Using data to design the customer value proposition

Article written  in a previous role:

How do you identify the right questions to ask, the right data to collect and the right tools to use to develop insight and understanding?

Value propositions are defined from two perspectives:

 Internal  – look at the need that has been identified and match how well a product or service fulfils that need.

External – look at the need and identify the points of differentiation between your offering and the competition.

Historically, organisations have focused on the product or the service, using their features and functionality as the primary means of identifying value and differentiating from the competition through customer focus groups, market research and customer satisfaction surveys to validate their assumptions. With new technologies, these techniques have been automated and the amount of data collected and analysed has vastly increased. This has provided new insights to organisations, resulting in new questions being asked about their customer base.

“The challenge is to identify the right questions to ask, the right data to collect and the right tools to develop insight and understanding.”

With the increase in the amount of data being collected on sales, products and buyer behaviour – both inside an organisation and through a number of external sources – more tools and techniques are being developed. The challenge is to identify the right questions to ask, the right data to collect and the right tools to develop insight and understanding.

What is customer value?

Customer value is defined in many ways. However, it is not what a vendor or academic defines it as but what each consumer perceives it to be. Consumers make an investment of time, energy and money in every transaction they make and value is gauged by each individual. Therefore, there is no one-size-fits-all research technique or methodology for measuring customer value.

However, there are a number of tools and techniques which can be used to assist vendor organisations to better understand their customers and the value they put on their products and services.

What do I want to understand about my customer?

Each organisation has a unique product and service offering which they are looking to sell to new and existing customers. In order to maximise the opportunity, they need to understand who their customers are today, why they buy, when they buy, how often they buy, where they buy and how much more could they buy. This level of understanding will only be achieved by selecting the correct range of market research and customer insight tools for their organisation.

What data can be used?

Data is available in all departments within an organisation so it is vital to create a data map.  This will help establish what is available internally, where the gaps are in the data and help make decisions about using external sources.

Historically, departments and teams within organisations collect the data which is relevant to that area of the business – for example, the sales team will track sales figures and trends, the marketing team will carry out market research and customer satisfaction surveys, the new product development teams will carry out research in to features and functionality, and so on. But organisations must look at all data as the pot of gold at the end of their rainbow and identify the right tools to extract the greatest value for the organisation as a whole, not just for individual departments and teams.

What tools should be used?

There are a number of tools and techniques available, most of which have taken advantage of technology in the collection and analysis of data:

·         Traditional market research

Before technology, market research was the primary means of collecting information about customers. However, the task was fairly labour intensive as it usually involved a market researcher speaking to target customer groups on a one-to-many basis and for the responses to be manually collated and the results delivered. Technology has improved this process through the creation of online survey tools, which can be used for customer research and satisfaction surveys, customer focus groups and competitive intelligence and analysis.

·         Data mining

Data mining is fast becoming the ‘must have’ for organisations but the meaning of the term data mining differs depending on the department doing the mining. For this purpose, it is the identification of information which is required to build a rounded view of a customer as well as their need for and their buying behaviour around a product or service. The type of data which may be identified and collected includes transactional sales, channel sales, loyalty programmes, demographics, product ranges, and store data location, size and format.

“Through conversations which take place, firms can better understand how customers use products and services, providing indicators of customer satisfaction, word of mouth recommendations and highlighting problem areas

Data may be extracted and put into a central repository or left in situ for the analysis process to take place. The analysis may then be carried out by internal teams, external specialist consultancies or a combination of the two – which is the optimal path for most organisations.

·         Social web and internet analysis

The internet has increased the variety and number of data sources which can be used to establish customer value. The first of these is the organisation’s website itself, which holds valuable information about the customer’s path to the web site, the journey they take around the site, the content they look at and download, and their exit path.

Outside of the organisation, customers are creating and contributing to independent product review sites and customer forums, providing additional information about perceptions of products and services. They are generally monitored by organisations, rather than run by them, providing the independence which affords customers the freedom to express their views.

Other sources of information can be found on retailers’ and publishers’ websites. These are generally run by external organisations who are either a sales channel or another online publisher that shares the same target customer base. Collectively, these sites can be used for secondary market research purposes.

·         Collaboration and engagement

Within many websites are customer support forums where customers can find out information about products and get help to resolve queries and problems. In some cases, they can also provide a reference point for new customers looking for advice about a potential purchase. Through the conversations which take place, firms can better understand how customers use products and services, providing indicators of customer satisfaction, word of mouth recommendations and highlighting problem areas or potential issues that may result in customer defection.

A number of brands have created social networks around their product or brand through which they engage customers in discussing an issue. Personal care brand Dove, for example, supplemented its ‘Campaign for Real Beauty’ with an online community. Both motorcycle firm Harley-Davidson and car firm Mini Cooper have online communities which support their enthusiasts, maintaining the engagement between purchases and providing opportunities to understand their customer base more fully.

Ultimately, to establish the value proposition, organisations must endeavour to understand the following key questions:

·         Who is my customer?

·         What am I selling them?

·         How are we different to the competitors?

·         Are we getting it right?

·         How can we improve our proposition?

In order to achieve this, they must look to all available data sources – and only by filtering out valuable nuggets of information from these sources can they then answer these critical questions.