Customer-Centric Metrics Make Your Demand Generation Dollars Go Further by Laura Patterson * [38]

 

As one of the primary revenue generators for an organization, Marketing provides three essential roles: finding profitable customers, keeping profitable customers, and growing the value of these profitable customers. Customer-centric metrics offer a good starting point for identifying prospects who most look like your profitable customers, knowing which customers and products are making the largest contributions to the bottom line, and for effectively investing your demand generation dollars. 

Besides measuring customer satisfaction and loyalty, the impact on profitability is also an important measurement of any customer-centric strategy. Many companies have demand generation metrics and even measure customer satisfaction. Yet, we have found all too often that while companies say they are customer-centric, they have few customer-related metrics.

Most marketers agree that creating a satisfying customer experience positively affects a company’s profitability. The customer experience includes both rational and emotional aspects, as well as how the customer feels about the brand and the company, and what the customer thinks every time he or she interacts with the company. Having a positive impact on the company’s profitability translates into either increased revenue or some reduction in cost.

Ø Establish Profitability Targets - 3 Key Metrics

If you can calculate these three important customer-centric marketing measures, you can establish a set of customer profitability targets:

1.   Customer acquisition cost: Determined by calculating the average cost to acquire a new customer. See more below about how to use this measure in your demand gen efforts.

2.   Customer retention cost: Determined by calculating the cost to retain and serve an existing customer.

3.   Average customer profit: Determined by calculating the average value of each customer segment after accounting for standard costs.

You can monitor your success by measuring how well you are staying within your customer profitability targets for each of these metrics. You don’t need sophisticated tools to measure customer profitability. 

Ø Add Profitability Targets to Your Dashboard

Customer metrics are one of the primary categories that should exist on every Marketing dashboard. Once you have calculated these three customer-centric metrics you can set targets for each and report Marketing’s performance against the goal and Marketing’s impact on overall customer profitability on the Marketing dashboard. Overtime you will be able to use this data to determine which customers offer the best opportunities and focus Marketing investments on customers who will have the greatest impact on the bottom line.

Now that you understand which customers are profitable, you can apply this knowledge to determine which customer segments are worthy of your demand gen dollars.

Ø Customer Metrics to Guide Marketing Investment

When it comes to effectively investing your demand gen dollars, we recommend focusing on two customer-centric measures: customer value and cost to acquire. These measures when combined together can help your organization decide how much of your resources can be profitably allocated against a particular customer or set of customers.

The two customer-centric metrics we’re suggesting will help you identify the customers and/or segments to pursue. While it would be wonderful to be able to invest in every customer, most companies need to be selective.

We’ve simplified an approach to jump start your thinking process. You’re going to create a  2 X 2 grid with one axis being customer acquisition cost and the other axis being customer value.

Before you do these steps, decide which customers go where on the grid. Once you generate a list of all your customers, score each customer and/or customer segments for both customer-centric metrics.

1.   Create a Customer Value Score: To create a customer value score you will need information generated from two pieces of data: purchase frequency and customer revenue.

o    On the customer list table have a column for purchase frequency (you may want to use a numeric rating scale for this measure) and one column for revenue (you may want to create ranges for revenue and use a numeric rating scale for each range). Score each customer and/or segment. Customers who have high values on both columns (for example all customers who have either a 5 and 5 or 4 and 5 or 5 and 4 in the columns) would be your high value customers.

o    Those customers with a 5/5 would receive an overall score of 5, those with a 4/5 (frequency and revenue) you may want to give an overall score of 4.5 and those with a 5/4 (frequency and revenue) an overall rating of 4.

o    Do the same for each combination, with those customers with both a 1 in both columns having the lowest score of 1.

2. Calculate Cost to Acquire. For your same list of customers, in another column, calculate your cost to acquire each of these customers. Customer acquisition cost is the cost associated with convincing a customer to buy your product or service, including research, marketing, and advertising costs. It’s an important business and marketing metric that can be used to gauge marketing’s effectiveness.

• Again, to keep things simple, create acquisition cost ranges and then assign a 1-5 rating scale for each range (we’d suggest using 1 as the lowest cost range and 5 for the highest cost range).

Ø How to Use Your Scores

For each customer or customer segment you should now have 2 rating numbers: a number derived for the customer value score and a number for customer acquisition.

Divide your 2  X 2  grid into 4 quadrants:

• High Value/High Cost
• High Value/Low Cost
• Low Value/High Cost
• Low Value/Low Cost.

Plot each customer into the appropriate quadrant.

> Score Customers for Each Metric

Those customers and prospects similar to them in the High Value/Low Cost quadrant are where you should spend the money.

Obviously very little, if any resources, should be allocated to customers and prospects in the Low Value/High Cost. You may have to have some internal conversations about the other two quadrants and applying the customer lifetime value calculation to these customers can often help guide decisions related to customers in these two groups. While it may take some time, this is a relatively easy and affordable first step.

Unless you’re among the few marketers who have all the time and money in the world to burn, we hope employing this analysis helps you decide how to eke out the most value from your limited and precious resources. You’ve probably already come to the conclusion that the best place to spend it is on those customers who are most likely to buy.  

Got the customer-centric metrics bug and want to know what else you should be measuring? Here the top eight measures often associated with companies truly committed to being customer-centric:

1.   Customer retention

2.                2. Buying frequency

3.   Contact frequency

4.   Churn rate

5.   Average revenue per user

6.   Customer lifetime value

7.   Share of customer’s wallet

8.   A customer’s EBITDA

Conduct a quick audit to see whether your company tracks any of these customer-centric measures. If it doesn’t and being customer-centric is important to your organization, then it may be time to revisit the metrics you are measuring.

 * This post was reprinted with permission from VisionEdge Marketing, Inc. 

Laura Patterson is a marketing practitioner, consultant, writer, and speaker. Contact her at  laurap@visionedgemarketing.com. Also, check out Laura's article "The Value of Investing in Customer Value Management" [22].  Post Editor: Preview (blogger.com)

 

Service Incidents and Failures Can Actually Present Opportunities for Firms by John Gironda * [37]

                                                                  Photo Credit: Clay Banks

While most firms should strive to provide their customers with the best experience possible at all times, service incidents and failures will occur from time to time. Although these issues aren’t ideal, they do present companies with opportunities as well. Obviously, companies should not make it a habit of experiencing ongoing service incidents and failures with customers. However, in the hopefully rare times in which they do occur, if companies are able to rectify the situation, many times this ends up with customers actually being happier than they would have if things went off completely without a hitch to begin with.

This might not sound quite right at first, but if we think about it for a moment, it should make more sense. If everything goes very smoothly during a service encounter, it should lead to happy and satisfied customers, which is a very good thing. Nevertheless, when there are incidents of service failures or dissatisfied customers, and there will inevitably be at some point, this gives firms the opportunity to show customers that they care by doing what it takes to get things fixed and possibly go above and beyond in order to make things right. By doing this, companies can turn dissatisfied customers to not only satisfied customers, but also delighted ones at that.

This is because consumers tend to remember any hiccups (i.e., service incidents or failures) that occur during their interactions with companies. These hiccups can go a multitude of ways. One way is that a company does not rectify the situation and people leave as unhappy dissatisfied customers, or now ex-customers in many cases. When this happens, people tend to keep this negative feeling with them, recalling it and thinking twice the next time they consider doing business with a company. In addition, consumers may tell friends, family, and other individuals online or in-person about their poor experience, leading to negative word-of-mouth for the company. A second way that a service incident can go, is that the firm does what is necessary to make things right with the customer. In this case, customers will remember that the incident happened, but will also carry positive feelings with them, recalling that the company cared about their experience and satisfaction, and made sure it did what it could to remedy the situation.

Good companies understand this, which is related to a concept in marketing called customer lifetime value. That is, the entire stream of purchases that a customer will make with a company over the course of their lifetime. By keeping customers happy and doing what it takes to correct incidents when they occur, companies stand a much better chance of keeping loyal repeat customers for longer periods of time.

In some cases, this may mean taking a short-term loss on a particular transaction with a customer to keep them happy and retain them for years to come. This is because in order to fix a service failure or incident and retain a customer, it may be necessary for companies to compensate customers for the issue that occurred. Perhaps the customer was inconvenienced by a long wait time for their order, which can happen at a variety of businesses, from restaurants to online retailers. Additionally, perhaps there was an inability to fully accommodate a customer’s request, or the customer simply did not like a particular product and would like a refund.

In terms of customer compensation for inconvenience caused by service incidents, a little bit of compensation can go a very long way in terms of being meaningful to customers. These can be things as simple as taking something off of a customer’s bill, giving the customer an additional item for free, a discount voucher for a future purchase, or additional points towards the company’s loyalty program. Clearly, the type of compensation needs to be commensurate with the type of incident that occurred. However, as the old adage goes, many times it’s the thought that counts more than anything. Additionally, another important factor in the exchange is speed. Incidents should be corrected as quickly as possible, which also means that companies should empower employees and give them some autonomy and leeway to make things right promptly without having to wait on approval for every little thing, within reason of course.

What are your thoughts on this? Do you agree that service incidents can actually present an opportunity for firms? Can you think of any positive examples of times when an incident occurred and a company went out of its way to remedy the situation for you? What impact did that have on you and your future relationship with that company? Please share your thoughts in the comments section below.

 

John Gironda, Ph.D., is an Associate Professor of Marketing at Nova Southeastern University, Fort Lauderdale, Florida. His teaching and research interests include digital and social media marketing, consumer behavior, marketing strategy, consumer privacy issues, and integrated marketing communications. He can be reached at: jgironda@nova.edu

 

Customer Delight - That Sounds About Right or Not Quite? * [36]

There are two schools of thought on customer delight -- it is an extreme form of customer satisfaction (very satisfied) or it is a distinct marketing construct. While the latter position has gained traction recently, this debate is far from settled.

Highly Satisfied or Customer Delight?

> Position A - Highly Satisfied

Customer satisfaction is frequently measured on a five-point Likert scale. While there are many variants of the approach, it is typically measured as follows: 1) highly dissatisfied, 2) dissatisfied, 3) neither satisfied or dissatisfied, 4) satisfied, and 5) highly satisfied. The “5” option may be viewed as a proxy for customer delight. In such cases, customers tend to be highly loyal and not prone to defection. The “4” score implies satisfaction but since it is not strong, customers generally are not very loyal and may defect. Customer satisfaction measures of 1-3 imply major or minor levels of dissatisfaction. In such cases, customers are likely to seek alternative vendors.  

This is analogous to the single-item, 11-point Net Promoter Score scale where respondents that give the organization a 9 or 10 are highly satisfied (promoters); 7 or 8 are somewhat satisfied (passives); and 0-6 are dissatisfied (detractors). Bain & Company has found that long-term value creators such as American Express, Publix Super Markets, Ritz-Carlton, and USAA have NPS scores of twice that of the average company and leaders grow at twice the rate of competitors. The customer satisfaction metric is so important that Lexus uses this basic scale in assessing service quality for their vehicles. In fact, one of their research instruments advised customers to immediately call the service manager if they were not totally satisfied with the service experience (i.e., unable to respond with a “5”).                          

> Position B - Customer Delight

Superior customer value means to continually create business experiences that exceed customer expectations. Innovative companies such as Tesla are not content with customer satisfaction; they strive to amaze, astound, delight or wow them (at least some of the time). Tesla’s $35,000 Model 3 electric vehicles received more than 400,000 pre-orders more than a year before it went to market. Other exciting business initiatives by Tesla include its multi-billion dollar Gigafactory (a battery production facility) and futuristic Hyperloop transportation system. 

While the pursuit of exceeding customer expectations is quite desirable, reality often dictates that customers are most satisfied when firms avoid disappointing them rather than trying too hard to delight them. Therefore, organizations must focus on the business fundamentals and have a flawless execution of operational basics. In rare instances of service failure, service recovery must be a priority. In most cases, customers can not truly articulate how to improve service experiences or what they are seeking to be delighted. 

In contrast, customers can readily identify attributes that are dissatisfiers/hygiene factors (must-haves) and satisfiers (nice-to-have attributes). The hygiene factors constitute the minimally acceptable level of service attributes that customers would expect to be present in the service offering.  For example, a mid-priced hotel catering to business travelers would be expected to offer such services as express check-out, fitness room, high-speed internet connections, a restaurant, and a lounge. Failure to offer these services or to perform or deliver them poorly will likely lead to dissatisfaction. In contrast, simply offering these services and performing them adequately will not delight the customer --the customer expects them as part of doing business. 

Truly delighting customers requires service providers to carefully consider satisfiers.   Satisfiers are those service attributes that both differentiate the service firm from its competitors, while at the same time exceeding customer expectations in one or more areas of service by delivering above what is expected.  Hygiene factors need to be delivered at an acceptable level before satisfiers become important. Satisfiers have the potential to create high customer satisfaction levels once expectations on hygiene factors have been met.  Firms that would offer satisfiers need to consider the value-added services that would both delight and surprise the customer. It should be emphasized that service quality is more than simply meeting specifications and that the customer's point of view is what matters (i.e., is the customer delighted?) Hence, customer satisfaction is what the customer says it is.

Consider some of the following examples in the effective use of satisfiers. Before a guest ever sets foot in Le Parker Meridian Hotel in New York they can use the hotel’s QuickTime Virtual Reality (QTVR) enabling potential guests to "walk" through the lobby and rooms.  In addition to virtual reality tours, the site offers in depth, timely information about room rates, events and points of interest for the business and pleasure traveler. The hotel also welcomes repeat guests with amenity baskets accompanied by handwritten notes.                          

Zappos, a billion dollar shoe, handbag, and clothing company owned by Amazon, aims to deliver “Happiness in a Box.” Their three-part formula is to: 1) meet expectations by delivering the right items, 2) meet desires through free shipping, free return shipping when necessary, and a 365 day return policy and 3) often delight customers via surprise upgrades to overnight shipping.

And conversely, bad-mouthing by dissatisfied customers can be not only harmful, but the very death knell to a company. Consider a case in point: one unhappy buyer at a computer superstore determined that this company lost $50,000 of his business (direct lifetime value) and another $350,000 (indirect lifetime value) due to negative word-of-mouth comments to his family and friends! Today, it’s very likely that dissatisfied consumers will post a bad review on Yelp, Facebook or Google. Negative comments via social media (word-of-mouse) can easily go viral leading to the need for damage control, a potential significant loss of business or even consumer boycotts.

Art Weinstein, Ph.D., is a Professor of Marketing at Nova Southeastern University. His research interests are customer value, market segmentation and entrepreneurial marketing strategies. He may be reached at art@nova.edu 

 

Know Your Customer to Bulletproof Your Marketing Strategy by Fernanda Almada * [35]

Working in today’s digital marketing landscape has become increasingly challenging. The markets are crowded, and changes are happening in an extremely fast pace. As marketers, we know that it is necessary to find a way to learn and adapt quickly. Otherwise, we will fail — as professionals or as businesses. However, there is one key component of any marketing strategy that is bulletproof: your customer.

It may seem obvious, but the truth is that the current times require a much higher-level understanding of who your customers are, and what are their needs, wants, and desires. And this goes way beyond demographics. It is essential to dive deep into their biggest dreams and fears so you can develop an effective marketing strategy that speaks to these very specific pain points and transformation goals.

When you have this level of comprehension around your customers, you will be able to craft the best offers that will turn them into raving fans and will make them stick around for much longer. That is when the magic happens: highly satisfied customers who are willing to buy repeatedly from you and advocate for your brand and business. This is when you will see an increase in your customer lifetime value and will be able to accomplish continued revenue growth.

Targeting Strategy

Before you start working on the real understanding of your customers, it is essential to take a step back and define who these dream customers are, which target markets you should go after, and assess this decision before moving forward. Some of the key factors to consider are the size of the segment (is it large enough to be profitable?), the competition it faces (how strong are your competitors?), and its alignment with your business’ overall goals (is targeting this segment compatible with your long-term goals?).

When you analyze different marketing campaigns from companies such as LinkedIn, Hulu, and Clorox, it is clear that they target different market segments and may have various lines of businesses to cater to them. LinkedIn, for instance, the world’s largest professional network, runs ads directed both at job seekers and advertisers.

Hulu also targets advertisers in addition to subscribers. And if you are wondering if Clorox only targets women in their marketing campaigns, that is not the case. Headlines such as “Cleans & kills germs: Helps build business” show that their strategy and creativity go further than traditional segments and that they also cater to business owners.

Booking.com is another great example of company with unique ad campaigns running simultaneously but targeting distinct audiences. Besides travelers (“Book the perfect stay with peace of mind”), they also promote their services to hotel professionals (“Attract summer bookings”) and business professionals (“All your company’s travel in one place”).

Standing Out from Competitors

The origin of these powerful headlines is in the company’s value proposition. Many marketers underestimate the importance of crafting a well-written value proposition, skipping this important step that dictates the entire marketing strategy. The combination of what your customer wants and what you are able to offer like no other business is what will help you create outstanding marketing strategies to propel your growth.

Strong taglines such as Amazon’s “Spend less. Smile more.” or Gillette’s “The best a man can get.” translate these companies’ value proposition in an attractive way and reinforce the reason why their dream customers should buy from them, and not from the competition.  

The same happens with the creation of marketing campaigns. The high-level understanding of your customer will come into play at the execution phase as well, with the development of variations of ad creative and copy that translate both the company’s positioning and the fulfilment of the client’s desires.

By highlighting benefits (instead of features), showing the removal of problems, elevating power-status, or providing sensory gratification, marketers create opportunities to continuously drive customers that are interested in each offer.

As Philip Kotler says, “Good marketing is no accident. It is both an art and a science”. And it does take a lot of testing and optimizing to create winning strategies. And if something doesn’t seem right, it is probably time to revisit the initial definition of what your company is and who your dream clients really are before going back to the drawing board of your ad campaigns.

Sources:

- Consumer Behavior, Leon Schiffman & Joe Wisenblit, 12^th edition, 2019.

- A Framework for Marketing Management, Philip Kotler & Kevin Lane Keller, 6^th edition, 2016.

-  Facebook Ad Library

* Fernanda Almada is a digital marketing strategist with 15 years of professional experience. She currently works as a marketing project manager at a digital marketing agency in South Florida in addition to managing her own online business. Fernanda has an MBA with a concentration in Marketing from Nova Southeastern University and can be found on Instagram @fernanda.almada.

Can Non-Owner Stakeholders Select CEOs to Create Value? by Gautam Mahajan * [34]

I was in a conversation with an executive who had been head of Business Excellence and Chief Culture Officer and Chief Sustainability Officer in a large company. He reminded me of the importance of sustainability for our happiness and good health, and for creating a planet that could continue to sustain human beings. He said that he did not think that any CEO would drive his business strategy through sustainability. After all they are appointed by shareholders and their eye is on quarterly profits and profits. So, what the Business Roundtable is saying and what Davos has stated that the purpose of a company is to create value for all stakeholders is a far cry from ground reality. He also suggested that maybe a non-shareholder selected CEO could work better at making the stakeholder role more cogent.

It is the norm that the CEO is chosen by the shareholders and remains at their pleasure.

Should this really be the case?

If both Davos and the Business Roundtable have suggested that the purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders – employees, customers, suppliers, local communities and society at large. The best way to understand and harmonize the divergent interests of all stakeholders is through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.

So, what is the role of sustainability leaders or customer leaders? Customer leaders have typically belonged to marketing and do become CEOs, but do sustainability leaders or community development leaders in a company or outside become CEOs. Why? And why not?

For that matter, few HR people become CEOs. Why?

Probably because they are functional in style and thinking and do not really create value.

Employees, of course become CEOs, but those who do from within the company, do they represent employees?

I think it is going to take time and serious thinking before any of the other stakeholders can become CEOs or select CEOs. This will require a serious effort to have a proper Purpose of the company.

Bold thinking purpose to improve the quality of life and happiness can bring great dividends. These improve the values of our company. We know from past work with power companies that over 60% of doing business with a company was their image and values. Values, we learnt from studies such as with Tata Power create value.

Since leaders can also be shareholders, should they look at creating happiness?

93% of 2000 leaders surveyed could not state why their company is in business. This means that many purpose statements do not have a proper sense of purpose. Are yours one of them?

As a leader you must have a purpose. What is a meaningful purpose you can express in terms of values, meaning ethics and morals etc. and in terms of what you want to achieve in life for yourself and your family? What will inspire those around you. Is it clean air, a happier environment, or a product with lowest costs and highest quality? The last is practical but it is your job to do so. Value Creation is going beyond your job and should be your purpose.

Do you know what your customers value, what your stakeholders value? How does your purpose reflect some of these aspirations and goals?

How can you inspire your people and family to create value and for whom and how? Granted it goes beyond the purpose but it can help you formulate and articulate purpose better.

At the very least your purpose should go beyond making money and increasing shareholder wealth.

This purpose will help you revise your vision and then your mission. Working on a strategy for each of your stakeholders will get you to a great business strategy, and re-inforce your purpose.

The purpose to create value for stakeholders makes you ally with employees, customers, society, environment and partners in learning from them and co-creating value with them. They become part of your succeeding.

Many of your employees prefer meaning to money. Should you too? Purpose improves employee participation and buy in. It creates value for employees by improving their well-being.

Helping employees with creating value for themselves and having a purpose engenders thinking about themselves and deciding what matters in life. It builds on the self, a sense of freedom and thinking about others.

Perhaps the selection process can be from a team consisting of all stakeholders, community leaders, suppliers/partners, employees, outside customers and environmentalists. This may help a polluting company change, or a company do more for the community and imbibe values in a better way, or become more customer and employee focused. Today it may not seem practical but it could become a norm in the future.

This selection process will lead to greater stakeholder participation in decision making and in choosing CEOs. This will make stakeholder strategy a reality, and change the business face around us from only making money to thinking of the future and creating happiness and a better place to live. This is Creating Value at its best.

* Gautam Mahajan is the President of the Customer Value Foundation and the Founder Editor of the Journal of Creating Value, jcv.sagepub.com. He may be reached at: mahajan@customervaluefoundation.com .  Article reprinted with permission of the author.

The Joint Value Proposition as a Differentiator by Huba Rostonics * [33]

                                                     Photo by Suzy Hazelwood from Pexels

In today's complex business environment, there is almost no product or service that is made, or delivered, end-to-end by one single company. There is almost always an intricate network of supply chain elements and partnerships involved. With the exception of the few of us who are deeply wading in the waters of partner ecosystems, these complexities tend to be ignored.

Not even in some partner-friendly company settings is everyone adequately acquainted with their own delivery models. More than a few times, I have found myself briefing an executive about the differences between  their own Value Added Resellers and Agents.

Very often, these relationships are also  simplified, mentally classifying them like a "supplier" or even worse, "the middle man", as if for some inherited privilege they have earned the right to collect some type of tax that they don't really deserve.

The truth is that many companies rely on partnerships to deliver their products to the market, and their partners are an integral part of their Go-To-Market strategy. In today's world, it is a rare find a company that is capable to deliver their product or service all the way from the source, to the hands of the customer. Along this journey, several companies -or "partners"- may perform services, attach other products, etc. adding value to the final product that lands at the customer.  It is from this journey and the several steps of value-add that the concept of the value chain stems from, and the product or service that is delivered to the customer is experienced through its Joint Value Proposition.

While these concepts are omnipresent in the tech industry, they are all over our economy as well. Two of the most noticeable ones are the Distribution Channel, and the Service Delivery Partners. As for the first one, we see it everywhere, from the grocery store, the car dealership, or our trusted IT guy. For example, it is impossible -and not cost-effective- for car manufacturers to set up dealerships in every town, so they rely on entrepreneurs who are willing to enter in this business. In a similar way, growers and other foodstuff manufacturers cannot afford to go to every town to sell their goods, so they engage in the distribution network (channel!) that brings those goods to your local grocery store.

It is very important to recognize the value that each of these partners offers for the consumer. Yes, they take a piece of the profits to pay for their services, but they also add value to the product or service. For example, the local dealership makes it easy to get there, they offer financing (they basically bring together the automobile, and a financial product, the loan), and they can also service your car.

In the case of the grocery store, besides making it really convenient to buy, with extended business hours, refrigeration, and now even home delivery, they are also an "aggregator", allowing us to buy apples, milk and honey, without having to visit the orchard, the dairy farmer, and the beekeeper.

A Service Delivery Partner can be a key player in the value chain, especially if the product or service requires installation, servicing, or any form of customization. They can be as simple as the independent contractor that may install the carpets that you bought at the big home-improvement store, or as complex as Microsoft's partner network, where partners specialize in specific technologies. Think about the difference in value of the carpet just delivered to your house in a roll, vs. actually being able to step on it. How much more value does that have in terms of your ability to enjoy the product?

The way we experience a product or service is the result of all the value transactions that occur throughout the value chain, before they reach us. Some of these value transactions and the players involved, have evolved over time, filling a need. Others have been created intentionally, by design. This is where some companies have the opportunity to differentiate themselves from others by designing value chains that complement each other, delivering value to their customers.

In your journey, What would you build if you could do it all? What are you missing? What kind of partner do you need that complements the value that you create? What would be the differentiated joint value proposition?

* Huba Rostonics is a go to market, marketing and channel strategist that has helped companies in the cloud, virtualization, networking, IT security, and telecom verticals to build strong and resilient partner ecosystems, and attain ambitious sales objectives. Visit his website at http://www.channelmeister.com

 

How a Small Colombian Language Training Institute is Reshaping its Marketing Strategy by Esteban Ochoa * [32]

Established in 1978, A.V.C is a premium language institute in Medellin, Colombia. The firm utilizes a customer intimacy strategy. The Institute developed strong relationships with  students by having an open-door policy about personal/life issues, granting scholarships based on program excellence, regular communication with family members, and an end-of-year award ceremony.

A.V.C. offers programs in English, French, German, and Italian to a Spanish-speaking market. Although the Institute has been in business for more than 40 years, only 600 students achieved full proficiency in their chosen languages and graduated. Given the difficulty of the program, nearly half of the students were unable to complete the coursework. The Institute has always focused on offering small classes, custom-tailored learning programs, and tutoring sessions with an emphasis on building lifelong customer relationships. Graduates still visit the school and often send their own children there.

Although A.V.C reached a high level of customer intimacy with students and alumni, due to lack of technological preparation, the Institute had to close at the beginning of the COVID-19 pandemic and lay off 85% of its employees. Service firms have had to look for ways to operate remotely to survive. VOC Digital was retained to re-imagine A.V.C.’s business model. The project started with identifying the right target market. Additionally, new sources of income were required to fund the virtualization of the different courses and re-hire of teachers.

Instead of looking to compete in the crowded city, VOC targeted rural residents, ages 15 through 45 in the outskirts of Medellin, Colombia. Using a geodemographic segmentation approach, there were two reasons that rural Colombian towns were selected as the target market: 

1) Service availability: Typically, formal foreign language lessons in Colombia are limited to middle and upper-class families in the city and those studying in citadel universities. Rural residents generally leave their towns for opportunities that only the big cities can offer, education being one of them. The service itself is almost non-existent in rural communities. VOC Digital and A.V.C. recognize this untapped market opportunity.

2) Number of rural towns in Antioquia and throughout Colombia: In the west region of Antioquia alone (Antioquia is the equivalent of a state in the United States), there are approximately 23 rural towns with an average population of more than 25,000 residents. In all of rural Antioquia, which is only one state in Colombia, there are over 8.5 million inhabitants. Furthermore, Colombia has 32 departments or states (User, S. n.d.).

The solution for the an alternative income generation source will be supplied by renting out a large portion (75%) of the school (a land asset) as office spaces. The two-story building is located in a prime central location in the heart of downtown Medellin which adds value and demand due to heavy foot traffic. Creating a new revenue stream combined with the proposed segmentation strategy and digital technology (adding virtual courses) will reinvigorate the educational services offered.

VOC Digital is currently creating all of the online programs that combine small (in student count) recorded virtual classes, custom-tailored learning programs, and online tutoring all under one centralized portal designed for cell phones which is funded by the rental spaces. All of the guides, course materials, and tests given will be compatible and optimized as well for mobile devices. Such a seamless integration is not only to make the program more user-friendly and accessible to its future student body but to be able to do it at a cost low enough to establish an ongoing relationship with consumers in rural Colombia. 

The hiring process for teachers begins in June 2021 and will be finalized by November 2021. A pilot course is set to launch at the end of the second quarter of 2022 to collect real time user data and will be offered free of charge to 15 individuals. During the remainder of 2022, three more free courses will be opened to further improve user experience and build customer intimacy with the first set of students taking language classes via the new approach. The launch of all the courses is planned for the start of 2023. Data will be collected monthly to continue to improve user experience. A.V.C is excited about the new strategy and creating long-term value for its clients.

Reference

User, S. (n.d.). 3.2.1-Proyecciones de población según ÁREA GEOGRÁFICA en Los municipios DE antioquia. Años 2015 - 2017. Retrieved March 21, 2021, from http://www.antioquiadatos.gov.co/index.php/3-2-1-proyecciones-de-poblacion-segun-area-geografica-en-los-municipios-de-antioquia-anos-2015-2016

* Esteban Ochoa is the owner of VOC Digital, a marketing agency. He may be reached at: vocdigitalco@gmail.com  

 

 

 

 

 

 

 

 

 

  

 

Nobody Does it Better - How an Australian Denim Brand Wins Globally through Supply Chain Transparency by Kanika Meshram * [31]

Denims are a fundamental part of modern fashion. Everyone seems to own a pair. The massive popularity of denim product has a lot to do with its symbolic value— the notion of cowboys, American Wild West, rock ‘n’ roll, punk rebellion (think Mick Jagger, Blondie, and John Lydon aka Johnny Rotten); the hippie movement in the ‘70s; grunge of the ‘90s; and the supermodel brigade. Titans of denim industry sustained competition using linear business models that massively reduced their production costs. But, at the cost of opaque supply chains with questionable working condition of factory workers and environmental damage (Ethical Fashion Report., 2019).

What if we tell consumers who made their clothes?

This is the question Nobody Denim’s CEOs John and Nick Condilis asked each other when they decided to create supply chain transparency as their competency. Born in 1992, Nobody Denim is a Melbourne, Australian based denim company. This legacy brand was initially a denim laundry which gives a denim its ‘distress look’ and ultimately its price value. In mid 90s the Condilis brothers decided to expand their denim laundry into denim manufacturing. In this blog I unpack the business model of Nobody using the dynamic capabilities perspective to demonstrate how this brand competes in the premium denim market (see Figure). A business model is the architecture of an organization that is enabled by its dynamic capabilities (Wirtz, Pistoia, Ullrich, & Göttel, 2016). According to Teece (2018), a dynamically capable organization will rapidly capture, create, and deliver customer value through sensing, seizing and transforming capabilities.

Sensing a value opportunity: Sensing is inherently involved with scanning the business ecosystem to identify and propose new customer values (Teece, 2011). For Nobody, the sensing activity was about educating customers on the value of ethical manufacturing in the fashion industry. To achieve this Nobody, opened their factories for customers to experience denim making from cut to finish and importantly interact with their garment workers. To assure customers about their brand integrity in fair work practices they also obtained Ethical Supply Chain accreditation. The rationale for this approach according to John was, ‘we are nobody, we don’t make a lot of noise, but those who wear us, do’.

Seizing the value opportunity: The seizing activity involves designing a value chain to satisfy customers and capture value (Teece, 2011). This activity also includes securing access to capital and the necessary human resources. Similarly, for Nobody, the seizing activity involved building competency in eco-centric denim production in Australia. For this, Nobody invested in ‘cut and sew operations’, ‘trained workers’ and ‘innovative techniques’ that consume less water during denim washing. To minimize their carbon footprint, Nobody also emphasized a shorter supply chain — their head office, factory, laundry, and retail store are all within a 6-km radius in Melbourne.

Transforming the value opportunity: Transforming capabilities involves shifting firm emphases to radical new opportunities. This activity is also needed periodically to soften rigidities developed over time from standard operating procedures (Teece, 2011). For Nobody Denim, the transformation process took place during the COVID-19 pandemic when the global fashion industry faced a massive drop in sales (Walk Free Foundation, 2020). However, Nobody survived the pandemic by capitalizing on their worker capabilities in stitching, sewing, and designing to make medical protective clothing for health care workers. This transition is not a short-term fix but a long-term strategy for Nobody. According to John, the pandemic has exposed the fragility of Australian supply chains and our heavy reliance on other countries for medical supplies. As part of the solution, Nobody invested in infrastructure that will enable it to make up to four million masks, 300,000 gowns, and 170,000 scrubs per year.

• Thus, the key takeaways from Nobody’s business model is how this brand kept customers and their workers central to all their value creation activities. Second, how Nobody built consumer trust by caring for their workers, paying fair wages and being transparent about their production process. Nobody also entices customers with lifetime free repair on their denim. 
• Value added: For readers of this blog, John shares some great advice on the perfect way to wash your jeans, “All jeans should be washed as little as possible, turned inside out and washed on a cold cycle and line dried for the longest life. No dryers please!”

                                      Figure - The Business Model of Nobody Denim

VP: What is offered to customers? Sensing opportunities in ethical supply chains that are of value to customers.

VC: How is the value proposition created? Building eco-centric capabilities to seize new customers, business clients and resources

RM: How is revenue created? Using worker capabilities to transform the revenue to a changing environment.

* Dr. Kanika Meshram is a Lecturer in Management and Marketing at the University of Melbourne. She may be reached at kanika.meshram@unimelb.edu.au. This blog is based on the author’s forthcoming paper and interview with John Condillis from Nobody Denim for their research project on modern slavery in fashion industry.

Key Reference:  Meshram, K., Bhakoo, V. & Bove, L. (forthcoming) Building and Sustaining an Anti-Slavery Business Model: A Tale of Two Fashion Brands. Journal of Strategic Marketing.

Additional References

Ethical Fashion Report. (2019). The Truth Behind the Barcode. Retrieved from https://baptistworldaid.org.au/resources/2019-ethical-fashion-report/

Teece, D. J. (2011). Dynamic capabilities: A guide for managers. Ivey Business Journal, 75(2), 29-32.

Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), 40-49.

Walk Free Foundation. (2020). Protecting People in a Pandemic: Urgent collaboration is needed to protect vulnerable workers and prevent exploitation. Retrieved from https://cdn.minderoo.org/content/uploads/2020/04/30211819/Walk-Free-Foundation-COVID-19-Report.pdf

Wirtz, B. W., Pistoia, A., Ullrich, S., & Göttel, V. (2016). Business models: Origin, development and future research perspectives. Long Range Planning, 49(1), 36-54.

 

 

The 7 Foundational Characteristics of Customer Value by Sara Leroi-Werelds * [30]

 

“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” Sam Walton, founder of Walmart

This quote nicely shows the link between value for the customer and value for the firm. Put simply, if there is no value for the customer, there is no value for the firm. For this reason, customer value has been recognized as one of the most fundamental concepts in marketing. Based on recent work (Leroi-Werelds 2019), we can discern seven key characteristics of customer value:

1. Customer value implies an interaction between a subject and an object

Customer value involves a customer (i.e. the subject) interacting with an object. The object can be a product, a service, a technology, an activity, a store, …

2. Customer value involves a trade-off between the benefits and costs of an object

One of the most often cited definitions of customer value is the one offered by Zeithaml (1988, p. 14) defining it as “the consumer’s overall assessment of the utility of a product based on perceptions of what is received and what is given.” This means that customer value involves a cost-benefit analysis made by the customer. The benefits are the positive consequences of using a product, encountering a service, visiting a store, using a technology, performing an activity, … The costs are the negative consequences.

3. Customer value is not inherent in an object, but in the customer’s experiences derived from the object

Customer value is experiential and is thus not embedded in the object. This is in line with the notion of ‘value-in-use’: “value is not created and delivered by the supplier but emerges during usage in the customer’s process of value creation” (Grönroos and Ravald 2011, p. 8).

4. Customer value is personal since it is subjectively determined by the customer

It is the customer and not the supplier who determines if an object is valuable. This implies that customer value is subjective and personal. Each customer has his/her own value perceptions based on personal characteristics such as knowledge, needs, skills, previous experience and financial resources.

5. Customer value is situation-specific

Customer value depends on the situation and is thus context-specific. For instance, if you are in a hurry, the efficiency of a store visit will be more valuable than when you are ‘fun shopping’.

6. Customer value is multi-dimensional

Considerable agreement exists on the multi-dimensional nature of customer value given that the concept is too complex to be conceptualized and operationalized in a one-dimensional way. Hence, customer value consists of multiple value types. A recent update on customer value (Leroi-Werelds 2019) proposed 24 potential value types (see below). However, it is important to note that not all value types are relevant for each object.

BENEFITS +	COSTS -
Convenience	Price
Excellence	Time
Status	Effort
Self-esteem	Privacy risk
Enjoyment	Security risk
Aesthetics	Performance risk
Escapism	Financial risk
Personalization	Physical risk
Control	Ecological costs
Novelty	Societal costs
Relational benefits
Social benefits
Ecological benefits
Societal benefits

 

7. Customer value is created by the customer by means of resource integration

By means of resource integration, the customer transforms the potential value of the object into real value. The customer thus integrates the resources provided by the firm (e.g. products, services, information) with other resources and skills to create real value. For instance, the value of a car is created by the customer when he/she integrates and combines this car with other resources (such as fuel, public roads, car insurance, maintenance/repair service), but also his/her own driving skills. Without these other resources and the needed skills, the customer cannot create value.

References 

Key Reading: Leroi-Werelds, S. (2019), "An Update on Customer Value: State of the Art, Revised Typology, and Research Agenda," Journal of Service Management, Vol. 30, No. 5, 650-680.

Gronroos, C. and Ravald, A. (2011), "Service as Business Logic: Implications for Value Creation and Marketing," Journal of Service Management, Vol. 22, No. 1, 5-22.

Zeithaml, Z. (1988), "Consumer Perceptions of  Price, Quality, and Value:  A Means-End Model and Synthesis of Evidence, Journal of Marketing, Vol. 52, July, 2-22.

* Dr. Sara Leroi-Werelds is an Assistant Professor of Marketing at Hasselt University, Belgium. She may be reached at sara.leroiwerelds@uhasselt.be