The following is a guess post from Nat Greene based on lessons and concepts in his new book Stop Guessing.
As a business leader, one of your key responsibilities is ensuring that your customers see huge value in your offering. In the hyper-competitive landscape of 21st century business, you have the difficult tax of constantly increasing your customer value. Many businesses focus primarily on reducing their cost to customers: if a customer gets the same product for less money, they see greater value in the investment. But merely driving down costs makes for a low-margin future, and strategically locks you in an ongoing price war with your competitors.
A far more effective–and enjoyable–path is seeking to improve the value of your product, so your customers are getting more for the same price. Doing this creates greater customer loyalty, improves your margins, and improves the satisfaction of your team, knowing that they’re better serving your customers rather than simply trying to be the lowest-cost provider.
You have certainly already put significant thought into this, and realized there are many different options by which you can attempt to improve your value to your customers. If you have spent time on search engines looking for ideas, you have likely found pithy lists or tips that will give you even more ideas to try out than you already had. But you have limited resources, and you know that what works well for some will not necessarily apply to your unique business and unique customers’ needs. How can you choose what’s most effective?
Learn How to Improve Customer Value
As for any problem you’re trying to solve, approaching the problem with the right behaviors will help you find the most effective solution for your unique situation. Rather than trying out different ideas that others have tried before, you need to understand your problem by observing it thoroughly and learning as much about it as possible.
To do this, get close to your customers. Don’t just ask them what they want from you: they are not likely to be able to conjure up in their minds what you can do for them. And that’s not their job: it’s yours. Understand how your product or service interacts with their business, and what changes would make the most impact to them. Approach this investigation by starting with the following questions:
- How do they use your product?
- What about their business are they trying to improve with your product?
- What resources do they deploy by working with your product?
- What do they have to do internally in order to work with your product?
- What is their experience trying to acquire your product?
- What is your customer’s biggest pain point that your product interacts with?
By understanding the answers to these questions–and more that arise during your investigation–you will be able to understand what you can change about your product that will most improve your value to your customers, and you’ll find yourself not only holding on to customers you may have been losing, but you may also find yourself at a higher price point.
Case In Point
One business I was working with made high-performance coatings for products like ships, jet planes, and equipment that underwent lots of stress, such as heat. In order to improve their cost competitiveness, they were planning on moving their operation from Western Europe to Eastern Europe, where labor costs were lower. The operation would have taken years and of course entailed significant capital costs to implement.
When they instead found out what was most important to their customers, price did not rise to the top. Instead, they found that the biggest stress to their customers was their own supply chain: these customers wanted to get their jets, ships, and heavy equipment out to their own customers reliably on time. Each of these manufacturers had to buy dozens of parts to assemble at their own facilities, and they felt constant stress that any late delivery would impact their own production timeline.
The coatings business decided to instead focus on perfecting its in-full on-time (IFOT) delivery performance. We worked together to solve logistics problems that caused some of their shipments to arrive late, and they were able to quickly boast the best IFOT in the industry. Their customers were thrilled, as they could be confident that at least the coatings part of their sourcing operation was something they never had to worry about. They stayed in Western Europe in order to keep their lead times low, and were even able to increase the price of their own products, without a grumble from their customers.
Nathaniel Greene is the co-founder and current CEO of Stroud International, and author of Stop Guessing: The 9 Behaviors of Great Problem-Solvers. Nat has a Masters of Engineering from Oxford University and studied design, manufacturing and management at Cambridge University, in addition to executive education coursework in Harvard Business School’s Owner/President Management program.