Jesper Hansson, Business Area Director of Pricing APAC & MEA, Electrolux
Looking across industries in 2019, from B2B to B2C, across newer industries such as online retail to ride-hailing, it is all apparently clear and have been for many years, that your efforts needs to be focused on customer value creation.
The topic of customer centricity has been around for many years by now, but still most companies fail to do it right. Customer centricity is not just about offering great service, it means offering a great customer centric experience from the awareness stage, through to the purchasing process and finally through the post-purchase process and after sales service. It’s a strategy that’s based on putting your customers first – letting them sit as an anchor at the core of your business. You quite simply need to be able to put the customer first at everything you do.
Today, a large number of companies are still keeping focus on cost optimization, but let’s be honest, we have all optimized supply chain, manufacturing and procurement costs over the last two decades and we are so good at it now, that cost optimization doesn’t really give us that much return on the bottom-line these days. We need to start optimizing using the most important business lever of all and that is of course pricing. We need to get the balance right when it comes to the right price at the right moment, through the right channel to the right customer (segment) – and this is not easy. Customer perception of value changes on a daily basis. There are new entrants into our markets every year – if not every quarter or month. Our competitors launch new products that will straight away eat into our revenues.
Pricing according to customer centricity and value is hard, don’t get me wrong here. We are doing business in a world, where we have to deal with the internet, which has created a platform for extreme price transparency.
We are doing business in a world, where we have to deal with the internet, which has created a platform for extreme price transparency
This is where the truly customer centric organization wins every time. The organization that believes that without the customer, they cannot succeed. It is all about value creation and passion. Believing in the value of your product and ensuring that your organization works together as one from development stage, pre-launch of products, launch, through to branding efforts and marketing communication and understanding customer behavior and ensuring that we have the right customer insights. Everything in the customer centric organization needs to be 100% aligned. Sales, marketing, branding, pricing and service offerings need to be aligned with the right price. Your price is and will always be your products most important statement. E.g. seliing a large flat screen TV at $149 does not signal quality and premium product.
To boil this down, get to know your customers intimately. Most companies have amazing CRM tools these days – use these tools to acquire customer insights through your sales force. Ask your customers and do studies on their willingness to pay for your product and which features and benefits they are willing to pay more for. Today there are very cost-effective ways of doing this through specialized consultancies that only focuses on pricing research.
Structure your value communication about what the customer tells you they value, and get away from the engineering driven pricing trap of pricing your products according to product features or competitive offerings.
At the same time, get your customer segmentation right. A bachelor living in a studio apartment does not often require the same product/value offering as a family living in a landed house with 4 kids.
Finally, ensure that you stay in contact with the customer through the whole sales process, which includes differentiated service solutions and frequent communication about new products, as you don’t want to miss out on that replacement sale.
A study by Deloitte, in July 2017 concluded that “Client-centricity is the most important factor in a successful business digitalization, since client-centric companies are 60% more profitable compared to companies not focused on the customer”.
Customer centricity and customer centric pricing is all about how well you know your customers’ needs and what they value, as well as what they are willing to pay. The rewards when it comes to profitability is massive. You need to get started today or you will be left behind by competitors who knows their customers better than you.
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