Copyright © of R.G. Srinivasan
The purpose of business is
to create and retain a customer.
Much has been
written about customer orientation, customer relationship management
(CRM), Customer Lifetime Value (CLV) metrics, Customer Centric
organization models, customer retention, customer care…add any high
sounding word with ‘customer’ preceding or succeeding that word and you
have a new model, a new theory. Headline hitting books, celebrity author
seminars and training till another theory comes along.
And we see the
poor customer is still the most dissatisfied lot (that includes all of us
specialists too, as customers).
manufacturer or service provider often thinks as a market or value
proposition, customers respond in a diametrically different fashion. Why
does it happen?
thinks in terms of products and derived values, customer is looking at
satisfaction. The key question is whether all the strategy, product
features, add ons and value creation lead to ultimate customer
Now this may
seem a little contradictory. To illustrate it better let’s take the
example of Cell phone services. Companies are rolling out a new product
every fortnight offering more value, in their perspective.
Then the point
is why does the customer keep switching over to different service
providers and products or packages so often, if the products are offering
The key here
is more value propositions are being rolled out without looking at the
very basic. Whether the value proposed gives satisfaction to the
customers. If not it is not valuable.
is buying satisfaction. Highest value is derived when the customer is
fully satisfied with his purchase.
myths in Value Creation
Myth # 1
More is often considered value
Buy one get
one free schemes are rolled out. There is of course an instant sales
push. However at the end of the scheme the customer feels that he had all
along been paying 100% more for the products and perceives that very
product as costly once the scheme is withdrawn. May switch to another
product at the same price.
Dissatisfaction leads to value erosion
Myth # 2
Price is value
considers lower price as offering more value. More often than not lowest
price products end up as the second best with a higher priced product with
similar product attributes leading the market. The simple reason is the
higher price product may be offering a higher satisfaction due to
perceived values and imagery. Car markets are a prime example of this
Myth # 3
More Features or add ons are value
load a product or service with more features thus offering a higher
value. While this may be attractive if the features are not backed by
adequate supports the satisfaction may be less and value is reduced.
this everyday. A customer buys a product with many features but not
demonstrated properly or may not be serviced properly. Enquiries may not
be handled effectively. Airlines offereing add ons like free overnite
accomodation are still not favored if the services, like enquiry handling,
reservations, and time schedules are poor. Cell phones companies may be
offering plenty of add ons like national roaming or free incoming calls
etc. However if the billing is poor and billing enquiries are not
addressed properly the customer is dissatisfied and leaves the service for
Myth # 4
Products are competing with similar products
This is often
true in the leisure industry. A movie theatre may not be competing with
another movie theatre. If the customer is not satisfied with a theatre or
movie he may look at options to other entertainment sources, for instance
an amusement park. We may call them discretionary time products. Highest
satisfaction levels are very important in this type of business.
These are some
of the examples of how businesses can go totally wrong in assessing
value. While it is all good to talk of value creation some thought must
go into the majoe ingredient in value that is the customer satisfaction.
business really serious about customer retention. As even a novice to
business knows it is far cheaper to service and retain existing
customers. The cost of acquiring new customer is very high.
Now how many
business have consumer satisfaction index to monitor this prime factor in
customer value creation