Pontius Pilate wanted to know, “What is truth?” Today’s marketers want to know, “What is value?”
Value is vital to business success. The most definitive single study of profit drivers, the Profit Impacts of Marketing Strategies Study (PIMS) identified perceived value in the target market as the key driver of profitability. That should make things easy except that the meaning of "value" is elusive.
Value is different things to different people Value is even different things to the same people at different times and in different situations.
The Most Beautiful Woman in the World and I like to go out to eat. One of our favorite places is The Front Street Brewery. We go there for the atmosphere and for the location. It’s in downtown Wilmington, North Carolina where there are other clubs and restaurants around. Parking is lousy. The food is good but nothing special. The price is fair, but the atmosphere is great.
We also like Café Sonoma. Parking is easy there, but that’s not the big value. The big value is that Café Sonoma does a special menu every night and brings in special wines from time to time. The quality of the meal is the value there.
Now, for a mix of price and fun there's Flaming Amy's Burritos. For a great price and good simple food there's the Front Street Diner. Neither place rates a mention in any of those fancy restaurant guides, but we sure like going there.
And, oh yeah, there are the nights when cooking is just too tough. That's the night for a swing by one of the fast food places, or a call out for pizza. Haute cuisine it ain't, and it may not even be healthy, but it sure is easy.
In economics textbooks value is presented as a strictly rational and economic proposition. I pay something and I get a certain amount for it. You pay less and get the same amount, and you’ve got a better value. That’s important sometimes. But at best, it’s only part of the value equation.
Instead, value is composed of lots of things. It’s convenience. It’s the quality of service. It’s the quality of the food or the amount of the food. It’s how easy the parking is. All of those things matter and they slosh around in the mix.
That brings up the other, and more important, component of value – emotional value. Emotional value deals with my expectations. It’s emotional value that Howard Schultz at Starbucks is trying to get at when he talks about the fact that Starbucks is selling the whole experience. Emotional value builds loyalty over time.
Value is also important in another way. It’s part of what differentiates one business from another. On a night when we want to call out for pizza, Café Sonoma and The Front Street Brewery and The Front Street Diner won't even get a thought.
Everything about you and your product or service contribute to the value that people get from you. What you offer needs to be distinctive so that it sets you apart from the competition.
About a year ago the folks at Gallup published research on how people perceived the differences between competitors in different businesses. 58 percent of current banking customers said that all banks were the same. Similar results came in from airline customers (45 percent) and purchasers of outdoor clothing (45 percent).
The companies involved thought they were delivering value and setting themselves apart. But a significant number of their customers were saying, "Yeah, there might be a difference, but it's not a difference that matters to me. There's no value in it."
The issue is really pretty simple. If the people you see as making up your market don't think you offer anything that's different and valuable, why should they buy from you? For years it didn't seem to matter.
For years most businesses decided what to offer and then went out to sell it. Customers could take it or leave it. Remember Henry Ford and the one color you could have on your Model T? Then somebody over at General Motors thought, “Gosh, I guess we can provide more colors.” It worked. But we were still pretty much guessing what people might like.
The discipline of market research developed to help us guess better. Over the years market research tools got to where they worked pretty well for relatively stable markets. But traditional market research simply didn’t work when you were talking about totally new products. That's because people have a hard time imagining something new if they don't have a mental reference point.
Several years ago, America Online was trying to do research to determine its overall market potential. They found that when they asked folks if they wanted an online service the answer they got was mostly, “No.” But when AOL asked folks if they wanted an easy way to stay in touch with people all over the World and do that almost instantaneously, the answer was almost always, “Yes.”
In the 21st Century, we’ve got some tools we didn’t have before. Database tools and software can help us comb through massive amounts of data to find patterns. Research tools borrowed from anthropology and other sciences can help us extract lessons from customer behavior. The Net gives us tools to stay in touch with customers and involve them in the process of figuring out what matters to them.
The research and product development process should work like this. We do some research and get some ideas. We ask people what they want or what their major problems are. Then we involve them in the process of coming up with a solution to those problems, whether that solution is a product or service.
Then we use what we've learned to deliver value to the customer and set ourselves apart from the competition. It sounds simple. It is. It’s just not easy. Here are some tips for doing it well.
Ask people about their problems, not about what they see as possible solutions. To do this you need to communicate with your customers and your prospects frequently. You’ll find that some of the problems they tell you about are ones that you can help with.
Watch how people behave to learn what matters to them. In the Digital Age you can do this a lot better than you ever could before. It’s possible to track where people go on your Web site – and what they do – from moment to moment. You can see what they look at first, what they look at next. You can see what links suggest themselves and what language seems to work.
Involve your customers or prospects in the design process itself. One company that does this very aggressively is Sumerset Houseboats. They involve their customers in the entire houseboat design process, making choices along the way and being able to monitor through a personal Web page. This process not only comes up with a better product in the end, it helps people achieve a sense of control over what’s going on. And people like that control.
Pay attention to the whole experience. Product or service features are only part of the story. It's the total impact on the customer that matters. Remember the powerful aphorism from Theodore Levitt. “People don’t want quarter inch drill bits. What they want are quarter-inch holes.”
People don’t actually care about your product or service. They care about what that product or service does for them. So be sure to tell people about your products or service in terms of benefits. Remind those who are already customers about the benefits they’re getting.
What is value? It’s what the customer wants – to solve a problem and make their life better. It's something you can deliver at a profit.
This feature appeared on 30 September 2002
