As mentioned earlier, Products and Service together create the Customer Experience. In business, this is called Industrial Design. Customer Value can be visually depicted through the use of a geometric Venn diagram based on three circles.
If you are successful in delivering your Product and Service at a particular price point, the customer realizes value and purchases your offering. The trick is to deliver what is valuable to your customers that your competitors do not deliver. If you are successful, you are operating in a Profit Zone.
Please note that many companies fight for profit in the Commodity Zone and are disappointed and frustrated with low profit margins. This is because you and your competitors are fighting for the same customers by offering similar Products and Service. Even more tragic are the companies that provide offerings to customers that have no customer value. This occurs when you operate completely outside the Customer Needs circle. These efforts are hopeless.
Your goal is to create a unique, valuable consumer experience so you can operate in a “premium” Profit Zone. Once you reach this “Zone” the next goal becomes what you can do to continue to be unique and valuable. If you are successful over time you will be rewarded with loyalty and the profitability that comes with it. (Click this link to check out a parallel and in-depth explanation of "Three-Circle Growth".)
Loyalty influences profitability in a huge way. This relatively new area of business thinking was recognized by Frederick Reichheld in his 1996 groundbreaking book: “The Loyalty Effect.” Reichheld was perplexed why some businesses that seemingly operate like their competitors are so much more profitable. He looked at a multitude of factors. His findings electrified the business world.
This Reichheld chart summarizes how Loyalty increases profitability over time, in many ways and in a dramatic fashion. If you are able to retain customers for two years or longer, you can see how profitability multiplies substantially from a variety of factors. Most successful companies loyalty ranges around 80% - or more. Reichheld also found that increasing loyalty five percentage points can increase profitability 75% or more over time. It becomes obvious that getting your Product and Service “right” so that it positively influences loyalty can be a real win for your organization.
Three basic steps are needed to reap these rewards.
If you are successful in delivering your Product and Service at a particular price point, the customer realizes value and purchases your offering. The trick is to deliver what is valuable to your customers that your competitors do not deliver. If you are successful, you are operating in a Profit Zone.
This Reichheld chart summarizes how Loyalty increases profitability over time, in many ways and in a dramatic fashion. If you are able to retain customers for two years or longer, you can see how profitability multiplies substantially from a variety of factors. Most successful companies loyalty ranges around 80% - or more. Reichheld also found that increasing loyalty five percentage points can increase profitability 75% or more over time. It becomes obvious that getting your Product and Service “right” so that it positively influences loyalty can be a real win for your organization.