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When customer delivered value matters

The popular adage that “customer is king” seems to have been abandoned or forgotten in most organisations; even the most popular ones have joined the fray in discrediting the very hen that lays the golden eggs.

By SYDNEY SIBANDA

Evidently, this culture seems to have emerged during the last days of the Zimbabwe dollar era, when shortages of commodities was the norm. Few organisations have awakened up since then to realise that such days of “business as usual” are gone by.

The problem with most businesses is that they preoccupy themselves with stocking shelves, producing more products and selling their services without measuring what Philip Kotler terms “customer delivered value”. Customers are not and will never be buying products or services but values. Unlike in the Zimbabwe dollar era characterised by shortages where customers would literally beg retailers to sell them wares, today’s customers are so discerning they have the impetus to choose where they derive most value from their hard-earned cash.

Organisations that take time to listen to what their customers want stand a chance to grow their businesses and realise profitability. One of the most common reason for the failure of business ventures, large or small, is inability to deliver value to customers. Value is the customer’s perception about the benefits that a product or service can give, which satisfy the needs of the customer effectively and efficiently. The fact that a customer defines value poses a challenge to management in that: “how do they read customer’s perceptions?” and “how do they deal with varying tastes?”

Customer satisfaction ought to be from the customer’s point of view. Value is always and will continue to be subjective, since what might satisfy customer X, might dissatisfy customer B. Business scholars argue that whether the customer is satisfied or dissatisfied depends on the net value derived from subtracting total customer cost from the total customer value. This net value is called customer delivered value.

To calculate customer delivered value (CDV), the total customer value (TCV) (which is the value perceived by the customers, mostly influenced by the sales person or other marketing communication), minus total customer costs (TCC) (which is cost of money, time, energy and physic factors). The result is CDV, which is either seen as “profit” or “loss” depending on the customer’s assumption. Based on the CDV result, the customer makes a decision as to whether to buy or not to buy the product or service, to come back or not to come back.

To apply this concept in a real life situation, we will need to consider situations below of customer X and customer Y who experience a positive CDV or “profit” and negative CDV or “loss” respectively after the following experiences.

Case 1

Customer X sees a nice advert on TV about ABC Mart and he is impressed. ABC Mart is conveniently located along the road to his residential apartment in Marlborough. After work, he drives to ABC Mart, where he is greeted by friendly salespeople as he enters the Mart. As he buys his groceries he notices that all items have price tags, something that most retailers don’t fuss about. Customer X also notices that most items are actually cheaper compared to other nearby supermarkets. On his way to the tills a friendly sales representative asks to push his trolley. Customer X is happy that his groceries cost less than what he had anticipated. The sales representative loads his groceries in his car and he drives off a happy man.

What has just happened here is that customer X had a positive experience — a “profit” CDV.

Case 2

Customer Y goes to Alpha Supermarket because he happened to be in Mount Pleasant visiting a friend. Alpha Supermarket’s parking bay has numerous potholes. The team at the supermarket is complacent and unmoved by the sight of a customer coming into the shop. A lot of items do not have price tags and there is litter all over. Customer Y goes out cursing and disappointed by the experience at Alpha Supermarket. Customer Y had a negative experience which we have termed negative CDV or “loss” CDV.

The above example typically shows that customer satisfaction is key. Customers Y and X are likely to share their experiences with many other potential customers. Customer X is likely to lure more customers to ABC Mart and his loyalty is guaranteed. Alpha Supermarket will see their business going down and failure to take remedial action will result in the supermarket closing shop. If CDV is favourable, customers achieve satisfaction.

In trying to find remedial action for the problem, marketers are faced with challenges of alignment. The main challenge is that customer satisfaction is a result of cognitive and affective experiences which are difficult to discern. In the foregoing paragraphs we discussed the issue of customer delivered value, emphasising that organisations should ensure customers’ experiences are positive, such that CDV is satisfying. Yet only the customer can define value. What companies — big or small — do not realise is the value they can create and deliver may not be aligned with the value their customers need. In essence, not all customers will walk into ABC Mart and come out satisfied.

Marketers are supposed to understand what customers value, align the value an organisation can deliver with customers value priorities and communicate the identified and differentiated value elements, then the organisation has to deliver the proposition. Business scholars argue that as early in the sales process as possible, it’s critical to understand as a business how “aligned” our value delivery capabilities are with how our customers define value. We can use this as the critical qualifying criteria. Where there isn’t great alignment, we disqualify the customer and focus on customers where we are more aligned. Additionally, in reality, it’s seldom that any competitor can address all the customers’ highest priority value drivers better than anyone else.

The more companies conduct customer satisfaction surveys covering all their target customers and markets, the more informed they become in filling gaps in their value delivery. Companies may discover gaps in their products and services, or holes in how they manage their customer experience, knowing this helps them build their strategies to fill these gaps.

l Sydney M Sibanda holds an MSc Strategic Management (CUT), Bphil Hons Marketing Management (IMMGSM), BSc Psychology (ZOU), BSc Hons Psychology (ZOU), Diploma in Marketing (LCCI), AIPMZ). He is an accredited IMM/MAZ Marketing Practitioner and can be reached on smsibanda@gmail.com

*This article was contributed on behalf the Marketers’ Association of Zimbabwe, a leading body of marketing professionals promoting professionalism to the highest standards for the benefit of the industry and the economy at large. For any further information, kindly contact mazmembership@mazim.co.zw or visit the website on www.maz.co.zw.

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