I explained last time how to use the customer groups/needs matrix to define and size business development opportunities (see here).
I then promised to explain how to use the “Value Curve” to plan and manage the capture and retention of customers from any such target segment, and thus build sales.
(Sorry, this is yet another case of sloppy terminology in management issues – “value” here is nothing to do with cash. Rather, it refers to the “values”, “benefits”, or “needs” that customers seek from some product or service)
Reasons to buy
We are trying to understand [a] how important to customers are different reasons-to-buy and [b] how well does our product or service (and those of our rivals) meet those needs. Here’s an example.
Beyond Meat (BM) offers non-meat food products through supermarkets and food-service channels. Its core proposition is that its products are indistinguishable from equivalent real-meat items.
This figure shows BM’s assessment of [1] the relative importance that target consumers place on various factors, [2] how well they reckon that their products match that importance and [3] how well they think consumers may rate typical competing non-meat food alternatives.
Beyond Meat’s view of target consumers’ Value Curve for its non-meat products
(This curve can be roughly estimated from simple customer research, but more rigour is possible by applying ‘conjoint analysis’. The Value Curve featured in “Blue Ocean Strategy” (2014) by Chan Kim and Renée Mauborgne, though the book says little more about its use.)
Three customer behaviours
However we go about assessing our products’ fit with customers’ needs, we are aiming to influence 3 key behaviours:
- Get potential customers to start buying the product. “BM food promises to be so like meat that I will try it”
- Retain current customers “I like BM products so much that I will continue buying them”
- Increase sales to current customers “BM products are so nice, and good value, that I will buy them more often”
… so quantify the items in this next diagram. At what rate will we win and retain customers and drive their purchase rate if our Value Curve is a good fit for their needs.
BE CAREFUL!
Our own beliefs – no matter how strongly held – are not good enough. We must understand what factors truly matter to which customer-groups, for which needs (see my last post). Beyond Meat unfortunately imagined that many people might eat non-meat products, if only they were exactly like meat. It turned out there were rather few such people. So when the product trialled with key retailers, sales rates were disappointing.
Then there are other details to get right:
- The Value Curve could look very different for different customer group/need segments. So don’t waste money and effort trying to win groups where the fit is poor.
- The mix of factors driving each of the 3 behaviours may differ. E.g. price may be less significant for driving the customer win-rate but more important for their subsequent purchase frequency.
- What we offer can be changed – maybe with R&D for physical product characteristics or with service-style changes.
… and more.
The Value Curve features in our online course on standard strategy methods – a full “Strategy 101” primer for anyone needing to get quickly up-to-speed on developing and delivering business strategy … with a strong emphasis on implementation.
Get the “Strategy for Leaders” course here.