by Mark Eardley. The debased word ‘value’ is usually bandied about in a meaningless way. If a company claims to add value for customers or provide the best value or deliver enhanced value, precisely what is being added, provided or enhanced? It’s difficult to say…
The entire concept of value has become diluted by idiotic marketing-speak into something that sounds nice-to-have but is completely indefinable and intangible. But is it?
Value is definable and tangible
Value may be separated into its five factors — response, service, time, quality and price — and each one can be defined. Value may therefore be measured; once measured, it becomes tangible. It can then be managed, improved and presented in ways that will motivate customers to buy.
Any product or service may be qualified and quantified in terms of value’s ‘Big Five’. What you are selling may therefore be translated into the language of what customers are buying.
Speaking the language of value: an example
In the Shakespearian play, The Tragedy of King Richard the Third, Richard loses his horse in battle and is severely disadvantaged by having to fight on foot. In desperation, he cries out: “A horse! A horse! My kingdom for a horse!”
To understand the dynamics of value, think of Richard as a customer and what he requires from the Big Five.
Response is critical to Richard. He needs to know that someone understands his challenges and can solve his pressing problem. His environment has changed, his needs altered and he wants a supplier who recognises this and can react accordingly.
As for service, what he won’t appreciate is a pre-sales status report telling him that a proof-of-concept will be presented before close of battle. He wants the attention of people who have the authority to ensure that everything possible is being done to provide the fastest solution.
Time definitely matters to Richard. Although he doesn’t say specifically when he needs a horse, you know he needs one immediately — if not sooner… Above all else, reliably rapid supply is his primary buying motivator.
Is he bothered about the quality of the horse? Well, yes and no. He’s not that interested in features and benefits. He couldn’t care whether it’s a carthorse, a racehorse, a grey mare or a black stallion. A half-decent, possibly saddled horse with a bit of go will meet his brief and serve its purpose. The unfamiliarity of a camel or a yak probably wouldn’t fit the bill…
Finally, Richard’s adamant that price is not an issue. Normally, it would have to be clear, rational, structured and competitive. Right now, total cost of ownership, ROI, discount structures, payment terms and cost comparisons are irrelevant. Just supply him a horse.
Richard’s story highlights the importance of understanding how customers’ needs change according to circumstances. It also shows that customers don’t always spell out exactly what really motivates them to buy.
Develop customer insights that matter
When the ‘Big Five’ are listed in order of their typical importance to customers, response is at the top, followed by service, time, quality and price. If it’s last on the list, why all the fuss, all the time, about price? To answer that question, it helps to see price as a mechanism for measuring the extent to which the other four factors contribute to a customer’s success. Price always becomes a barrier to sales and a threat to margins if customers don’t see the benefits of those contributions.
Aspects of products and services that do not create measurable value have no monetary worth. That blunt fact emphasises the importance of customer insight.
Far from being a buzz-phrase, customer insight is essential if you want to understand what motivates the buying decisions that create your sales, protect your margins and side-line your competitors.
Mark Eardley advises B2B companies on how to govern their marketing to attract and retain profitable customers; several of his clients have grown to become market leaders. He is the author, together with Charlie Stewart, of Business-to-Business Marketing: A Step-by-Step Guide (Penguin Random House), which offers practical, actionable advice on how to make marketing make money. Find him on LinkedIn.
“Motive” is a by-invitation-only column on MarkLives.com. Contributors are picked by the editors but generally don’t form part of our regular columnist lineup, unless the topic is off-column.