Getting to the Heart of Value through Consumer Insights
In the sixth show in this current series of B I G Insights on the Business Bunker we explored ‘The Integrator’; one of the ten characteristics uncovered by the University of Kent’s Business School that challenge us to reflect on how we, as leaders, approach growth and performance.
We were joined on the show by Andrew Fearne, a Professor of Value Chain Management from Norwich Business School. Andy has helped hundreds of organisations across the world, large and small, challenge the way they approach value and the delivery thereof, in order to improve their growth and performance prospects.
Our research reveals that those SMEs that understand the needs of their customers and consumers and that work in a collaborative manner with suppliers and customers in their value chain outperform the competition. This is because the development of effective value chain relationships affords a quicker and more accurate response to consumer needs, and drives improvement.
Define the value you deliver
“If you can identify what is of value to your consumers, and you can deliver this, people will pay for it”
The Integrator challenges us all, as leaders of our organisations, to understand the value we deliver to customers and consumers. As Andy stated:
“there isn’t a company on the planet that has more resources than they can use. Allocating scarce resources to the right aspects of what you do is critical to success. If you are creating products or services that no one else values then you are creating waste, and none of us want to create waste!”
Defining the value that your organisation delivers to the end consumer is therefore essential. To achieve this we have to understand the behaviour of those who buy and consume our products and services. It is our jobs, as leaders, to get into the head of the consumer to identify how and why they make purchasing decisions. However, in many organisations the focus can often be internally on satisfying the demand of today, the ‘here and now’, rather than what customers and consumers actually want.
In defining what value is, Andy raised the topic of the ‘monetisation of utility’. Let’s break this down a little here, to understand what he was getting at. ‘Monetisation’ relates to cash; the making of money. ‘Utility’ relates to satisfaction that people get from the particular product or service. One can define utility in many ways including ‘form’ (what is it? what are its attributes), ‘time’ (when can it be purchased/experienced?) and ‘place’ (where can it be purchased/experienced?).
As leaders we also need to pin point what precisely is of value. We can often believe that everything we do is of value to the end consumer, but what if it isn’t? What if the real value actually comes from someone else, a supplier perhaps? What if you are not aware of this? What happens when you inevitably replace that component part of your product or service? It is likely that consumers will respond but take their business elsewhere…
Just being passionate about your product or service is not enough. It is highly likely you end up focusing on your perceptions of what you do rather than other people. This means you are not spending enough time on understanding why people are (or are not) buying what you do.
Gain insight to why your consumers buy
So, understanding why people make the purchasing decisions they do is central to responding appropriately to their needs. And in today’s world, there is no excuse for not knowing, as Andy highlights:
“information is ubiquitous, it is everywhere. There may have been an excuse years ago that you couldn’t get hold of the right information, but these same excuses do not fly these days. You have got to want to do it [consumer/customer research], and you have got to see it as important”
To illustrate the importance of consumer research Andy shared an example of a small manufacturer of ice creams that had been experiencing sluggish sales. The company was one of a larger network of small food producers that Andy has worked with, and facilitated access to student support. In this case, the student visited one of the retail stores stocking the product, inspected how the product was placed, spoke to 30-40 customers about the product and then presented their findings.
What became apparent was the way the product was positioned in regard to perception and physical location. The product was sold as the ‘best Ice cream in the world’, but had a lower retail price than other popular brands. The packaging had been designed to be stored at eye level, and instead the product was displayed in a freezer cabinet so only the top of the container was showing. When asked, the consumers’ response was that they would have bought it if they knew it was there!
Following the sharing of these consumer insights the company repositioned its product so that it became visible to the end consumer, and sales increased dramatically. Andy revealed that the typical way these scenarios play out is not in always in such a positive way:
“The retailer would typically provide a report that says your product is not selling. They would recommend that you lower the price. You would do this, and you may find that no more of your product sells, and the retailer may cut your product from their store”.
So Andy’s advice is “to ditch your perception, and accept you need to understand what your consumers are experiencing. The more insights you can gain, the better able you are to understand the truth”.
What about the service sector?
We challenged Andy on the application of this approach to the service sector. Andy highlighted “it is much more difficult for services. You can’t physical see a service, so you have to have a dialogue with the consumer about how they have experienced your service”
Spending time drawing together insights on what consumers want and how your service delivers this is time well spent.
I just want a ‘normal’ coffee!
We also challenged Andy about how we, as leaders of SMEs, build our product portfolios. Choice can often be seen as entirely positive, however there is a concept known as ‘choice overload’ which relates to the overload that consumers can feel through the provision of too many options.
We have all been to our local coffee shop and in response to our desire to buy a coffee, have been bombarded by choices “would you like a small, medium or large? Full fat, semi skimmed or skimmed milk? Beans from Latin America, eastern Africa, Arabia, or Asia? Nutmeg, paprika, chocolate or cinnamon on the top…” The fact that size and other aspects can be presented in a foreign language to be seen as ‘trendy’ can make it even more confusing!
So, how much choice to offer is an important thing for organisations, especially SMEs to decide, as Andy reinforced: “it is all too easy for SMEs to fall into the trap of offering all things to all people. You need to define a niche, find evidence that your product or service is of value and focus on your core offer”.
Top ways to collect consumer insights
To finish the show, Andy provided the audience with two top tips that are cheap to implement.
“I was constantly being challenged by SME business owner/mangers how can we do this? They were quick to dismiss the relevance to them. So I developed these simple approaches to demonstrate that smaller organisations can copy larger firms in how they develop market insight”
First there is where to find information and here we have the ‘3 T’s’ – Till Roll (who you sell, or have sold to), Talk (to stakeholders customers, consumers, stakeholders (e.g. Government) and competitors) and Twitter (social media).
Then there is a need to think about what to ask. The ‘5 W’s’ are a way to develop our own inquiry processes and learn about our customers/consumers:
What did you buy?
When did you buy it?
Who did you buy it from?
Why did you buy it? Or, ‘What problem were you looking to solve?’
What if… “What if we had done X” “What if we did Y”
The ‘What if’ question is one not often asked, and opens up all sorts of possibilities and opportunities to meet the needs and wants of customers/consumers.
And finally, you’ll need to think about the method you use to collect, analyse, and apply (use) the data and our tips here are: record it, take it seriously, do it well (outsource?) and do it regularly (every quarter).
Make a Difference (MAD) challenge from this section: In reading this section, we would ask that you reflect on the following questions:
What do you think is the difference between a ‘customer’ and a ‘consumer’ in your marketplace, and why do these distinctions matter?
What do you know about what your current customers and consumers value? What evidence do you have to support your claims?
What choices do customers/consumers have when making a purchasing decision in the marketplace within which you compete?
Click here for further information on the collaboration between the Kent Business School and the Business Bunker Radio Show. Should you have any questions in regard to this piece of the wider work please do not hesitate to get in touch with Dr Simon Raby [email protected] or Paul Andrews [email protected]