4

VALUE IS IN THE EYE OF THE BEHOLDER

If people believe they share values with a company, they will stay loyal to the brand.

Howard Shultz, Chairman, Starbucks

It goes without saying that in order to achieve steady and predictable growth in sales, revenue and profits for an organization results from consistently delivering value into the marketplace. The challenge, however, is that each customer tends to define value differently. In Chapter 3, we discussed addressing how to influence the perceived value of a product or service through customerization as I like to call it. Although it’s true that the ability to offer customized solutions to customers to satisfy individual desires and needs has become a significant driver in building customer awareness and (ultimately) investment, it isn’t the only consideration.

To determine the perceived value that a product or service can have, we can learn a considerable amount from understanding what successful organizations, those that appear to be virtually unstoppable, do in order to sell their products into a highly competitive marketplace at above average prices. Reflecting on this for a moment, what companies tend to come to mind? I immediately think of Starbucks, selling coffee at a premium that is typically well above that of their competition, while dominating their space in the market. Whether you are a regular patron of Starbucks, or are astounded at their prices and refuse to buy their product, there is no one that I’ve come across who isn’t aware of the Starbucks brand. The question we must ask ourselves is why does a segment of the global market prefer a cup of coffee from Starbucks when they can simply buy a coffee machine for their home, making a similar cup of coffee within minutes in less time than they would likely spend in the lineup and at a fraction of the price? (You can even buy Starbucks coffee in various forms for use with different coffee brewers.)

This question has been analyzed and debated for years with theories on why consumers continue to patronize Starbucks despite the lack of logic behind their decisions. Some have argued that Starbucks does a great job at marketing (and they do); whereas others have suggested that it’s all about Starbucks unique ability of becoming part of their customer’s habitual routines. Most of the ideas that have surfaced make sense, but when you study Starbucks and Howard Schultz’s¹ take on the business, the most important aspect of why Starbucks has been so successful has been the result of its ability to create a unique and valuable experience for its customers through its employees. Think, for example, about the last time you entered a Starbucks and you’ll recall a few distinctions that set its employees apart from other coffee or fast food retailers.

• Greeters are always friendly and quick to process your order (they recognize that any wait you’ve had while standing in line can be overcome with fast, courteous, and prompt service).
• Servers ask for your first name and handwrite it on your cup (each transaction is personalized from your initial point of contact with an employee until the point when the server calls out your name).
• Chatter and interactions amongst staff (which are in the open) are fun and friendly. It’s rare to see employees behind the counter at a Starbucks not having a good time.
• Smiles are part of the equation. Employees treat customers with the same friendly, warm, and cheerful greeting each and every time, with smiles and a warm welcome despite the varying attitudes of their customers.

When you consider how a company like Starbucks has been able to create these environments amongst their locations globally, two things become apparent. First, these nuances are a key to Starbucks creating a warm and inviting atmosphere for its clientele; they add significant value in a market segment that is typically more focused on the speed of transactions versus creating an efficient yet inviting atmosphere. Second, Starbucks has created a culture of “customer first.” It is intentional, and it breeds from more than just customer-focused training or great pay and benefits (the default ideas that many leaders have when considering how they might build a strong customer-centric environment). There’s something much deeper and more complex at play.

What Starbucks has done is recognize that customers will actually pay more and remain loyal if their perception of the value of their experience equates to the investment they are making. Starbucks realizes that in order to charge up to double what their competition is charging for a similar product (coffee), they have to provide an experience that is more valuable to the end customer than their competition does.

Some of Starbucks’ competition, organizations such as McDonald’s for example, have built their reputation and appeal for their customers based on the realization that to attract and maintain their ideal customer in an uber-competitive fast food market (which in some instances includes competing with Starbucks!), they must consistently ensure a quick, convenient, and error-free experience where customers can place and receive their orders. McDonald’s consistently satisfies this pursuit by training all employees on providing an exceptional customer experience, in conjunction with providing a wide variety of options for their customers, allowing them to pick and choose not only what is ordered but how it’s ordered. For example, you’ll recall I mentioned in the last chapter a reference to McDonald’s adding self-serving kiosks allowing customers another option in addition to a personalized ordering experience with someone behind the counter. Although the kiosk itself allows McDonald’s to reduce the number of people serving customers behind the counter, in recognizing their competition (like Starbucks) is having significant success in creating a strong customer following by focusing on a positive experience, McDonald’s is retraining and deploying their employees into the dining areas of their restaurants. For an organization to satisfy evolving customer desires and needs, the focus on adding value is a never-ending pursuit and one that hinges on the employees’ ability to both understand and consistently deliver what customers value.

We can also look at Harley Davidson, which has recognized that in order to sell motorcycles for significantly higher prices than the closest competitors, the overall customer experience when entering a store, regardless of its location around the world, must equate in the customer’s mind to the value of the investment made. It is rare to find anything cheap in a Harley Davidson store (I was recently told by a friend that HD actually stands for “Hundred Dollars,” which is what I seem to spend every time I enter a store!). Similar to McDonald’s, Harley offers a branded product (produced by others, but with ensured high quality and branded as Harley Davidson demonstrating such), providing value by ensuring their customers can customize their experience with a set number of available options. When I bought a Harley Davidson Street Glide a year ago, I was amazed at all of the ways in which I could customize the bike to my liking, from the exhaust to the handlebars and seat. The options are literally endless, which Harley has recognized and capitalized on, hinged on well-trained and educated staff that is always friendly and willing to service customers. Harley Davidson lives and breathes “customerization” with all of its products, and does so by ensuring its employees understand what customers value, and more importantly, how their customers can add value.

In each of these examples, it’s the combination of a perception of customization in conjunction with the customer’s experience with the product or service that demonstrates value. The question that remains after reflecting on these examples is how exactly do these companies assess, identify, and deliver value for their customers?

Providing Value: Why You’ll Need Glasses

Inevitably, when I bring up conglomerates like McDonald’s or Starbucks, most of the CEOs or executives I meet have a difficult time relating. With the longevity of each of these global brands, the global footprint they possess, and the resulting cash they pump out day in and day out, it’s difficult to relate to or even contemplate exactly how to mimic their success. What I often suggest is that rather than consider the companies in their current state, consider how they came to be and the journey they took that ultimately brought them to their current level of success. I recently watched the movie The Founder, where Michael Keaton played the role of Ray Croc, the founder of the McDonald’s Corporation and the person responsible for building the McDonald’s franchise.² In the movie, the story depicts Croc as a traveling salesman who stumbles across two men who had developed a system for producing high quality food consistently and quickly during a time when restaurants and drive-thrus weren’t fast and orders were consistently incorrect. Early on, the movie depicts the McDonald brothers spending literally hours with their employees, training them, and running through routines that mimicked the cooking and serving environments, all while having some laughs and fun in the process. The model the brothers created, and more importantly, how they involved their employees in understanding and adopting that model, was ultimately the key to their initial success and remains a standard for fast food production and serving today. The originators of this concept, Richard and Maurice McDonald³, identified, honed, and tested their theory with their employees, building not only a level of commitment to the process for the employees, but also ensuring buy-in to the process by involving employees early on, before they were ever in the restaurant itself. Employees were clear on what they were there to achieve, and more importantly, how their specific role added value to their customers.

There are some deep lessons that can be taken from this approach the McDonald brothers took, most notably:

1. Creating a competitive advantage begins with understanding what your customers’ true needs are, recognizing what they value, and knowing how that value can be delivered.
2. Moving from concept to realization in an organization requires a combination of process and people, initially defined and then honed and improved.
3. Commitment to the customer is achieved when employees participate in and take ownership in the process they use. Being told strictly what to do, with no context for why, has little staying power.
4. Providing a value-first approach to customers requires involving leadership in the process, working side by side and hand in hand with their teams.
5. Selection of team members with a focus on building camaraderie is the key to building a consistently valuable product or service.

You might be wondering why we don’t see more organizations with the explosive growth and staying power of these global brands. After all, building a team of employees who clearly understand what customers value, and how their role contributes to providing this value, seems like a simple task, right? If only it were that simple. Before we answer this question, let’s first be clear about something. Value has an extremely broad definition, and every person values something different. This creates a problem in understanding what your customers might value because it varies by customer and is based on their personal preferences and circumstances. For example, what I value in a restaurant can differ depending on a variety of factors. If I’m in a rush, then I place greater value on speed and quality of the order than I might on taste. If I’m taking my wife out for dinner, I place greater value on the environment and experience than I do on speed of the order.

To put it mildly, defining value for your customers can seem quite difficult, but you need to find ways to remain in direct contact with them to ascertain the range of value they place on the service or product you provide. For example, refer back to my point earlier in this chapter. Who in your organization interacts with your customers both directly and indirectly? Your employees do, of course. What would happen if you were to provide them with a brief script of questions that would allow both you and your people to maintain a pulse on feedback from customers by consistently asking a brief series of questions, collecting that feedback, and responding with changes or improvements? Not only will value become more apparent to your employees, but also any changes in response to evolving value for your customers may be timelier!

Let me share an example of how this can work and break down a simple approach you can use to understand what your customers value. A few years ago, I spent some time with an organization helping them to assess and define what their customers value. The process involved several customer interviews and focus groups. Armed with this information, I then worked with teams from across the organization to help them understand and connect with:

1. What influence they had, both real and perceived, on providing value to the customer.
2. How they might further increase their value on a consistent basis and the influences this would have on the customer, the organization, and their role.
3. What changes they could make in the organization that would influence the value of both existing and potential customers.

For a downloadable PDF of this exercise, make sure you visit www.unstoppableorganization.com to complete this exercise with your customers.

To demonstrate how we did this, here is an example. In the instance above, the organization had an accounting department that consisted of an accounts receivable clerk and an accounts payable clerk. When we began discussing how their roles added value to their customers, they were unable to provide any definitive answers. However, as we explored the different ways they interacted with the customer, value opportunities began to surface. The accounts receivable clerk consistently contacted customers who were past due on their accounts by e-mail. The clerk, upon recognizing that this interaction was an opportunity to understand what customers valued, realized that phone calls followed up by e-mails were likely a more powerful way to connect. In addition, she identified three questions that were key to consistently defining value in the eyes of these customers who, although past due on their accounts, were generally still good, longstanding clients. The questions were contained in a script as follows.

Initial Script:

“Hello Mrs. Customer, I wanted to give you a call as I recently noticed invoice 123 was 60 days past due. I wasn’t sure if you were aware, but for your convenience we not only accept check, but we can also a accept credit card if that’s more convenient for you.”

Second Script (following first, regardless of response):

“While I have you on the phone, I was hoping to ask how your experience was with our product/service. Was it everything you expected it to be?”

If yes: “Great, I was curious, would you be willing to provide me with a brief testimonial based on your experience with the product/service?”

If no: “I’m sorry to hear that, how can I help?”

To provide you with some further context behind this script, the company struggled with outstanding accounts, but had never offered alternate sources for payment other than checks. In a day and age where credit cards and (more recently) EFT transactions have become the norm, offering alternate payment options only made sense. Upon introduction, the initial script and response from customers led to more than 40 percent reduction in outstanding payments beyond 30 days.

In regards to the second script, we considered the call and subsequent e-mail a customer touch point, meaning that we had an opportunity to create a personalized interaction with a customer. If done correctly, we could learn more about how valuable, or not, the organization’s product/service was.

When you consider that virtually every employee in your organization today interacts with customers both directly and indirectly, the idea of assessing and adding value becomes much more realistic. This is the very realization that organizations such as Starbucks, McDonald’s, and Harley Davidson had from the start. Every interaction has the opportunity to add value, if only for the employee’s recognition and ability to do so.

Once you realize the opportunities that exist throughout your organization to add value to your customers, the minimal cost to do so, and the significant influence this approach can have, a flood of ideas and opportunities will come to light. However, this is not the ultimate benefit of integrating your employees as part of the value equation. It’s in the competitive advantage this approach provides, building strong employee-customer connections that yield higher levels of customer loyalty, thus allowing you the opportunity to charge a premium for your product or service.

I realize this might seem like a tall order considering all we’ve done is helped employees connect their roles with adding value to your customers. However, when you consider that the higher value your customers receive (the measure of “higher” being value that exceeds what customers experience with your competition) equates to an ability for your organization to charge higher prices, then the real benefit of this approach starts to take effect. Take a moment to return to the examples earlier in the chapter. Starbucks charges more for coffee than their most direct competition, as does Harley Davidson and McDonald’s. Higher value equates to higher prices, and that is the return that supports the consistent growth of revenue for an unstoppable organization.

To understand how to specifically assess what it is your customers value today, you need to consider the five aspects of value, which we will do in the next section.

The Five Aspects of Value for Today’s Customers

As we’ve discussed thus far, your customer invests their money and resources based on a product or service, creating for them a perception that it satisfies their desired need. Needs vary by customer, and so do values. What someone values today in the purchase of a new car may be very different in a few years when his or her life circumstances have changed. What a customer values today in clothing may be very different in a few weeks when they learn of a move to a different climate or experience a change in their body weight.

To simplify the complexity of value, we need to consider the five aspects of customer value, the degree to which and priority of such varies with each customer and each individual transaction. What’s important to mention is that these aspects can and have changed through time as a result of our evolution. Our value on “time,” for example, is considerably different in today’s generation than it was 20 years ago, as is the value we place on price.

The following are the five key areas in which today’s customers assess value.

Social Proof

The continued emergence and growth in popularity of social media and the Internet has resulted in a broader willingness to use social proof and acceptance. Where a decision to buy a car was once solely based on your relationship with a dealer and the feedback from a few close friends, today that same decision can be influenced by what your 200-plus friends (some of whom you’ve never met or haven’t seen in person in years) on Facebook have to say; the feedback from a few blogs of car fanatics who post reviews; and reviews posted on sites such as Google and Bing that tell you what others, often complete strangers, have to say about the car or the dealership.

Ease of Use

As time has become more of a perceivable scarce resource for North Americans, the need and desire for products and services that are simple to use, further simplify our lives, and in essence “give back time,” has become in greater demand. Apple is a company that has built a reputation (and a global brand) on the concept that simplicity and convenience are the cornerstones of their products. In reality, with more apps consuming more time, this might not be the case. Regardless, simplicity and ease of use is something that customers today seek out.

Responsiveness

When Dave Carroll wrote the song “United Breaks Guitars” back in 2008, it was out of sheer frustration with the lack of response and support he received from United when they damaged his guitar during a flight.⁴ United’s response, unfortunately, came after the damage to their reputation was already done (the YouTube video Dave created now has more than 14 million views). Responsiveness also creates a sense of importance for customers of today, who have a greater expectation for customization to satisfy personal preferences.

Life Integration

With a greater demand for customization and more value placed on simplicity and time, the customers of today want products that help them integrate their life. Notice I didn’t say “make their life better”? Integration is seen as a way to further reduce complexity and make life and all of its challenges and obstacles easier. Apple comes to mind as a company that has focused on the integration of its products; automobiles today are equipped with various apps to allow drivers to carry on conversations on their phones, hands free; and grocery stores have integrated a broader array of products, including clothing and pharmaceuticals in an effort to create a “one-stop-shop” experience for customers. The more effectively a product or service integrates for a customer, the more value they place on it.

Technological Intrigue

Now I’ll admit that this may not seem as obvious as the previous aspects of value, but when you consider the pace at which technology has evolved, more and more people are willing to pay for technology (some are even obsessed with it). I’d suggest that autonomous cars, although still not fully integrated, will drive interest (pardon the pun) more because of the curiosity the general public has on how the technology works, than on the idea of a car driving itself. The benefits are huge, but how the technology works and being “the first to try it” has greater influence on value today than ever before.

You will have noticed that I left out the most historically recognized value contributors such as price or quality, and there’s a reason for this. These factors, which were once highly valued by customers, and to some degree still are, have become expected norms. That is, we expect quality to be acceptable as part of the product or service, and we expect the price to be competitive. If they are not, we revert to using avenues such as social proof to determine if the price or quality is realistic. We only need to reflect back on our discussion of Harley Davidson as an example of this. Not only are Harleys expensive, but so are their parts! Trust me on this. When deciding to add a backrest to bring my wife along on trips, I quickly realized that just a backrest alone would be shy of $300 (hopefully she isn’t reading this). When I asked others about the expense, they validated that yes it was expensive and yes that was the price, but as a Harley Davidson owner, you pay for the quality you receive (in other words, whining about the price of components and parts amongst a community of Harley owners will fall on deaf ears!). Social proof and life integration determined that the expense was justified!

Understanding how customers today assess value is critical for success as an unstoppable organization. But here we need to return to our earlier point of employees as the key to create, deliver, and offer value. Employees can influence each one of these areas, from social proof to technological intrigue. To do so we need to recognize that employees are in fact a conduit to delivering value.

Employees: The Value Conduit

As customers have become more informed and prolific in their desire to gain feedback through other sources prior to making decisions, they have also evolved in how they define what value is when it comes to making an investment. Increasing sensitivity to what a brand and an organization represent, product or service origins and benefits, as well as social influence have added to the already existent criteria of price, quality, and availability. As the definition of value continues to evolve, it might seem that meeting a customer’s needs is almost impossible. If you are thinking this might actually be the case for your organization, then you’d be wrong. In every organization, there is what I call the “value conduit,” a connection that exists between employees of the organization and their customers, both directly and indirectly, that ultimately influence the customers’ perception of whether they are receiving value or not. Most importantly, the value conduit can override the actual value obtained from a product or service regardless of the quality, price, or availability of the product (historically accepted measurable means of value). This further supports the influence of more modern attributes of value that we discussed earlier, such as brand representation and social influence.

The value conduit is your employees, and the phases of the conduit are outlined in the following figure.

The five stages of value that a customer will progress through are influenced directly and indirectly by employees. Your employees have the single-handed ability to make or break a customer’s perception of the value your company provides. The stages are outlined as follows:

Stage 1: Image. This is the stage at which customers perceive your product/service from a distance, such as when they hear things about your company, its employees, brand, products, community involvement, and so on. During the image stage, customers assess impressions of the value of your organization and its products or services, and determine whether further consideration makes sense. If it does, they transition to stage 2.

Stage 2: Perception. This is the stage at which customers begin to research and observe your organization and its products and services. This might include listening to stories from their friends or coworkers on their experiences, or checking out customer feedback online or through social media. If they like what they see, they next transition to stage 3.

Stage 3: Experience. Once the customer decides to try your product or service, they will make initial contact. Based on this contact, the customer will assess their initial experience to determine the extent to which it aligns with their perceptions.

Stage 4: Expectation. If the customer is satisfied with their initial experience, they will invest in your product or service (to varying degrees, depending on the strength of response in the previous stages and the extent to which their need will be met) and will immediately determine if the experience satisfies their expectations.

Stage 5: Satisfaction. If the customer’s expectations have been met, they will continue to invest in your organization’s products or services, and will do so as long as the experience satisfies their initial expectations.

Quite often in considering these stages, CEOs, executives, and leaders consider stage 5 as the point at which they need to engage their people, ensuring that expectations are continually met. As you can see, this is only one-fifth of the entire equation and we are bringing employees in too late to ensure they understand what customers value, and more importantly, how they can deliver this value. Let me share with you an example.

About two years ago we were considering moving our Internet and television service to a new provider. The organization had been around for decades and appeared (through advertisements) to offer premium services that aligned with our needs (stage 1). With this initial idea in our minds, my wife and I began to ask others who used the same provider about their experiences. We also began paying closer attention to the flyers that frequented our doorstep (stage 2). Eventually, we decided to contact the provider to inquire about specific pricing and services for our situation, engaging in an online chat (stage 3). The experience of the online chat seemed to align with our perceptions, and as a result, I called the provider to inquire about purchasing their services. This is where the wagon began to chart off-course. The final price on the phone was slightly higher than the quoted price online, and the agent who took my call didn’t seem concerned with determining why this was or matching the price (this is a weak entry into stage 4). My wife and I, somewhat skeptical, decided to proceed with the investment as we had waited long enough, and arranged an installation of the service provider’s equipment at our home. The installation went as expected, although the installer seemed to be having a bad day, grunting when we asked a question and leaving scraps of wire and remnants of connectors everywhere he went. At this point, having been through similar experiences with other providers, we accepted the weaknesses as an “industry-wide” issue, rather than isolated to this specific company. Our expectations therefore were met, though not entirely. At this point, we were now on high alert (never entering stage 5).

A few weeks later, we decided to purchase another controller in order to install a second television, and I called the company again. I was shocked to learn that my initial pricing had been considered “promotional,” and as a result, any further equipment purchases were about three times my initial cost. Frustrated, I pleaded my case to the agent on the phone. They didn’t seem the slight bit concerned. After speaking to my wife, I called the agent back and cancelled the service, deciding instead to move to our second option for a service provider.

I share this example not only to demonstrate the phases, but also to point out something that might not be so obvious. Regardless of your product or service, one thing stands commonly between all five of these stages of the value conduit: your employees. At each and every level, customers, both existing and potential, are assessing your products or services with and through your employees, be they in sales, customer service, production, or otherwise. A poor quality product that is produced at a manufacturing facility will influence your customer’s perception of quality, and is indirectly influenced by your employees—some might argue it’s directly influenced.

My point is simple. Organizations that are unstoppable recognize the influence their people have on the value customers perceive and receive of their products and services. The question, then, isn’t whether your employees influence your customer’s perceptions of value, but to what degrees and in what ways. Once you define this, you are at a significant competitive advantage to position your people to escalate and sustain high levels of value that your customers simply aren’t getting anywhere else.