How can we figure out what customers will value before we develop a product or service? That’s the question!
You are not your customer
One way to figure out what your customer will value is to ask yourself do I like this and then assume that if you like it then your customer will probably also like it too. Easy! Easy and almost always wrong.
I don’t know anything about you, obviously, but the fact that you are reading this article right now makes me feel pretty sure your dissimilar to the average people in some pretty important ways.
People are different and the type of people who winds up making marketing decisions about products and services are usually different from the types of people they’re trying to sell stuff to. Not better, different.
And, if you’re going to be successful in marketing you will need to respect and try to understand those differences. So that’s the first rule of trying to understand your customers, and, remember, that you are almost certainly not your customer.
Different customers, different approaches
You may be older or younger you may be more or less educated, you may have more or less tolerance for risk, you’re definitely smarter and better looking than your customers, right, and are clearly more tolerant of flagrant attempts at flattery.
So there are differences, and your preferences are probably just not that relevant here. So what can we do instead? If introspection is likely a dead end what are the alternatives?
One useful way of trying to figure out what customers will value is to recognize that there are different types of value – functional, monetary, social, and psychological – that customers can get from an offering, and that for any particular customer those different types of value going to vary in terms of importance.
Functional value is what an offering does its purpose, the solution it provides to a customer’s problem. So, the functional value associated with the car is that it can get you from point A to point B. The functional value of a bottle of water is that it quenches your thirst and hydrates you.
Products and services differ in terms of their functional value to the extent of their better at fulfilling their functional purpose. One floor cleaner can provide more functional value than another if it cleans floors better or in less time or with less effort then another floor cleaner.
The second potential source of value that customers can derive from offering his monetary value, and monetary value is a function of the price paid for and offering relative to its overall perceived worth to the customer.
As such monetary value is not a completely distinct form of value from the other sources of value rather it invites a trade-off between those other types of value and the monetary costs. Monetary value can provide a very compelling reason for choice.
A third source of value is social sometimes owning a particular product allows consumers to connect with other people. If you’ve ever had someone strike up a conversation with you over the type of computer you’re using the type of hat you’re wearing, type of motorcycle your driving then you have experienced social value.
People use products and services to express themselves and to make themselves feel better, sometimes all customers want out of an exchange is to feel appreciated or respected, sometimes people are looking to feel comforted or secure or hopeful.
The key insight here is not just that people derive value from these four different sources but that these sources of value are not equally important all the time to all consumers. In fact how important each source of value is will depend on the consumer and on the purchase.
Understanding the source of value
So the key is to figure out which source of value your customers are seeking in the particular transaction you’re interested in. If you’ve missed calibrated and you think your customers want one thing it’s a monetary value when the primarily interested in something else the psychological value you may be wasting your marketing efforts.
Understanding your customers source of value allows you to position your offering in a way that provides them with a reason for choosing your product. Some product attributes are just naturally constant with certain sources of value and, therefore, for a given product attribute there is often a positioning decision to be made.
The key is to translate the source of value offered into the language of the type of value your customers are seeking, don’t rely on your customers to do that work for themselves.
Marketing creates value
Marketing creates value for customers and the company and we can figure out how to do this by answering three simple questions:
- Who are my customers?
- What do they value? and
- How can I give them what they value better than the competition
If you can answer those three questions then you have the basis for a marketing strategy and it’s only after you have a strategy that you can begin to figure out the best tactics to employ.