Cell phone companies make the most money from unlimited plans, and they have an extra incentive to make other plans confusing. Plans with a fixed number of minutes charge high fees for going over your allotted minutes. Pack your first offer with value and make it as easy as possible to buy. Make your website easy to read. The same goes for products and purchases. In one of those studies , we found that the way products are described matters. The format of text descriptions influences how people perceive the products themselves. Optimize your site to improve the buying experience and influence customers.
Get the complete guide to conversion optimization. However, people who examined products while standing on the same plush carpet judged items that were close by as less comforting. This translates online as well. The way things are presented and emotional factors come into play. Takeaway: Cover walking areas in your retail store with soft carpet, but use hard flooring next to products. Another report showed that social media rarely leads directly to online purchases. The report found that email and search advertising were much more effective vehicles for turning browsers into buyers.
The difference between these two studies is that the first was based on what people said , but the second was based on what people actually did. However, they were tracking direct click-throughs from social media, not taking into account the positive influence it may have over time. Even as social media purchases continue to increase—nearly half of survey respondents in had made a purchase directly through Facebook—a full third of the market had yet to buy via social media. Less than one in ten bought from any social channel other than Facebook.
Field value assessments also known by other names, such as value-in-use or cost-in-use studies are the most commonly used—and, we believe, the most accurate—method for building customer value models. Learning Objectives Describe the roles and functions that comprise decision making units in B2B organizations. The relevant discount level will be set at the date the application is made. BT Products, a subsidiary of BT Industries Group, which is based in Sweden, is a worldwide producer of warehouse trucks for inventory handling. Help Creative Commons. But the experiences of suppliers that have built and used them successfully suggest several guidelines that we believe will be useful to any company attempting to define and measure value for its customers.
Does buying your product make your customer seem more or less cool? Place the Facebook and Twitter icons accordingly. Do people make decisions based on emotions or logic? It shows that comparative features are important but mostly as a justification fofr after a buyer makes an emotional decision.
Research participants were shown two photos. One was a nice-looking, plump chicken. The other was a chicken that looked thin and sickly. Participants were told that the plump chicken was a natural chicken and that the thin chicken was genetically engineered. Researchers informed half the participants that natural chickens were healthy but less tasty and genetically engineered chickens were tasty but less healthy. The other half were told the opposite. Overwhelmingly, participants preferred the plump chicken, but their reasoning was different:.
The scientists replicated the results in other areas, including marketing, politics, religion, etc. What is even more interesting is that people who claim that emotions are not that important, who consider themselves to be really rational, are actually more prone to fall into this trap. What does this mean for marketers? Raghunathan suggests that the earlier you can make an emotional connection, the better.
Rational thinking will only justify their emotional choice. For the last 50 or 60 years, market research, as an industry, has believed that people make decisions based on rational, conscious thought processes. Science tells a different story, one that turns that fundamental belief on its head.
Most decision-making happens at the subconscious level. People are complex. Some tests have shown that people prefer items on the right or at the bottom of the list. New questions about human thought processes and decision-making pop up every day. Neuroscience is still working on the answers, but there are some insights that we can start putting into play now. What is the most common problem with websites?
What should you change? Make better decisions…. Hiring is tough. Interviews and not even their history are not perfect to assess somebody's…. Peep Laja is the founder of CXL. He's a renowned conversion optimization champion and was nominated as the most influential CRO expert in the world. Very interesting article. The cognitive fluency point really rang true with both what I do and with what I see from my customers.
Any insight on how consumers perceive comparing their product to a competitor at shelf VS being a favorable choice on social sites? Cognitive fluency. Brilliant way to rationalize the critical need for simplicity in sales. Fantastic data! Search for:. Even in the modern era, the influence of friends and family on purchasing decisions remains strong. Image Source. Your buying habits may depend more on crowd behavior than you think.
With a comprehensive list of value elements in hand, the next step is obtaining initial estimates for each element and finding out what each one is worth in monetary terms. To allay any concerns on the part of the employee, customer management should tell them that the person is there to help out and to learn. The customer may think the information does not exist.
In fact, the kind of data that needs to be pulled together in the analysis may reside on six or seven databases or systems in different functional areas. Sometimes, the only way to find the data is for team members to ask around until they come across the individual who knows where the information is.
Focus groups made up of representatives from each functional area in a company can also be an effective mechanism for uncovering data. The Proaction Group, a Chicago-based consulting and strategy implementation company, recently conducted four internal focus groups at a customer company for exactly that purpose. To prepare themselves and the prospective focus-group participants, Proaction consultants met individually with each prospective participant before the session, learning what the issues might be and gathering some initial data.
During the session, participants were asked what kinds of information they thought should be used in a value model and then where in the organization to look for that information.
The value research team also needs to be creative in finding other sources of information. Independent industry consultants or knowledgeable personnel within the supplier company can be good sources of initial estimates. The ease with which the team can establish monetary estimates for its value elements will vary. The value of social elements such as greater peace of mind, for example, is generally very difficult to express in monetary terms. In fact, most suppliers do not even attempt to assign monetary amounts to social elements.
Instead, they put those elements aside and discuss them with the customer in a qualitative way after presenting quantitative results. In any field value assessment, suppliers will find that some assumptions must be made in order to complete an analysis. It is critical for the supplier to be explicit about any assumptions it makes. After building the initial value model, the supplier should validate it by conducting additional assessments with other customers or potential customers in the market segment. In other words, the supplier should provide the initial estimate and ask the informants whether that element is more or less valuable to them than the estimate.
In conducting additional assessments, the supplier will also learn how the value its offerings provide varies across kinds of customers. The supplier can then build a database that contains value estimates—and the individual customer characteristics, which we call descriptors, that might affect those estimates—from all participating companies.
Looking at all of the data together, the supplier can then determine which descriptors have more impact than others on the value customers receive from the offering in question. As a result, the supplier can choose to pursue those customers and prospective customers for which its offering will provide superior value. Suppliers can not only use value models to inform and guide their own decision making but also to create persuasive sales tools. One common sales tool is a value case history. Rather than selling customers the more commonly marketed corrugated-cardboard packaging materials, Sonoco offers packaging systems that, it maintains, are stronger, lighter, and smaller.
Sonoco maintains a file of these case studies, which its salespeople draw on when making proposals to other prospects. The studies persuasively convey the cost savings that the prospects themselves would likely realize. Value assessment can also become a service that suppliers offer as part of a consultative selling approach. For example, a supplier can develop a spreadsheet software application that salespeople can use on-site with a laptop computer to evaluate the potential value of the offering to a particular customer.
BT Products, a subsidiary of BT Industries Group, which is based in Sweden, is a worldwide producer of warehouse trucks for inventory handling. In , the company created BT Compass, a logistics-planning software system, to help its customers improve their profitability by lowering the total cost of the inventory-handling process.
The BT Compass system provides the following:. The BT Compass system has been developed to work in seven languages, and all inputs and outputs can be translated into any language with a single keystroke. It displays different layout options by using high-quality color graphics, and all plans can be printed quickly using a printer or plotter. BT Products uses the Compass system when a customer is contemplating a change in materials handling or is adding a new facility. The system helps the customer figure out, for example, the optimal aisle width that will accommodate the dimensions of a counterbalance lift truck, and it calculates the layout and equipment requirements to meet peak-hour needs.
Thus it knows the critical performance measures that customers use to judge lift trucks. Customers sometimes provide functional specifications and ask the lift truck supplier to tell them the number and types of trucks required. If the performance is not met, the selected supplier has to provide additional trucks at no cost to the customer. The data the customer must enter into Compass requires some competence on their part. To help the customer gather the required data, BT Products has developed a one-page worksheet that pulls together the necessary input data.
One of the advantages of using Compass is that it combines warehouse planning with an analysis of the kind and number of trucks needed to optimize warehouse performance. Recently, Birkenstock, the German shoe manufacturer, decided to build a new warehouse in Asbach, Germany. An in-house consultant responsible for the procurement process for this new warehouse had proposed a layout that required three lift trucks to handle the pallet movements. By using Compass, BT Products was able to demonstrate how an alternative layout in conjunction with its high-performance trucks required only two trucks—one less truck and one less operator.
In addition, they believed that they would not have been able to convince Birkenstock management that their solution was correct. Suppliers can use their understanding of value to strengthen performance and create competitive advantage in several ways. For example, a supplier can use its knowledge to tailor supplementary services, programs, and systems in its current market offerings and to guide the development of new offerings.
Integrating everything it has learned about value into its marketing efforts, it can also gain new customers. Finally, it can better sustain customer relationships by documenting its delivery of superior value over time and by discovering new ways to update and reinvigorate those relationships. Doing so entails constructing what we call naked solutions with options.
Naked solutions consist of just those product and service elements that all customers within a market segment value. We said that suppliers should strive to sell naked solutions at the lowest possible price that will yield a profit. An understanding of how customers value those components—and what they cost the supplier to deliver—enables suppliers to identify and eliminate what we call value drains.
These are services that cost the supplier more to provide than they are worth to the customers receiving them and that have no strategic significance. Consider this: A producer of chemicals used in extracting oil from wells routinely performed a field analytic monitoring service for its customers to determine when, and in what amounts, they should apply its products. Rather than finding value drains by chance, as in the example, suppliers can set out to detect them by using field value assessment in conjunction with activity-based-costing analysis.
Identifying and eliminating value drains results in better allocation of resources and improved profitability. Virtually always, the results more than pay for the cost of doing the field-value-assessment research.
Value models provide that information. Knowing that an improvement in some functionality is important does not tell a supplier if a customer is willing to pay for it. At the same time, a model allows the supplier to see how the value of its new technology varies across applications, customer capabilities, and usage situations.
For example, the supplier could ask managers in different functional areas of customer companies to evaluate potential improvements. Specifically, the supplier wanted to know how the customer would value some near-term-achievable changes in technical attributes, such as gloss or dispersibility. Knowledge of how their market offerings specifically deliver value to customers enables suppliers to craft persuasive value propositions.
Consider the case of Greif Brothers Corporation, which produces fiber drums, plastic drums, and intermediate bulk containers for food products and chemicals manufacturers. Rather than competing on a price-per-container basis, Greif markets complete packaging systems.
How does Greif develop its propositions? First, a Greif strategic account manager, together with a representative from the customer, builds a value model to understand total costs. Greif developed its current model based on information from 20 major customers. Key elements include the costs associated with tracking and retrieving the drums, cleaning and maintaining them, testing and recertifying recycled drums, and all the associated paperwork.
Greif has found that customers—both existing and potential—can readily assign monetary values to some elements but that other elements are more difficult to pin down. For those elements that are harder to quantify, Greif takes its analysis to a deeper level. Consider the benefit of environmental stewardship. During the presentation, they discuss the merits and prices of each solution. At the core of all successful working relationships are two essential characteristics: trust and commitment. To demonstrate their trustworthiness and commitment to customers, progressive suppliers periodically provide evidence to customers of their accomplishments.
Sales managers at Greif, for example, give customers quarterly reviews that document actual cost savings. Applied Industrial Technologies AIT , a major distributor of specialty replacement bearings, power transmission components, and fluid power products in the United States and Canada, provides another good example. AIT primarily serves maintenance, repair, and operating MRO supplies markets within the primary metals, mining, pulp and paper, utilities, chemical processing, textiles, food processing, and agricultural industries.
It operates more than branch locations across the United States. In , the company began to market a value proposition promising to help its customers improve productivity rather than simply selling them parts at a low price. Through value assessment, the company began to work with its customers to help them save money in areas such as maintenance, inventory, and energy consumption—any measurable area other than purchasing.
And to support their efforts, the company has developed a customized software program that calculates cost savings. Sales representatives can run the program on laptops while visiting customers. Then, either on a quarterly or a semiannual basis, AIT presents each customer with a report that documents the savings, allowing customers to assess firsthand the value AIT has delivered. In order to establish credibility for its reports, AIT asks customers to sign and return a copy.
The company keeps track of the performance of each cost-savings initiative and aggregates the totals. Understanding value in business markets and doing business based on value delivered gives suppliers the means to get an equitable return for their efforts. The essence of customer value management is to deliver superior value and get an equitable return for it, both of which depend on value assessment. Grainger, the MRO supplies distributor, is an excellent example of a company that has realized the benefits of measuring and monitoring value for its customers.
The company has even established a consulting arm, Grainger Consulting Services, specifically to help customers understand the total cost of MRO supplies management.
Grainger and Its Customers Benefit. Grainger distributes maintenance, repair, and operating MRO supplies and related information to the commercial, industrial, contractor, and institutional markets in North America. At each company, GCS detailed the steps involved in acquiring an MRO item and outlined the estimated costs associated with each step. Since the original studies, GCS has gained extensive experience and knowledge in building customer value models, which it calls total cost models.
And as its reputation has grown, it has increasingly offered its consulting services on a for-fee basis to clients. Pharma Labs is a rapidly growing pharmaceuticals manufacturer. At one of its largest plants—a facility with employees—purchasing managers were questioning whether to outsource their MRO procurement and inventory management processes. During the meeting, two GCS managers toured the facility to gain an overview of its MRO-supplies-management processes. The consultants told the Pharma managers, for instance, that some companies do not account for MRO supplies inventory and associated carrying costs.
Following the meeting, GCS proposed that it perform what it calls a baseline assessment, which documents the total costs of MRO supplies management and then, following that assessment, offer Pharma managers some strategic recommendations about how they could improve their operations.