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 understanding 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 is rarely a 48-inch B&O wide screen, gold faucets, or designer furniture he or she mentions.
Value in service companies can be illustrated in a value equation:
What is the primary need of the customer? If I want to go to Paris, it’s just 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.
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 analyze our processes in terms of what creates value for the customer because it almost always increases the expenses. The Ryanair concept aims at minimizing the processes of getting from A to B, leaving the customer with almost nothing but the primary result.
Price is, of course, what the customer has to pay for the service.
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 room service, you make a tiny effort but have to pay some more for that luxury.
In this way there are always four variables we can influence in the service concept. Result, Process, Price and Effort. These four variables together constitute the Value Equation, and all service products are 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.