Marketing can be defined in terms of creating value for all the parties involved in an exchange. This means both the customer and the company must get something out of an exchange in order for it to be considered a success.
Sources of value for companies
Some companies make very expansive claims about always doing what’s best for the customer regardless of the cost, but the reality is the customer’s value can’t be the only thing you consider you still need to find a way to keep the lights on.
The best marketing happens when everybody walks away feeling like they’ve won. Just as there are several sources of value for the customers as we’ve already talked about there are also several potential sources of value for companies as well.
There are three additional kinds of value that customers can create for companies: loyalty value, information value and communication value.
Customer loyalty is seen by some as kind of a snake oil for marketing. Loyal customers are widely considered to cost less to serve and to be less price-sensitive. They also tend to buy more and buy more often.
But how do you identify loyal customers and promote customer loyalty? One mistake people sometimes make is operationalizing loyalty in purely behavioral terms. So you might consider a customer to be loyal if he or she has bought more than a certain amount of your product within a certain timeframe.
Frequency, volume and share of purchase are not necessarily evidence of loyalty. It could be that someone buys from you out of habit. Behaviorally this would look a lot like loyalty after all they’re both buying your offerings but psychologically they are really very different.
Loyal customers talk about brands as relationship partners. These people are not crazy they don’t think of brands as actual people or anything but people can and do form relationships of a sort with non-people whether it’s a pet or the house you grew up in or brand that you’ve used for a long time.
Loyalty is different than incentivized sales. It is a potential source of value for companies and they should give careful consideration to how much it is worth to them to cultivate a more loyal customer base. The only issue is to build customer loyalty and not just facilitate customer habit.
A second type of value that customers can provide to companies is information value. Your customers can provide you with vast amounts of valuable information. If only you will listen to them
this information comes in several flavors.
One type of information is information about the customers themselves, simply by collecting data on customer purchases companies can find out all kinds of interesting things. Just imagine how much more efficient it is to deliver messages that your customers are actually interested in.
Instead of broadcasting information about your great deals on baby wipes to everyone in the hopes of reaching the small percentage of customers that will actually care you can find out what customers like by observing their behavior.
So your customers can provide you with valuable information about themselves if you collected and pay attention to it and use it properly. You can use this information to better customize your offerings, to develop new offerings and to make accurate forecasts.
But is not limited to sales data request for information navigation patterns through your store or through website. All of this information can teach us something about your customers. This information should be considered as a potential source of value that your customers can provide over and above the money that they give you an in exchange.
The third source of company value that will talk about today is communication value. This is the value that customers bring to you by talking to other potential customers about your business
in short customer word-of-mouth.
I just want to emphasize the value customer communications can provide to the company. Most of the sources of value we will talk about today are strictly positive. You may be able to get a lot or a little out of a particular type of value, but rarely do need to worry about negative value.
Communication value stands in sharp contrast. This can be tremendously helpful when your customers tell their friends and neighbors how great you are there’s also tremendous harm that can come from negative word-of-mouth.
Communication value is difficult to account for because it is so difficult to measure directly even though it’s hard to know exactly how much word-of-mouth is affecting your customers it’s relatively easy to figure out in general terms how important word-of-mouth is likely to be for your company.
You can start by asking yourself some general questions about the type of market you are competing in and also the type of customers you are serving when determining how important communication value is to your company you should first determine the structure of the market in which are competing.