I’m surprised how often I come across situations where people I’m working with in an organisation are ambivalent about taking a customer centric approach to what they do - or worse still, dismissive of it. My feeling is that these reactions are because they feel there’s no value in being customer centric so long as they’re earning revenue from customers and cutting costs whilst doing so.
How value works
However, this attitude fails to understand how value works – just because something doesn’t directly show up on the bottom line doesn’t mean it’s not valuable – after all you wouldn’t dismiss the value of the NHS just because it doesn’t earn any real revenue. And just because it’s more complex than the revenue/cost equation doesn’t mean that you shouldn’t seek to understand how it works.
So if we take a less short-sighted approach to the value of customer centricity, the question then is – how should we value it? Well, there’s no great secret – it’s the same as anything else we consider worth having – we just need to talk about, and agree on, what we think is and isn’t valuable about it.
Value is context dependent
But value changes depending on your perspective, and sometimes we’re not even sure what we think should have value – conceptual art for example, or cryptocurrencies? Do they have value – and if they do, is it an intrinsic value, or is value just applied to them?
As Mark Carney pointed out in his recent 2020 Reith lecture, what we do and don’t value has always thrown up a number of paradoxes that seem counter-intuitive. For instance, water (which is an essential of life), has been free for most of history, but diamonds (not essential) have been anything but. And even to this day the Amazon is valued about 120 times less than the company of the same name. So how do we make sense of these contradictions? How should we go about valuing things?
The one common thread that applies throughout any discussion of value, is that the value of something has always been context dependent. That’s why the value of paper money issued by different governments, has varied so widely throughout history.
The dominance of financial value
Nonetheless we have grown used to money, and financial value, as a placeholder for actual value. This dominance of the financial interpretation of value has in turn been hugely influenced by economists and how they have defined value over the last three centuries.
Classical economic theory (from Francois Quesnay, to Adam Smith, David Ricardo and Karl Marx among others), argued that value was essentially productive or extractive – it resided in the value of the inputs it took to create a product. This kind of approach is often referred to as ‘objective value’.
We still see the legacy of that thinking in the Gross Domestic Product (GDP) measure – where the wealth, or value that a nation creates, is equivalent to the amount of ‘product’ created. But this takes no account of things like government services (such as the NHS). Sometimes these are included using some creative accounting, which is why different countries calculate GDP in different ways – meaning that it’s often very hard to compare the growth, or lack of it, across different economies.
Neoclassical economists understood that there was more to economic value than just the objective ‘productive/extractive’ definition. One of the most influential – Alfred Marshall – argued that there was such a thing as ‘supply and demand’ and something called ‘marginal utility’ that determined how much benefit (or utility) someone derived from consuming a product or service, and therefore, how much they were willing to pay for it.
So the idea of ‘subjective value’ was born where consumers decided the price they were prepared to pay for something – and this in turn was reflected in its value. But to paraphrase Oscar Wilde, ‘only the cynic judges something on price rather than value’. So whilst easily quantifiable measures like price (or revenue, and costs) obviously need to be taken into account – they are not the only ways to quantify value.
Other kinds of value
Clearly there are many different and additional realms of value that we can agree on – human, social, cultural, ethical, environmental value, and so on, but the one I want to focus on is the value that we all experience when we receive a service – either as customers, users, patients or citizens – commonly referred to as Customer Experience.
The value of customer experience
And we know that the value we experience from being a customer of a service is more than just the price we pay for it. Think of those occasions when you have spent more on a meal or on a holiday precisely because you felt you got more value from paying a higher price. Conversely think of all those times when you have paid more for a service specifically to avoid a bad experience. So it makes sense therefore, to try to understand what we, as users of a service, want and value from the services we use.
What our needs are of a service, and how we place value on different aspects of it, all depends on the context of our consumption. Organizations need to understand what these are – and the only way that organizations can really start to unpick what their customers value is by being customer centric.
Being customer centric means putting the customer at the heart of everything you do as an organisation. It means understanding what your customers want, what they need, and delivering a customer experience that enables them to meet these needs in the best possible way.
As we’ve already seen, value is more than just the price someone pays for something, and this is just as true for customer centricity, as anything else. So we can say that, yes, customer centric organisations have indeed been shown to earn higher revenues, have lower costs, and more satisfied employees than those that don’t, but they also benefit from all sorts of other outcomes that have value in their own right.
Different elements of customer value
Outcomes such as an increased knowledge and a better understanding of what their customers want. A stronger alignment and culture around meeting the needs of those customers, and more satisfied employees who enjoy delivering services and products to their customers. More improvement and innovation in the way that those needs are met. Greater efficiency achieved and less effort expended in the delivery and consumption of the services and products provided. And because of this, more trust is gained and a better brand perception attained, through the experience the customers have of that organisation.
These – together with revenue and costs – are the dimensions of customer value that we at Livework typically look to impact, improve and measure when we engage in a customer centricity programme with a client. How we go about doing that will be the subject of my next article.