Is your business truly customer-centric? Probably not says Murray Cox, digital strategy director of consultants Pancentric. And he says that until it is, you won’t be able to create a value proposition that appeals in the new marketplace
What is the point of your business in today’s digital economy? What do you do and what do you stand for? And, most importantly, why should I care?
As a consumer with high expectations and a persistent internet connection through my smartphone, these are exactly the sort of questions I subconsciously ask before I hand over my data to companies, let alone money.
I’m not alone – I’m simply one of millions who have seen how easy it is to deal with Amazon and who can’t understand why everyone else makes it so much harder.
Companies that aim to emulate Amazon and its ilk are realising it comes down to the core role of strategic marketing, which is defining the value proposition.
The value proposition should describe the benefits customers can expect from your products or services.
That definition is deceptively simple, because it implies your company is already completely customer-orientated – a reality simply not true in most businesses.
Nailing the value proposition in a compelling way is the number one challenge of senior marketers globally, according to research house Frost & Sullivan.
Examples of companies doing this well are actually relatively rare – the obvious one being Ronseal doing exactly what it says on the tin.
If you go to MacDonald’s you mostly know what you’re going to be getting, and John Lewis has created the perception you’ll be treated well and charged fairly.
Value proposition in insurance
Thinking about the same scenario in insurance is hard – which brand has a clear, let alone differentiated, value proposition?
With so many insurers having outsourced their marketing communications to the aggregators where they compete on price, the value proposition has taken another hit.
For most consumers insurance has become a grudge purchase where they expect to be disappointed if they need to make a claim, so they go for the lowest priced product, and the vicious cycle continues.
But the value proposition as the driver of differentiation (and margin) is moving back to centre stage as numerous start-ups have banks and other financial services organisations in their sights.
US startup Lemonade has big backing, and while we don’t yet know the detail of its model, it is clear that it is a) customer-centric to the core; b) using digital techology to innovate around traditional business models; and c) planning to be hugely disruptive.
Nor does it want to play nicely with incumbents. Author and behavioural economics expert Dan Ariely was scathing about insurance in a video to coincide with his appointment as Lemonade’s chief behavioural officer.
He said: “If you tried to create a system to bring out the worst in humans, it would look a lot like the insurance of today.”
Ouch. Unsurprisingly, Stateside insurance blogs have been full of predictions about and wishes for the imminent demise of Lemonade.
Ariely added: “When I look at insurance I look at an industry that is an antagonistic, annoying, difficult process with low trust and high dishonesty.”
Whether insurance experts believe he is right or wrong is largely immaterial. His words will resonate with customers and Lemonade is differentiating itself with a value proposition that has consumer appeal.
Old world ‘vs’ new world
Rising to the challenge of (unreasonable) consumer expectations means it is more important than ever to figure out who you are and the value of what you do.
You can’t “message” your way out of a negative perception of poor service and value in the age of Netflix, falling newspaper consumption and ad blocking software. Old fixes of bigger ad spend or price cuts won’t support a tired value proposition for long.
Your value proposition is becoming the promise you are making to your customers, and how you conduct yourself is the way you keep that promise.
The proposition needs to communicate how money will be saved, or how value will be created or the grounds on which an emotional connection will be formed – the so-called value triad.
This needs a deep understanding – not of your business, but of customers. Not the superficial understanding from a focus group or survey, but deep insight that comes from observation and getting uncomfortably up-close-and-personal with your customers.
This is the role of strategic marketing. It’s hard and difficult work, but in the digital age of demanding consumers it is vitally important.
But it’s not new work. Two decades ago management guru Peter Drucker said: “The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself.”
The only thing different today is that we have better tools and approaches to tackle this than in Drucker’s day. Shall we get started?