What has 2020 taught us about our Customers’ Perception of Value? (And is this important?)
In early 1993 the Harvard Business Review published an article by Michael Treacy and Fred Wiersma on the 3 primary battlegrounds of commercial competition.
Quoting this article:
“Companies that have taken leadership positions in their industries in the last decade typically have done so by narrowing their business focus… on delivering superior customer value in line with one of three value disciplines—operational excellence, customer intimacy, or product leadership.
By operational excellence, we mean providing customers with reliable products or services at competitive prices and delivered with minimal difficulty or inconvenience. Customer intimacy, the second value discipline, means segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches. As a consequence, these companies engender tremendous customer loyalty. And product leadership, the third discipline, means offering customers leading-edge products and services that consistently enhance the customer’s use or application of the product, thereby making rivals’ goods obsolete.”
This article was published over a quarter of a century ago. Clearly, the idea that companies succeed by selling value is not new. What is new is how customers have changed how they define “value”. In the past, customers judged the value of a product or service on the basis of some combination of product factors, customer service and price. Today’s customers, by contrast, have an expanded concept of value that includes convenience of purchase, after-sale service, dependability, and other considerations.
This change has occurred as a result of several factors. First, product differentiation is getting more and more difficult to achieve and to maintain. Product enhancements are becoming less significant and product quality has improved across the board to the point where products are becoming genericized in many consumers’ minds.
Second, the globalization of the supply chain (one of the big drivers of “operational excellence” to drive down price) has failed many companies during the COVID pandemic and (along with the new reality of protectionism and trade wars) we are seeing shelves going empty for lack of inventory.
And COVID has also had a huge negative impact on customer intimacy, for obvious reasons of health security.
We are being shown that customer loyalty can no longer be taken for granted.
For example, we are seeing that consumers are prepared to pay more for factors like convenience, availability and security. High end restaurants are now offering take-out and delivery services. Upstart companies are circumventing grocery stores with home delivery of meal ingredients. And companies like Wayfair and Amazon are circumventing traditional retailers by aggregating products and delivering them to our doors.
Assuming that tomorrow is not going to look like yesterday any time soon, the questions we need to be asking ourselves are:
- What did our clients really value in our products/services in the past?
- Are these factors still valid and relevant?
- How can we adapt/enhance/change them to capitalize on the new marketplace realities?
The answers to these questions are vitally important. The very survival of our companies may be at stake.
About the author: Bruce McAlpine is President of Fulcrum Search Science Inc., a Toronto-based executive search firm solving Mission-Critical hiring challenges throughout North America, and Past President of the Association of Canadian Search, Employment & Staffing Services. He can be reached at firstname.lastname@example.org or 416.779.8505.