Value
The primary factor of customer satisfaction is value – that the customer has gained more from the product than he thinks it is worth. Satisfaction is a very personal matter and it varies significantly from person to person. This is one of the keys to understand why employee loyalty becomes so important. If two products are almost similar and cost the same, it’s the emotional component that makes the difference. If you ask a person to describe a fantastic service experience it’s rarely a 48’ inches B&O wide screen, gold faucets or designer furniture he or she mentions.
Value in service companies can be illustrated in a value equation:
Result
What is the primary need of the customer? If I want to go to Paris, it’s a travel from A to B. Nothing more – nothing less. If I order a party for my family what is then the primary result? It has to be a memorable experience, and what is a memorable experience? It can vary a great deal depending on who the customer is. The obvious consequence of not understanding the needs of the customer is that they might never return.
Process
We can achieve the primary result – getting from A to B – in many ways. The difference is the way we do it. In the Value Equation we call this the process. We have to analyse our processes in terms of what creates value for the customer because it almost always increase the expenses. The Ryanair concept aims at minimising the processes of getting from A to B leaving the customer with almost nothing but the primary result.
Price
Price is of course what the customer has to pay for the service.
Effort
Effort is to which degree the customer makes an effort him- or herself in the service delivery. If you do your shopping in IKEA you make a great effort yourself – when you pick up your furniture in the stock or remove your service from the table after your meal. The effort reduces the price. If you order roomservice you make a tiny effort but have to pay some more for that luxury.
4 Variables
In this way there are always four variables we can influence in the service concept. Result, Process, Price and Effort. These four variables together constitutes the Value Equation, and all service products is a unique combination of these particular four elements. IKEA, Ryanair, 7-Eleven and Hotel D’Angleterre each work with their own particular combination. The most clever service companies have several value equations operating at the same time – one for each group of customers and situation.
The question now is how does a company create value for its customers? It’s all about understanding how to create value for the customer in any given situation in which the customer expects good service. Value is about giving the customer more than the customer actually expected. Creating value requires employees who understand the needs of the customers. This we call employee productivity.
