Some years ago, I was consulting with a major U.S. foodservice distribution client, helping them build more value into the products and services they offered customers, determining what operational and relationship impediments might be keeping that from happening, and identifying what steps and initiatives to apply. The client had three actively communicated ‘pillars’ of customer value delivery, which they believed differentiated them from competitors.
Without getting into the details of these value elements my client held so sacred, much of what they were doing involved little more than providing the basics of service and marketing:
– Accuracy of orders – getting the right items
– Completeness of orders – fill rate
– Driver friendliness and courtesy
– Driver helpfulness and cooperation
– Stock placement within store
– Delivery timeliness
– Communication when delivery problems occur
– Responsiveness to special requests
– Product quality
– Responsiveness when problems occur
– Timely credits processing
– Ease of placing orders
– Pricing competitiveness
There’s a bit more, but you get the idea of what was included in their understanding of the customer experience. The client’s view of delivered value was largely tangible and functional, with relatively little that was individualized, emotional, and relationship-based.
When qualitative and quantitative performance research was conducted among their customers (who were fast food franchise owners and store managers), however, the central theme of our learning was that virtually everything the company had been providing and doing was perceived as a commodity, and that the need for more advantageous pricing had become the principal front-and-center issue. Further, it was determined that the areas of service, even when performed at a high level, that management believed offered a competitive advantage all but vanished when accomplished with anything less than perfection.
Customers can almost always locate cheaper products or services. They may also be able to find better quality, or more innovation. Service, even at the most efficient level, is difficult to make a game-changer. What they want, however, is higher personal perceived value. And, where value is concerned, ‘good enough’ is rarely, if ever, good enough. Today, customers have many methods, including showrooming, for finding what they want. Ultimately, they will invest a greater share of their purchase dollars with suppliers who deliver superior value. Competing on price, or any other single dimension, may pull away customers from other suppliers in the short run, but it will be difficult to keep them for long. One dimension is usually not a sufficient ‘barrier to exit’, and is more often an invitation to churn.
What to do? Well, brand the overall customer experience by decommoditizing, to start. And, make that experience unique and relevant. Build relationships through more frequent and relevant communication. In addition, begin to include company employees as a component of future experience research – what we call ‘mirroring’, as we did with our client – so they can see where they think elements of value delivery are more or less important, and performed better and less well, relative to customers themselves. We’ve found this to be a terrific internal training aid. Do all this, and more, and you’ll see customers respond in a positive way.
In the case of my client, we focused on becoming more proactive, with more relevant and value-based communication between the distribution centers, franchise owners, and store managers. We recommended hands-on software training, so that store managers would find it easier to place online orders. We recommended annual business reviews between the distributors and franchisees, further communicating review results to store managers.. And, while the company had a regularly published newsletter for store managers and franchisees, we recommended more stories on new products and services, articles of benefit to readers (such as time management), and industry information.
Value was now perceived by each customer in the amount of individual, personalized benefit and attention they were seeing. At the end of the day, personalization and proaction in the relationship prevailed; and the pressure on pricing was reduced to such an extent that our client was able to raise prices, with very little customer turnover. Profits dramatically increased.
Jeff Immelt, Chairman and CEO of GE, has been quoted on the dangers of commoditization, saying: “Constant reinvention is the central necessity at GE. We’re all just a moment away from commodity hell.” The value-eroding challenges inherent in commoditization, and the potential benefits of decommoditization, could not be stated better.