Idam Trutyam

Part 30

Our Goldmine
Listen to your customer
Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A product is not quality because it is hard to make and costs a lot of money, as manufacturers typically believe. This is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality. ~ Peter F. Drucker, American Management Guru. In todays competitive business environment, selling has become a price war. It is something frustrating and unpleasant that takes all the fun out of selling. But in this environment we see that certain companies like Microsoft, Intel, Apple dominate their respective markets and their products earn enormous profits. The secret of their domination over the markets is in their value creation for the customers. There are two ways for these companies to create high value successfully. One type of company has commanding lead either in technology or brand recognition. Their products or brands have become industry standards and thus dominate the market. Examples of this type company are Microsoft, Intel, Cisco, Google and so on. The best example of the other type of company is Apple. Their value creation appeals to the heart of the customer. However, in todays world, only a handful of companies fall in these two categories. Others are the mediocre in both technical or brand dominance or in winning customers heart. In order to survive and make good profit in todays market, it is necessary that any business has either technical / brand dominance or is customer centric. In both the situations, understanding what customer says is of critical importance. In the two above-mentioned success models, the real key to success is that the product or brand creates enormous vale for the customer so that many customer crave for the product and are ready to pay a higher price. Now the question is What is value and how do you create it? What is its role in long term success? We all do business to make profit and high profitability is ascertained when we get decent sales volume at right price and keep our costs low. For us Business Profit = Revenue Cost And Revenue = Sales Volume * Price

Price here means sustainable price, price that customer will be willing to pay. A high price with very low sales volume or a high sales volume at a very low price, both may affect business profits adversely. We must understand that both sales volume and the product price are determined by customer value the customers perception. The customers opinion determines a products fate. It is customers opinion that decides the price level, market size at various price levels and the future trend of the market. A product that commands high value in the opinion of the customer can fetch good price and higher profit margin with high volume. It will create good reputation for the company and grow to become a brand. The customer value can be defined as follows: Customer Value = Benefits Cost Benefits can be economic benefits like amount of money customer will save by using the product instead of not using it or by not using any other product. It can be psychological benefit like using a product that is a status symbol. It can be convenience or service benefit of using something convenient to use or for which after sale service is excellent. The cost can be cost of acquisition, cost of maintenance, cost of services that may be required, cost of usage, cost of disposal etc. Psychological cost is negative psychological effects a cheap brand or an unknown brand carries which discourages the customer from buying it. The service and convenience cost is all negative effects related to service and convenience of the product. These benefits and cost, as perceived by the customer will result into its sale. A high priced product, if creates better value in the eyes of the customer then it may beat its low priced substitutes. Therefore, to gain excellent profit, creating product with high customer value is a must. So many products with very high functionality have failed in the market because the customer did not see right value in it. Many organizations fail to understand the value aspects of their product and ultimately incur losses. How to create customer value? This is a very crucial question. Customer is always looking to get a better product and is usually ready to pay a higher price for a product that creates better value. To create customer value is not impossible. We are still in business. We are creating value for someone. But what should we do if we want to expand our business and take it to new heights. What should we do to increase our profit manifolds? Is it possible? Yes, it is possible but there is a catch. We will not be able to do it with our traditional approach. We will not be able to do it if we continue to do our business the way we have been doing so far. The best way to create customer value is to start with customer and his problems, his requirements and his expectations instead of our products, our services, our quality and our price. Be customer friendly. Be customer centric. Ask him about his problems and how he expects it to be solved. Be his trusted partner. Be with him whenever he needs you. Get a better understanding of his problem. Understand how his company makes decisions. Help him earn better margins along with revenue growth. Offer him customized products and services where possible.

What will happen if you do this? Will your world change overnight? Certainly not. But slowly, price will become a secondary issue. Your association with him makes him your loyal customer. You will be able to charge him for properly for the goods and services you sell him but he will not think of looking at your competitors price. This is called Value Creation Selling (VCS). VCS gets you ahead of the competition. It frees you of price based selling. It assures you of long-term business relations with customers. It differentiates you from the rest and lets you chare better price, get higher margins and bigger sales volume. It gives you a great competitive advantage.

The only sustainable competitive advantage is the ability to learn faster than the competition. ~ Arie de Geus, Dutch writer, author of 'The Living Company'

Spark:
Bheeshma drona tata jayadratha jala gandhara neelotpala shlya graha vatee kripena vahni karena velakula ashwathama vikarna-ghora-makara duryodhana avartini sotteerna khalu pandavai rana nadee kaivartakah keshavah ~ Bhagwad Geeta (With Keshava as the helmsman, verily was crossed by the Pandavas, the battle river whose banks were Bhishma and Drona, whose water was Jayadratha, whose blue lotus was the king of Gandhara, whose crocodile was Salya, whose current was Kripa, whose billow was Karna, whose terrible alligators were Ashvattama and Vikarna, whose whirlpool was Duryodhana.)

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