April 4

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How your customers measure value has changed

By Ian Johnstone

April 4, 2020


If creating 'Customer Value' is essential to the success of any business, then why do so many hospitality businesses fail to do it consistently? 

The reality is that every customer sees value differently, they have different needs and expectations, and what one customer finds enjoyable or satisfactory will be different from another. 

Historically customer value has always been calculated by the benefits divided by the cost. 

Value Formula Old

Value Formula Old

However, this is no longer the case, because each of your customers are different and each has different needs and expectations.   

Today’s customer value equation

The way that customers perceive value is based on several factors from convenience, quality, price, expectations etc.  

Based on years of research and experience we have identified that customer value can be measured by two equally important elements.

The attractors plus the influencers

Value Formula New

Value Formula New

  • The attractors are what draws customers through your doors.
  • The influencers are based on the experiences that customers have while in your venue, it is these that excite and delight your customers, encouraging them to buy more, rave about you and become loyal customers.
  • Today's customer value equation.

    Customer Service Behaviour

    Customer Value Equation

    What attracts customers to visit

    The attractors are what encourage customers to visit, and these can be broken down into two areas. 

    Attractor 1 - The quality of your product 

    The quality of your product will be reflected by your customer's perception of both your business and reputation.   

    As well as the branded products you serve, such as Coke vs Pepsi, Starbucks vs Nespresso or Radisson vs Hilton hotels.  

    Each of these has a perceived value by customers which attracts them to visit.

    Attractor 2 – The physical cost 

    The physical cost refers to how much the customer will pay. Typically, you can attract a customer based on the business's daily prices, specials (i.e. happy hours) and promotions (i.e. Groupon vouchers) on offer.    

    Example of the Attractors

    Value Equation Attractors

    Value Equation Attractors

    The attractors entice customers through your front door, however, the attractors are: 

    • fixed and employees have very little influence on changing them.   
    • discounting and themes are not an effective way to encourage customer loyalty, as customers will always be looking for the next bargain. 

    This means that having the best products to sell, or the best pricing, is not a recipe for success.

    You can have the best brand, best product and best reputation, yet still create a mediocre customer experience.
    Quotes (2)

    The secret to customer loyalty

    The secret to customer loyalty, increased brand recognition and greater sales is how you make the customer feel.  

    This means that getting customers through the front door is only a small part of the challenge, and why the influencers are so important to creating customer loyalty.

    What Influences customers to continue to buy 

    The influencers are based on the experiences that customers have whilst in your venue. It is these that excite and delight your customers, encouraging them to buy more, rave about you and become loyal customers.  

    There are 3 influences:

    Vaule Equation Influenceers

    Value Equation Influencers

    Influencer 1 - Production 

    The production refers to a business that makes and prepare products  for customers,  these could include everything from making coffee, cocktails or preparing food. 

    Having a good quality raw product is essential, but it takes skill and care by the employees to get it right.

    Customers rate production on:

    • Quality – The standard to which each product is made
    • Consistency – How often they receive the same level of quality from all employees
    • Efficiency – The speed at which your products are made and served

    Example 

     A group of 4 customers sit down at a bar for some afternoon drinks, they make an order for 2 cocktails, a glass of wine and a coffee.    After 5-minutes, the cocktails and wine are delivered, and the group is told the coffee is on its way.  


    After another 5 minutes, the coffee finally arrives.     The waiter apologises as the barista was on a short break, and rushes off to serve another guest.   

    The customer notices there is no sugar on the table and has to look for the waiter.


    The customer may have a received a good quality coffee but it took to long, and would not be encouraged to buy another one. 

    Influencer 2 – Experience 

    Customers rate their experience on how the employee engages them in both 

    • Sales – How employees anticipate each customer's needs, promotes relevant products and encourages further purchases. 
    • Service – How the employees interacts with the customer, before during and after the sale.  

    Example 

    Have you walked out of a restaurant after spending more than you wanted to? 

    • If it was a good experience you might think to yourself – “that was expensive but worth it”.
    • If the experience was ordinary or poor you may think to yourself "I feel like I have paid too much'' or even ''been ripped off''

    Influencer 3 – Personal Cost 

    Personal cost refers to the ease and impact of the experience.  Personal cost can be measured by

    • Time – The overall time taken to go through the entire interaction.
    • Convenience – The ease of service for the customer.

    The challenge with personal cost is that it involves the one thing that we can’t get back, and that’s their time. 

    This is because each customers values time differently based on their individual needs, for example, a worker who has limited time for lunch needs quick service, while a hotel guest who is lounging by the pool is relaxing and has more time to wait. 

    Example 

    Imagine if you had a poor experience in a restaurant and you felt that you needed to complain to them to give them the feedback.  You tell the waiter/ server that you have a complaint and they tell you that “there is nothing you can do and that you have to tell the manager”, and ask you to wait. 

    • How would this make you feel? 

    It takes several minutes for the manager to appear, and after repeating the complaint, they politely inform you there is nothing they can do but you can have 10% of your next visit.

    • How would you feel now? 
    • How likely would you want to return?  

      So there we have it, ''How your employees impact the customer experience''.   The customer experience is no longer about having a good product at a  fair price, it is about: 

       

    • The production of the goods
    • The experience the customer receives
    • The personal cost to the customer

    Hints & Tips 

    Ways to improve the customer value:

    • Train your team for quality, consistency and efficiency in that order. 
    • Encourage everyone to create every interaction with a personalised customer experience.  
    • Encourage employees to be mindful of the needs of their customers. 
    • When things go wrong, get employees to communicate these to customers before they are asked. 
    • Help employees learn from their mistakes.
    • Employees will only provide as good an experience to customers based on the quality of experience they are having in the workplace. 

    What are your thoughts? Do you agree? or Do you have a different perspective? if so then leave your comments and feedback below. 

    Ian Johnstone

    About the author

    Ian is a Sales & Service Coach & Trainer with a background in over 20 years of 5-star Hospitality and Customer Services within Australia, the United Kingdom, and the United Arab Emirates. He works with businesses to consistently achieve great results by designing and delivering interactive, engaging and memorable training programs, tailored to meet the needs of each business, their teams and their customers.

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