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Customer Value: It's About a Bigger Pie

By focusing all their customer relations on getting that final transaction, companies are thinking too small.

BiggerPie.jpgEarlier in the year, I reflected upon an article that appeared in Harvard Business Review. The title of my article was: "It Is About The Relationship Not The Transaction."

The theme of both centered around creating shared value between the buyer and seller, customer and organization. The focal point was pricing strategies, often poorly formed and ill-considered strategies (otherwise it would have been a boring article).

Companies focus on extracting value (think airlines and baggage fees), instead of creating shared value. Unfortunately, they do not consider the value of the relationship with their customers, beyond just a transaction.

Looked at from another point of view, if the objective is to make sure to grab a larger share of the pie (think wallet), instead of making the pie bigger (think repeat buyer, co-creation, referral value), then the company is missing an opportunity.

value is not the fixed pie that most companies imagine; rather, it can be enlarged through collaboration with customers, such as when a firm provides a well-crafted discount that not only boosts sales and encourages referrals but also promotes the brand and builds loyalty." Marco Bertini and John T. Gourville "Pricing to Create Shared Value

There is a sense (theory?), not completely proven that engaged customers cost less to retain and are more loyal. The belief is that engaged customers shift to higher-end products or like to "accessorize." My approach here is that of guarded optimism, human nature being what it is.

Customers can be engaged for many reasons, most of which are self-serving (a slightly jaded viewpoint, I admit). That said, if customers are engaged, they will "call it like they see it" which is valuable to the entire organization.

Enter Social Customer Service (Interactions)

In this context, I am defining Social as those interactions that are communicated via public channels. The real word is "Digital," but that is for another day. In other words, an email to customer service is not social, any more than a phone call.

Organizations who are willing to engage via social (aka public) channels are likely to better leverage the benefits associated with these interactions. The rewards, however, may or may not be monetary (at least not first degree measures). In the end, customers are looking for two things: answers and value. If customers are able to find either, they (we) are happy.

There is also this whole concept of transparency, another overused buzzword, to be frank. Funny thing about transparency, there is lots of talk about it, but organizations are only as transparent as they have to be. If they think you know something, then they will be transparent, if they are sure you don't (know) … the jury is out.

In other words "transparency" is used as a lever of the wrong kind. I am not saying that companies do not want to be transparent, rather, companies would simply rather not have to explain everything. Some things are simply too complex.

An example of this would be pricing structures for airline seats; I am not sure I want to know, frankly. My personal benchmark here is an organization's willingness to be transparent, given the need or opportunity.

Social for Complex Industries

What do you think of the following:

It is no surprise that many of the sectors with the worst customer satisfaction scores also have the most extensive product lines, complicated pricing plans, and obscure contractual terms — in other words, the most opaque relationships with customers." Marco Bertini and John T. Gourville "Pricing to Create Shared Value"

On the one hand, it makes a lot of sense. On the other hand, it seems a bit unfair, no?

Some industries that come to mind are telecommunications providers and airlines. Yes, they have extensive product lines and complicated products. They are prone to issues which are not in their complete control: weather, equipment failures and other external factors.

Am I making excuses for them? No, not really, I am trying to make you think about these sectors. They get a pretty good beating online, every day. How does social customer service and transparency help them …  just asking.

 

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