Creating value for the customer


Creating value for the customer

“Value is created when a customer uses the acquired product or service,” says Professor Kaj Storbacka, Hanken School of Economics. “In other words, use-value instead of exchange-value.”

According to Storbacka, when talking about managing customer relations, we should understand how our customers produce value for their own customers. This is called ‘customer insight’. “Although successful communication between people in a business relationship is important, I would not emphasize this. The understanding of a customer’s business is of even greater importance, meaning that we know our customer’s business drivers, their business concerns.” A customer relationship is a cross-functional process In understanding our customer, we should see all the various meetings on different levels between our two companies as encounters in a process; the customer’s process and our own process. “It’s critical to note that a customer relationship is a relational process stretching over time. If you want to manage a customer relationship, you need an extended period of time. There are various issues that contradict this statement, but you need to have enough time to develop the customer relationship, and over a longer period you will be able to create value for your customer,” says Storbacka. Storbacka believes that the biggest challenge in managing a customer relationship lies in the fact that it’s a cross-functional process. Information must be exchanged between people in various positions and roles on both sides, and they are all part of the process, the customer relationship. But how do we manage to get the information flowing within our own company? “We start thinking differently,” Storbacka explains. “Instead of having various functions, such as a sales function, product development function and so on, we start thinking of these as processes. In a process, many people can have a role, even if they are not directly involved. For example, in the process of selling to a customer, various people in your company exchange information among themselves as well as with representatives of the customer, and so they have a role in the sales process.” The meaning of an organization as a specific order of functions loses its meaning in this way of thinking. Actions become a process, although the organization as such is kept intact in the sense that managers and their teams remain as before. Discussions between people on the distribution of work are frequent and ongoing. “Three things must be in order to truly develop a customer relationship: customer insight, a long time span, and the cross-functional aspect,” adds Storbacka. Enabling customers to succeed If you are serious about taking customer relationships to a whole new level, you should also reconsider what it is you are selling. “You won’t continue selling a product, but instead you will sell what the product in question enables your customer to do,” says Storbacka. “If you are not ready to strategically redefine what you are selling, you can just as well leave the whole concept of developing customer relationships be.” Storbacka goes on to suggest that a sales man could exchange his speech from introducing a product to telling the customer that he has something that can truly improve their process. “Value creation for the customer, and we are the extension of that – the customer is not the extension of our production.” Customer specific value proposition Less is more. “Sometimes we need to cut down on the number of components to provide more value. Self-service is in fact the best concept for the customer – to be able to define what to do yourself and to only pay for what you really want. Value proposition, i.e. to specify what you are offering, is of critical importance,” states Storbacka. And to go even further, there is customer-specific value proposition. “We should be able to promise the customer something unique!” It is a common assumption that in times of economic recession, customers consider the price of a product to be the most important factor. According to Storbacka, this is not true. “Studies have shown that security is most appreciated during hard times. In addition, customers want simplicity; they want to feel that it is easy to do business. Certainly, they also want value for money. If we cannot affect the price of our product or service, then we should consider if we can affect the value of it,” Storbacka concludes.   •Dr. Kaj Storbacka is one of the forerunners in the field of developing customer oriented business models.  He has a Ph.D. in Marketing from Hanken School of Economics and a Master's degree in Naval Architechture from the Helsinki School of Technology. •Professor Storbacka presently holds the chair of Marketing at Hanken School of Economics in Helsinki. •In 2006-2009 Professor Storbacka held the chair of Sales and Account Management at Nyenrode Business Universiteit in the Netherlands. •Dr. Storbacka is a frequent speaker at internal seminars for major global corporations, at several Executive MBA programs and leading management development institutions in Europe, Americas and Asia. He is also the Academic Director for Hanken&IFL's Sales Leadership Master Class. •He has over twenty-five years of experience as a strategy consultant to major international firms in finance, manufacturing, media, travel, retail, utility, and telecommunications. •He serves as the chairman of Vectia Ltd., a consultancy with 30 experts - specializing in customer oriented strategy development, and sales and account management - that he founded in 1994. •Since 2004, he also serves on the board of the Strategic Account Management Association (SAMA), a Chicago based, non-profit organization focusing on knowledge development and exchange.


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