Competitive pressures are forcing businesses to differentiate on the customer experiences they provide. Differentiating on product quality and cost are often inadequate as more and more businesses provide similar quality products at similar costs.
What Is Customer Experience?
Most of us would be familiar with the experience of having to wait interminably for our call to be answered when we call in to seek some help. And we are surprised when someone answers a call promptly, courteously and helpfully. Such an experience is quite likely to make us repeat customers of the merchant who delights us with such an experience.
Customer experience has a “concrete” dimension in the forms of product quality, price, buying convenience, timely delivery and correct billing, among others. It also has an “intangible” dimension in the forms of prompt response to our queries, courteousness of the response and how helpful the response was in solving our problems.
The experience becomes particularly delightful when the merchant takes pains to understand what we want to do and helps us in doing it with advice and other support.
Providing Value to the Customer
Businesses exist to provide value to the customer. This is a perspective that leads to a different approach to marketing compared to the typical perspective that businesses exist to make money. The customer value perspective actually helps businesses make more money through a better job of marketing.
In a separate article, we looked at the issue of identifying customer value proposition, i.e. defining the precise value that will appeal to customers. As mentioned in that article, customer value is not a simple concept. The customer of a BMW car often buys it more for the status and prestige it provides rather than just for the obvious transportation value.
Customer value can also differ from customer to customer and from time to time for the same customer. A fast food joint with standing room only might be more than OK for the hurried office worker. Another customer might pass it by while looking for a place where he or she can have a leisurely lunch. Actually, the same hurried office worker might also go for the latter type of restaurant for an evening outing.
And then, of course, there are such factors as advancing technology and changing tastes that make what was valued yesterday obsolete today. Have you heard of the DOS operating system for PCs? I used to develop highly marketable computer applications under DOS during the 1990s and can’t think of a single client who will buy any of these applications today.
Creating or increasing customer value is thus an issue that needs an in-depth analysis of how and why customers use a product or service.
Competing on Customer Value
There are several advantages for competing on customer value (as against product quality and price).
- Customers constitute an amorphous group, and it is easier to develop a unique value that appeals to a particular segment of customers. Setting up a store at a location that is convenient to a particular group of customers is a simple example.
- Customer retention by providing great value makes it possible to tap “lifetime customer value.” Repeat orders from the same customer eliminate the much heavier expenses of acquiring new customers (through heavy publicity, etc).
- Competing on customer value also eliminates the need to compete on price, a risky proposition as competitors can retaliate leading to a cycle that might ultimately end in below-cost prices. Customers delighted with the value they receive from a merchant are less likely to look for bargains elsewhere.
- A business that constantly focuses on customer value is less likely to be surprised by changing market conditions. Such a business will always be aware of what is going on in the market and will have the opportunity to prepare for expected changes.
Creating Customer Value
Customer value is created not just by the marketing department. Customers often interact with persons from different departments, such as the receptionist, billing clerk, shipping clerks and support person on the phone. Any of these persons can give a bad experience to the customer, affecting customer loyalty to the business.
Businesses have to attend to the needs of their “internal” customers, their managers and employees, to ensure that these “customers” are motivated to provide superior value to external customers.
Systems should also be in place that ensures that the external customer faces a minimum of hassles while dealing with the company.
Customer value is a complex concept that goes much beyond product and price. It is best seen as the total experience that a customer receives while dealing with the company, including promptness and courtesy of responses and helpful support and advice. Great customer experience creates customer loyalty that might not be broken by bargain offers from competitors. Competing on customer value has other great advantages, as we saw in this article.