then, at moments of truth, you can optimise the experience to maximise customer retention.  

Customers are always, even subconsciously, asking questions like: 

• Does it live up to advertising?

• Does it work? 

• Is it useful? 

• Am I valued? 

• Do I still need this? 

• Is there something better? 

• I think I should go, but should I stay? 

These questions become front and centre of a customer's mind at moments of truth.  

Data and research can be used to understand the value realisation process and help brands develop strategies to help customers achieve their desired outcomes on their terms. The graphic below summarises some of the ways to do that:

Through customer data and research, Netflix understood that customers want a big library, but they realise value when they find something they love fast (customers hate to doom scroll). This is why Netflix has heavily invested in personalisation. Eighty percent of content consumed on Netflix comes from recommendations rather than customer searches. For Netflix, the key to customer retention is usage, and facilitating this usage involves helping customers navigate their extensive library.  

Final Thoughts 

Shifting organisational focus from believing you deliver value to understanding customers realise value means you will: 

1. Prioritise customer outcomes  

2. Make interactions easy and aligned with customer goals

3. Use data and research to understand and enhance the customer value realisation process 

4. Support customers based on their value realisation process at critical moments of truth 

This mindset shift will transform customer retention. 

Until next week, 

Tom 

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