Are you ready to let your customers define value?
Lean Thinking specifies that your customer defines value. But how do they define value? Back in the eighties Michael Porter said that customer value is considered by many businesses as what buyers are willing to pay for. Today many businesses still consider that this is the only measure of customer value but the world and customers’ expectations have changed dramatically since the 1980’s and today customers place value on different things.
Therefore, your business needs a better way to understand how customers define value. It involves answering two questions that were scripted by Peter Drucker. The questions appear simple but in reality they are challenging as few businesses really know the answers.
- Who are our customers?
- What do they value?
Integrating the answers to these questions into your business is a process. The first part of the process is to segment your customer base. Establish who it is that you are trying to reach. Deciding that your customer every person that interacts with your business is not a good approach because you can’t please everyone. Get specific.
The process starts by examining your industry sector and conducting a competitor analysis. Then you really need to get a clear picture of who your business will serve. Once you have this done you can move on to understanding what the customer values.
But while doing so remember that within you’re your chosen customer segments customers will define value in different ways. Some place value on your technology that creates better products. Others place value on the intangible aspects of what your product does for them so for them or how it makes them feel so you need to create better meanings. Other customers place value on the cost of your product and for them you need to create better delivery.
For each aspect you will need to create a compelling value proposition that will keep your customers coming back to you. For this part of the process you need knowledge. As its customer knowledge that will help you create better customer experience, help you establish why you are relevant for your customers, the specific benefits that the customer wants and why they will buy from you and not your competitors. This means you truly need to know your customer, understand their needs, and listen to them when they tell you what jobs they are trying to get done, why they need your product or service.
Making your job even more difficult is that the same customer can change their definition of value in different contexts and over time redefine value. This is challenging but remember
that gaining customer knowledge is not a one off event and should be considered as an iterative process that you can continuously improve and adjust over time.
Once you have established who your customer is and how they define value the next part of the process is to place this customer knowledge at the centre of your business. Easier said than done because when your business adjusts to this Lean way of thinking everything in your business needs to change. But it’s worth the effort as you will become a customer centred business and your customers will keep coming back for more.
References:
Drucker: The Five Most Important Questions You Will Ever Ask About Your Organization.
Porter: The Competitive Advantage: Creating and Sustaining Superior Performance
Womack and Jones: Lean Thinking: Banish Waste and Create Wealth in Your Corporation