Articles

Do you create value for your customers?

Written by Catharina Stackelberg, Marketing Clinic Group CEO

In my experience this is one of the most difficult questions for most executives.  To be able to answer this question you need to truly understand the needs and the motives of your customers and end users, and know how well your offering matches these needs.   

To find out how well companies create value I usually use the following support questions:
1.     Is your business growing? if yes WHY?
2.     Do you have high customer loyalty/retention?
3.     Is your company/brand different and better than other alternatives?
4.     Do your customers/consumers pay a premium for your brand?
5.     Do you have dealer leverage?
6.     Ultimately; how valuable are your intangible assets? How is your stock performing?
A customer or consumer centric business model is by far the biggest growth opportunity for most companies.  Surprisingly, this topic is very seldom the key agenda point for management team meetings or for board meetings.

But why is value creation so important today? One of the reasons is that the competitive environment is changing both for B2B and B2C companies. It is no longer enough to offer a range of products to the customers!
B2B companies are facing increasing competition from players in low cost countries, who are copying the physical products and selling them at a significantly lower price.
You need to make some strategic choices 1) you compete with the Chinese on price, if you have a cost structure to support it; which you most likely don’t 2) or you figure out how you can create value beyond your product and the price!

In most cases value is created by offering, in addition to the products, relevant services and expertise.  Selling services and/or solutions calls for a major sales force transformation. Products are usually sold to the procurement guys, whereas selling solutions requires multiple touch points within the customer’s value chain.
The situation is not much different for B2C companies. You need to determine your competitive strategy.  You cannot any more offer me-too products at mid-range prices.  You either create value to your consumers or you compete with commodity products on price.  The consumers have a multitude of options and are only willing to pay for perceived value.

When pursuing a premium brand strategy the brand promise needs to be highly relevant for the target group and the company needs to be able to communicate and demonstrate the added value to consumers in all touch points. In a low cost strategy, on the other hand, the added value to consumers is the low price! This means that the cost structure needs to be as lean as possible to make business sense; ie you have to cut media spending, limit product/packaging development, limit the number of SKUs and streamline production and logistics.
It’s time to wake up and redefine how you are going to win in the market going forward!

Catharina Stackelberg