Giving The Customer More Than They Paid For

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We’ve long had the idea that a value proposition has to do with “exceeding customer expectations” or “giving the customer more than they paid for.”  I’ve held that position but am questioning it.

Instead, perhaps the real value proposition is giving the customer exactly what they want/need at a price they are willing to pay for it.  And doing this consistently in every interchange.

I first started thinking about this during one of my ritual visits to Starbucks.  As background, I love Starbucks–the consistency of experience, the speed of service, and an always consistent Grande Dark Roast coffee (with no room for cream).  In total, it’s worth the several dollars I pay for it.  They deliver on the value I expect for those few dollars–nothing more, nothing less.  It’s a great value proposition for me.

Recently, I happened to visit another Starbucks.  It was the same cup of coffee at the same price.  But my experience was very different than in other stores.  The service was slow, the people were flustered, confused–a little impolite.  I experienced the same thing in the same store two days in a row.  On the 3rd and 4th day, I went to a little coffee shop down the street to buy a cup of coffee to go.  What happened is that particular Starbucks outlet was not delivering on the value proposition.  What I was paying for the experience/cup of coffee no longer seemed worth it.

I’ll still visit Starbucks for my daily fix, but I’ll never go to that Starbucks because they failed to deliver what I was paying for.

It seems to me, a winning value proposition is giving the customer exactly what they are paying for in each and every exchange.  Anything more is a waste–it something they don’t care about, consequently don’t value.

What does it mean to be giving the customer exactly what they are willing to pay for?

First, it is understanding what they are willing to pay for, and how much they are willing to pay.  This is actually quite complex, it’s really not about “Are you willing to pay $1M for a solution?”  It’s really the complex interaction between what they value, what they want to achieve, the consequences of doing nothing, their experience in the process, the return they expect, and so forth.  And it’s different for every alternative they consider.

Our value equation is not just the benefits of the solution we deliver for the price we offer, it’s the total experience–do we use their time well, are we delivering ideas and insights that are helpful/meaningful, and important to them–or are we indistinguishable from everyone else?

It could be as simple as determining the value proposition for a meeting.  The customer pays for these meetings/interchanges with their time.  They want their time used well, they may want to learn something, they may want to make progress in a project.  We create value in the meeting by delivering on that expectation.  We sustain that value creation by doing so every time.  The moment we fail, then the customer isn’t getting what they paid for (in this case their time.)

It could be a solution selection the customer makes.  The customer is making a tradeoff on what they expect to receive versus what they are willing to pay for it.  If they aren’t willing to pay for what we are providing (not just the product, but the whole customer experience), then we’ve not understood what they really value.

Secondly, we talk about “adding value.”  Delivering more than the customer is willing to pay for is a waste, both  for the customer and us.  Being a little harsh, these perceived “freebies” devalue our offering.  If I were a customer and you are selling me on all the additional stuff you are providing at the price, I would say, “I don’t need that.  But since you can offer them in your price, please remove them and reduce your price.”  Clearly, we can’t do that with our products, but we should stop talking about that stuff they don’t care about.

Finally, we need to deliver the value we committed and is expected.  All the other things we do are meaningless if we don’t deliver on the total value proposition.  That one Starbuck’s store lost my business (and the business of those I told to avoid it) because they couldn’t deliver on the total value proposition.  It was a great cup of coffee, but everything else was deficient.  I wasn’t paying for a cup of coffee.

If we deliver a product that works, but the experience of using that product,  interacting with the company, or the sheer “hassle factor” is more than the price the customer is willing to pay, then the customer needs to go somewhere else.

In some sense, our value proposition is like a Balance Sheet.  The Assets and Liabilities are always equal.  Understand the complete expectations of your customer.  Deliver on that total value at the price they are willing to pay.  If you can’t, don’t waste your or their time.

Republished with author's permission from original post.

Dave Brock
Dave has spent his career developing high performance organizations. He worked in sales, marketing, and executive management capacities with IBM, Tektronix and Keithley Instruments. His consulting clients include companies in the semiconductor, aerospace, electronics, consumer products, computer, telecommunications, retailing, internet, software, professional and financial services industries.

6 COMMENTS

  1. Many thanks for sharing Dave. In my opinion, I echo many of your sentiments. Customers consider every touch point in the ‘customer journey’ as either a basic (something they take as given) or a ‘wow’ moment (something that exceeds their expectation, or the fairy dust as I call it). Too many businesses focus too much on fairy dust before they have even got the basics right.

    However, whilst it vital to deliver the things that customers take as given consistently well, depending on the situation, it is also necessary to sprinkle fairy dust too. The thing about ‘basics’ is that they are not differentiating – it is the ‘wow’ that differentiates – so not exceeding expectation could be a risk in a competitive environment.

    That being said, so many business could potentially create differentiation by just getting the basics right – especially in industries that require significant improvement!

  2. David, great and meaningful article.
    Customer Value Added measures whether the customer is getting more than what they paid versus competitive offers. Your visit to the second Starbuck was compared by you to the original store.
    Second, based on the benefits you add, we are able to price products properly and get a price for everything we think we are adding. I gave courses on thie in Singapore and Amsterdam recently.

  3. All elements of the experience have both tangible and emotional, or relationship, value. Even the price that you pay for a product or service has strong emotional undertones, and will influence the customer’s memory of the experience. You’ve confirmed this by liking Starbucks, but not THAT Starbucks where you had a poor experience; and, so, price took on more importance in the value proposition.

    In general, the ‘overpromise and overdelivery’ concept of value works here. And, giving the customer more than he/she paid remains a good, differentiating, idea, especially if there is an element of the experience that is unexpected and pleasant (such as the “lagniappe” that customers experience from merchants in Southern Louisiana)

  4. What does it mean to be giving the customer exactly what they are willing to pay for? In a word, boring!

    Granted there are service experiences where I am fine with boring. I go online to Amazon, buy a book and it comes when they tell me it will. And I promptly forget the experience about as fast as eating my morning oatmeal. But, there are service experiences where functional goodness alone is a missed opportunity and a lost chance to touch a life.

    Since customer to service provider interactions typically involve a relationship, let’s examine another relationship most of us know well: a marriage. In fact, marketing guru and Harvard professor Ted Levitt used a marriage (versus a one-night stand) as the best metaphor for exploring how to nurture a long-term relationship with a customer

    So, let’s assume your marriage is made up of doing only what is expected–completing chores correctly and on time, providing the necessities for a comfortable living, and doing properly all your marital responsibilities. How does that sound? Affirmations, generosity, pleasant surprises, and romantic intimacies are all extras…not a part of the “for better or worse” deal you made at the altar. Want to take a bet on how long such a marriage might last?

    Sure, my metaphor is not without holes. But, giving customers exactly (and only) what they expect reflects a view that customer advocacy is unimportant to the bottom line. I do not tweet, review or brag to others about my “meets expectations” experiences. I never mention to anyone that Amazon got it all correct and on time. But, delight me with value-added or value-unique experiences, and I will become a raving extension of your sales department! Let’s don’t plain vanilla customer experiences! Life can be challenging; let’s be the source of spirit, passion and joy not “fulfilled contractual obligations.”

  5. Great discussion here. Perhaps some clarification and a plea for certain literary license.

    1. Ian nailed the intent of this article very well. In general, I sales people do a terrible job of defining what customers value, what that value means to them, then communicating and delivering value. Those that focus on just that are actually more aligned with the customer and will drive better engagement/results based on the focus on what the customer cares about. I agree that in engaging with the customer we have to make that offering/alignment sparkle and create a “Wow factor.”
    2. Too often, we focus more on what we think is value, regardless of what the customer thinks. We continue to emphasize this through the buying cycle, suggesting that as value add and a differentiator, where it is mostly meaningless to the customer. The incessant focus on this is distracting and doesn’t help the customer with what they are trying to achieve. So we actually do the customer and ourselves a disservice. Again, focusing on just what they want and need, perhaps teaching them and getting them to want and need something different is part of what we need to do with the customer, then we and they align around those differentiators–and we deliver it.
    3. I agree/disagree with Gautam. The argument of giving something more as a differentiator is valid when “all things are equal.” In reality all things are never equal and we need to do our best to make sure this is always the case–and what we are delivering is perfectly aligned with what the customer wants to do. In some sense, we are really saying the same thing, but as a sales person, I never want to be positioned such that the differentiator is what we give extra. The easiest way to negate that is discounting, which too many are willing to do too quickly. So I want to create a difference where we are so aligned/focused on the precise things the customer values and delivering on that–and no one else is close. (I recognize this is far easier said than done.)
    4. The “overdelivery” on the emotional attachment to the solution is very good and powerful. Love that concept, thanks for sharing it Michael.
    5. My wife would be delighted if I just delivered to my commitments, promises, claims. Unfortunately, more often I fall short and my smile, good looks, dinner out bribe (I mean value add) become meaningless over time. Too often, we fall into the same situation with customers. It’s remarkable to sit down with a customer who is excited saying, “You delivered just what we wanted and just what you said you would deliver.” They get excited because so few deliver on that basic commitment, so it is far from boring. And the references, conversations, testimonials to that are very powerful.
    6. Too some degree we underestimate the sophistication of the buyers and that they too often see through the smoke screen of “value add.” I recently sat in a meeting as an advisor to the buying team. It was a $50+ million deal. The sales team spent all their time talking about all the “other things, capabilities” they offered as part of the business, never quite convincing the customer they could deliver on the basic things the customer wanted to. The customer kept trying to refocus the team on the customer problem and what they valued, but the team focused on value add (I suspect because they had no good answers to the basic things the customer needed). Finally, out of frustration, the top executive said, “We don’t need that stuff. Since I assume there are resources and costs to delivering that stuff, I assume they are embedded in your pricing. Please remove them, focus on our needs and tell us what the price will be for delivering on those. The team could not respond.
    7. There is an implicit and explicit cost to every commitment we make in our proposals and our pricing has to cover those. The degree we offer them as “freebies,” they become baked into our customers expectations, they become entitlements, and lose their value, slowly eroding our margins, or upping the ante on the more value add we have to provide.

    Thanks for the great discussion.

  6. Very insightful article Dave, with a nice personal spin as well. No doubt understanding and consistently delivering on the expectations of the customer is key to value creation. In a video interview we did with him Bose CIO Rob Ramrath talked about how, in an age of connected products, IT teams are evolving to support CX. You might find it interesting: http://ow.ly/WB1jH

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