Thirty Drivers of Value Perceptions, or Why Customers Love Your Company

3
240 views

Share on LinkedIn

Customers love a company because they perceive value in their interactions with its people, products, and services. As customer experience (CX) professionals, we usually measure this sense of value with the Net Promoter Score®, or NPS®, which is a nominal indication of how likely the customer is to recommend the company to another person, and which correlates with other customer behaviors (such as loyalty.)

So what is it that drives a customer’s value perceptions?

A Value Perceptions Study
A new article in the Harvard Business Review proposes a theoretical model of elements on which a company can distinguish itself, and which are determinant of its value rating (i.e., its NPS®.) The authors derived their model by reviewing past studies they’d conducted, and looking for data and anecdotes to help clarify why a customer would rate a particular company’s value highly (or not.) They came up with thirty concepts, such as “saves time”, “provides hope”, “reduces risk”, and “quality”, on which customer perceptions can be measured on a simple Likert scale. They then did a large (10,000+ subjects) study to validate it, and their findings suggest some useful ideas.

The Thirty Elements of Value. Image credit: MaritzCX
The Thirty Elements of Value. Image credit: MaritzCX

Choose more than one element to target
They found that companies which scored highly (8+ on a scale of 1-10) on four or more of the thirty elements had triple the NPS® and quadruple the revenue growth of companies with only one high score. These highly-rated companies also had twenty times the NPS® of companies with no high scores!

In other words, the more elements on which a company scored highly, the higher their NPS® score was likely to be. The lesson here is to focus your CX improvement efforts on more than one element. Don’t just try to excel at saving customers’ time, or creating a sense of belonging. Rather, you should choose a set of elements to target, and develop a strategy for building customer’s perceptions of how well you do on each one.

Don’t try to target all thirty elements
No company scored well on all

thirty elements. The authors found that even a wildly successful company like Apple scored highly on only eleven elements. They also found that the elements that drive customers’ value perceptions vary by industry. For example, in Auto Insurance, “Quality”, “Reduces Anxiety”, and “Reduces Cost” were the top three determinants of NPS®.

This suggests you should be strategic in your choice of elements on which you focus. Consider those most important in your industry, and those on which you already have a competitive advantage, when you’re deciding where to invest on improving the customer experience.

Make sure Quality is on your short list
Across industries, the authors found that the element of Quality stood out as most determinant of value perceptions. In other words, quality ratings were most strongly correlated to NPS®, regardless of the industry in which the company being rated was competing. As such, when you’re deciding your focal elements, make sure “Quality” is one of them.

Bonus suggestion: Study your success!
If you’re going to pursue improvements on a strategically-selected set of drivers of value perceptions, be sure you measure how you’re doing! Collect ratings over time on all thirty elements from a meaningful number of your customers. You should be able to use statistical analysis to tie your business changes back to improvements in your chosen elements, and in your NPS and revenue growth. You can then draw a direct line between your organizational change initiatives, and improvements in customer’s value perceptions and loyalty.

Maintaining a valuable relationship
Remember that your customers love your company because they value their relationship with it, and that sense of value is driven by the effectiveness with which your company delivers any of the thirty elements from the study under discussion. By strategically developing your CX program around Quality and other elements that are important in your industry, and tracking and analyzing your results, you’ll be able to show your stakeholders the direct relationship between implementation of the program, improvements in customers’ KPS ratings, and accelerated revenue growth.

The article on which this post was based can be found at https://hbr.org/2016/09/the-elements-of-value.

This article originally appeared in the CX Cafe.

3 COMMENTS

  1. Value rating = NPS? Really? IMHO, that’s a bridge way, way too far. NPS is, at best, a “nominal indication” of value. And, the results described are also more an example of correlation than causation. It’s the drivers of customer behavior that need to be identified and understood, not just that companies achieving high ratings on an array of attributes attained high NPS scores.

    Quality is representative of the tangible, functional, and rational components of value; but, every element of quality (completeness, accuracy, timeliness, durability, etc.) also has an emotional base for customers. As for emotions, “hope” is a good example of one that’s positive, and “anxiety” is one that’s negative (though it, through reduction, has been expressed as a positive for purpposes of the study) but there are many more that drive loyalty and advocacy behavior, and there are also multiple negative emotions which undermine the perception of value and behavior

  2. The article was authored by Bain executives, which explains a lot. My disagreements begin the very first sentence of the article, which states “When customers evaluate a product or service, they weigh its perceived value against the asking price.” That automatically makes cost co-equal with all other elements of value, an idea which has been frequently disproven since the 1980’s, when price/value was first postulated. Also questionable is the ‘Elements of Value Pyramid’. Although broken into four categories – functional, emotional, life-changing, and social impact – the 30 components all have subconscious emotional underpinnings, which must be considered if impact on perceived value is to be determined.

  3. Many well-regarded published studies of the relationship between perceptions and behaviors are based on data that’s self-reported by the subjects, and as such are inherently correlational at best. In such studies, to establish a persuasive argument for a causal relationship (or a relationship that’s at least not entirely coincidental) requires a cogent review of the evidence available in the existing body of research. Since the original article isn’t published in a scholarly format with a literature review, references, methodological specifics, and comprehensive reporting of the results, it’s difficult to judge the validity of the nomological net the authors have woven around their Value construct, and the extent to which NPS is an accurate measure of it. However, garden-variety logic suggests the two are likely to be related. (I specifically didn’t say “value = NPS”, for the same reason I wouldn’t say “problem solving capacity = IQ”. The latter measure is simply a logical approximation of the former, as supported by many robust studies containing correlational evidence like that in this study.)

    I’m also relying to a certain extent on the editorial standards maintained by HBR, which I’ve found to be very good over the years. YMMV.

    I’ve re-read your comments regarding Quality a few times, but I’m not entirely certain what you’re driving at. It sounds like you’re saying that customers have perceptions about other aspects of a product or service that drive their value perceptions and advocacy behaviors. That is entirely accurate, and is what’s being stated in the article. The authors merely said that Quality accounted for the most variance in NPS across industries; they didn’t say that other factors weren’t important. To the contrary, they said that having positive perceptions regarding a number of elements was much more important in predicting NPS than just having a positive perception of Quality.

    You’re statement regarding the author’s positions and place of employment is an ad hominem attack, and as such is unpersuasive. You questioned the validity of using cost as an indicator of value in the first sentence…which is the same point the authors make in the rest of the opening paragraphs. Your position that there are ‘subconscious emotional underpinnings’ for the thirty elements in question is logically sound, but not very practical for the intended audience. It’s easy to collect self-reported data on things like perceptions of ‘quality’ for the typical CX practitioner in industry, and to leverage that data for studying other things like NPS. Measuring what’s in the customer’s subconscious, which by definition is below the customer’s perceptual capabilities, is another story.

LEAVE A REPLY

Please enter your comment!
Please enter your name here