Monday, February 15, 2010

Focus on the customer to optimize sales. Learn their value.

Horserace 2
The way to see value is in the customers’ eyes. Value is not the sum total of the technology parts you assemble with the profit you need. If the customer demands it, the price can rise as long as the supply stays constant. This is a basic economic fact. The customer demands better social networks because they see value in it. When you start using the customer as the vantage point you start understanding value. The objective is to increase value in the customers’ minds. Then your sales increase.

This is the last in a series of five posts which has covered value through the help and guidance of Information Technology Infrastructure Library. Past posts included:
Listening to customers

It takes effort to keep listening to the customer and not just be the prisoner of your own process. Shift happens. Businesses have to stay nimble and look for the next big thing and be prepared to drop the thing that isn’t doing the least good to retask those assets. The business, which could be you if you have a blog, tweet, or keep up a web site, must know when things like the floppy drive have run their course and people need something new. Steve Jobs was listening as he transformed the interface of the desktop computer.

People will lie to you about what they want as the last post talked about. We lie to ourselves just as easily when we’re the customer. Customers talk up the features that they want and then realize that it was a benefit they really needed after they have it put in front of them. It’s because we think in concrete units easier than in abstract needs. Perhaps the most famous quote on this subject was Henry Ford who supposedly said:
If I’d asked my customers what they wanted, they’d have said a faster horse.

Lazy manufacturers

Let’s update a saying that Peter Drucker, one of my favorite business writers, has used. He said that there are no irrational customers, only lazy manufacturers. Drucker was the force that helped turn the focus on the customer wherein the power of success laid. That customer now has recently been empowered with the internet and took over the wheel causing the shift from sales as we knew it to Sales 2.0, or sales that doesn’t work the old way. The customer has to be assumed to be rational but as Drucker knows, the perceived reality is usually quite different from that of the manufacturer’s reality.

The new saying should be that there are no stupid customers, only lazy service providers. That goes for Google, Microsoft, Oracle, Apple, Twitter, Facebook, and anyone else who lets the customer slide enough to where they have to find another product or service that really meets their need.  The laziness is in not keeping an open ear to the customers’ needs.

Growth can slow efficiency

You may be listening to the customer and then charging off into the distance where the customer may follow or may not. They are the leader here and not you. If you start ramping up a bigger and better product, you may be in for some rough times ahead. The not so stunning introduction of the iPad is one of those make-it-bigger thoughts that equates to making it better in executives’ minds. A bigger iPhone is just a more unusable iPhone. The iPad is just a newer type of computing device that lies somewhere between the smartphone and the netbook. Most likely, there won’t be a separate market develop for it but it may cause the netbook market to go towards touchpads faster. Prove me wrong, Apple.

Size increases can provide the brakes on the efficiency of a firm as well as a product/service. Ben W. Heineman, Jr., former general counsel of General Electric, complained that being big is not the solution to superior legal service, quality or price. In the end, Heineman “came to believe generally that small was beautiful, and big was wasteful.” The problem he was grappling with was one of outsourcing and therefore loss of control for global in-house law departments. He preferred the small specialty group in-house over the global legal powerhouses. The extremely large law services didn’t see the need of the customer to be in control and how much better small groups served the corporation.

So what happened to the economic principle of scalability? It works to a point which is more of an issue of the industry rather than a universal principle of growth. The service manager has to be aware of when size gets in the way and step back into guerrilla tactics instead of keeping up the full assault.

Value comes from turning towards the customer and giving them both what they need and a promise of stability. Value is more than a good product at a low cost. And throughout the quest for more value, you will never achieve the goal because it’s a journey that will keep your ear open to the customer who really makes your business or service work.

Image by Magnus3D via Flickr
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