Any clear definition of a business should be accompanied by an understanding of who the customers are in that business.
The next step is to develop an understanding of what global business product characteristics those customers value.
Companies can succeed by studying customer needs (which are not necessarily the same thing as customer wants) and by understanding them better than perhaps even customers do themselves.
Finding new sources of value for customers requires careful market research that should be treated as an ongoing process, since needs and preferences change continuously.
Value can take many forms in the eyes of customers. The following are some of the more common characteristics valued by different groups of customers:
Virtually all customers like a deal. They will be satisfied with the company if they feel it offers them a product or service comparable to the competition’s at a lower price.
A low-cost strategy is one of the two fundamental approaches that can be pursued by managers (the other being product differentiation).
In today’s complex organizations, there are literally scores or points along the value chain where measures can be taken to reduce costs.
There is, of course, also the strategy of predatory pricing in which companies with deeper pockets can afford to slash prices for longer than their smaller rivals.
Paradoxically, there are a small number of markets where the advantage comes from a high price tied to luxury items, designer labels, or what might be termed “snob appeal.”
Companies like BMW or Rolex cater to this type of market, charging a significant premium for their logo on a product.
In such markets the manager’s task is to maintain an aura of exclusivity. This may derive more from the way in which a product or service is marketed, rather than how it is produced.
This is a very broad category that ultimately depends on the specifics of each product. An excellent example of a market driven by features is the cell phone business.
Today’s phones are no longer just gadgets for making calls. They include screens, cameras, and substantial memory, and can be used for Internet access, texting, listening to music, and downloading videos.
In this kind of a business, managers will look for ways of incorporating features that no one else has.
The trick is to ensure that the features are appropriate to the product, that they are useful to customers, and that they work.
The word timeliness should not be taken to imply that getting to market first is always best, as anyone confronted with green bananas at the supermarket will know.
Timeliness really means getting there at exactly the right time. In the grocery business, this means at the peak of freshness.
In the retail electronic business, it means delivering the newest gaming system to customers while interest is keenest and before everyone on the block has it.
In some businesses, customers value having a large selection of items from which to choose. This is especially typical of clothing stores but the same principle extends to many other consumer goods.
Traditionally, managers tried to stock as many items as possible in a store, though this tied up inventory and was expensive.
Amazon has demonstrated how catalogues, on-line shopping and next day delivery provide customers with a range of options that would have been prohibitively expensive in a conventional retail outlet.
Reliability can be interpreted in several ways. One is that the product works exactly as advertised, so a software program will not keep crashing unexpectedly.
For some products, such as batteries, the concept of reliability is interpreted as being long-lasting. And in the case of power tools, the concept really translates into ruggedness or durability.
Another way of interpreting reliability is that the company actually does exactly what it says it will do. For example, rebate programs will be held in contempt by customers if the issuing company does not actually follow through and remit the promised discount.
Finally, reliability can mean a guarantee that something will be available when customers want it. Retailers will initially stock many copies of popular new technology to satisfy initial demand, then decrease their stock as demand falls.
In many industries, the sale is only the beginning of an ongoing relationship between the buyer and seller.
Most computer manufacturers and software developers include a promise of 24/7 technical support along with their products. Car manufacturers bundle regular maintenance visits under warranty along with their vehicles.
The ability of a company to respond to customers can also be a source of value.
Responsiveness can occur long before a sale is made when the customer is still “kicking the tires” or looking for information, and it can extend long after the sale is made and the customer is looking for the resolution of a problem.
In this area, a company’s representatives, whether they are full-time employees or commissioned sales agents in a foreign market, are integral to the creation of customer value.
They should be provided with the tools to enable them to fulfill this role. This might include training, effective sales material, the provision of market intelligence and leads.
In some instances making it easy for customers to find out about or purchase a product is decisive. The growing popularity of ecommerce and the success of companies such as Amazon, testify to the importance of convenience to customers.
Dell computers specialized in delivering its products directly to customers’ homes or offices.
In some cases, even grocery stores are allowing customers to shop and pay online, after which purchases are delivered to their doorstep on the same day.
10. Unrecognized needs
Some industries create new needs about which consumers were completely unaware.
Pharmaceutical companies spend years promoting research into medical conditions (e.g. restless leg syndrome) that had not received any attention. They will fund research studies and help to publish them, after which they will announce that they have products that address the condition.
A similar strategy was pursued in the creation of the Big Bertha golf driver (Callaway Golf), which was larger than previous golf clubs and positioned as a club that would significantly improve the performance of even indifferent golfers. As a result, sales went through the roof.
11. The cool factor
There is a significant category of products that appeal to the teenage and early adult demographic. The source of this appeal may be hard to define but it affects items such as clothes, games, music, movies and gear (technology).
Being cool may be associated with characteristics such as design and immediacy, but a large part of what makes “cool” so appealing is precisely that it is appealing: everybody else wants it.
Managers playing to this attribute have to be skilled at creating the right kind of buzz to imply that everybody wants the item, and therefore, so should you.
Beyond any of the factors described above is the broader consideration of quality.
The concept of quality means more than just free of defects or errors. The word is a bit of a catchall and can be taken to mean many different things.
Indeed, most of the features of the preceding list can be seen as contributing to quality. Many organizations have come to embrace the concept of quality as a source of competitive advantage (e.g. “At Ford, Quality is Job 1”).