Hello. In this session we are going to talk about customer value. If you think about it, there's one reason and one reason alone, why customers choose to do business with a company or choose not to do business with a company. It's because they get something of value in return for the dollars that they are spending. Now, a good way to begin is by asking yourself, what business are we in? That's a very interesting way of getting at customer value. When you ask a company like Dominion Electric, or you ask a company like American Airlines, or Procter and Gamble, or Apple, or Cisco, or Samsung, or IBM what business are you in? Usually, companies answer the question in terms of the products that they sell. But, I'm gonna ask you to think about it a little differently. Ted Levitt, in his seminal article called Marketing Myopia, which was written way back in the late 50s and the early 60s, said, customers don't buy quarter inch drills, they buy quarter inch holes. What does that mean? What that means is, customers are not buying the physical product, they are buying the benefit that they are getting from the physical product. So a good way to answer what business are you in, or what business is your company in, is by focusing not on the physical product, not on the quarter inch drill, but on the quarter inch hole. The benefit that your physical product is providing the customers. Let's pause a little to reflect. Value is not what companies do to their offerings in their factories. It's not about injecting attributes and features, in products and services. Something like what athletes like to do when they sort of inject themselves with steroids to improve their performance, that's not what value is. So value is not what companies do to their offerings in their factories, value is what customers do with. That's a very important distinction. Do to, do with. These offerings in their day to day lives. So I'm not buying a computer that you have made very powerful in your factory. I'm buying the computer, because I can use that extra power to do data analytic's, to do big data analytic's, or to do graphic design, or to display my products, because I am an e-commerce retailer. So it's all about customer solutions and experience, value is not what companies do to their offerings and their factories. Value is what customers do with these offerings, in their day to day lives. Now there are four aspects of customer value. Customer value is interactive. I must interact with your company, if I am to benefit from the value that you are attempting to offer me. Customer value is relative, means customers make comparisons between what I am offering, what my company is offering them, and what my competitors are offering them. Customer value is preferential. If I'm truly getting value from what you're offering me, I will prefer your product over those being offered by competitors. And finally, customer value is experienced. And means that no matter what you claim, what you claim to offer, the ultimate test is I can only experience or I can only understand that value after I have experienced your product. Now there are many sources of value. Value just doesn't come as we said from the physical product from what companies produce in their factories. But what they also add to their factory output in the form of packaging, services, advertising, etc. And that's where we develop this concept of the total product. You're gonna see this concept a lot. So it's very important that you embrace it and understand it. A total product is made of layers. Just like on a very cold, wintry day we layer ourselves with woolens. Similarly a total product is layers. The core product sits in the middle, which is the core benefit that we are getting from the quarter inch drill. The expected product is the basic minimum configuration, that is going to meet the customer's expectations, and could include things like price. Could include things like financing or service. The augmented product is what the manufacturer adds to the product, in order to make it richer, in order to make it more appealing than the offerings of its competitors. And finally, the potential product is all the capabilities and benefits that the product has today, that it can actually bring into play tomorrow. So for example, I may have a cell phone which makes calls today, but because the cell phone can send a signal, it can also be used as a payment device tomorrow in the future when new technologies emerge. And that's what a potential product is. There are a few other value concepts that are important to keep in mind, one is the cost of doing business attributes, okay. These attributes are the ones that are bare minimum. You have to have them in order for a product to be appealing to you. So for example, no matter what Google says about self driving cars, in today's day and environment, you're not gonna buy a car without a steering wheel. That's the cost of doing business. A steering wheel is a cost of doing business or alternately, you're not gonna buy a computer without a keyboard. So a keyboard becomes a cost of doing business. There are differentiating attributes also. The size of the screen, the color intensity, the luminosity, the lightness of the computer, all those become differentiating attributes. A hassle free experience is also part of value. Why? Because I'm sure you've heard the term value added. Now the whole concept of value added, creates a picture as if I'm pouring something into a container. But imagine that we are not having a hassle free experience. Well, that is sometimes compared to a leaky bucket, where value is being leaked out of the customer experience. So if I'm leaking value because I'm under delivering, value added actually makes no sense, because whatever I'm adding is actually leaking out. So it's compensating for all the problems that the customer is experiencing. And finally yes, price is a very important source of value, but customers make price value trade offs. Which means if they see real value in something, they're willing to pay extra. And we see this from our own lives. If someone offers us a carefree experience, no maintenance for 12 months or 24 months, we may be willing to pay a little extra for that product. So customers make price value trade offs. All this that we have discussed, adds up to a value proposition. The reason that a company gives to the world to do business with it. And a value proposition is a statement of three parts. It has three parts. It has a functional component, in terms of the features and attributes. It has an economic component, value for money. Not just price, but value for money. What am I paying? What am I getting in return? And has emotional benefits, that appeal to the core target customers, which then differentiate our product from our competitor's products. All this has to be supported by evidence. And we can't just make statements about the value that we are offering to our customers. We have to support it by evidence, and this then becomes a compelling reason when we have a functional reason. When we have an economic reason. When we have an emotional reason, backed by evidence. It becomes a compelling reason for the customer to buy our product or service. In summary, customer value is why customers do business with companies. It's what they get in return for the money that they are spending, that's the single most important reason why customers choose to do business with a company. Customers don't buy quarter inch drills, they buy quarter inch holes. Customers derive value from the whole product, not just from the physical product. All that companies can claim, is to offer superior value and demonstrate it. But ultimately in the final analysis, the test of value is what the customers actually experience by using the product or service that really matters.
