Getting Started Online: Finding and Creating Customer Value

By Charles Crouch | 24 Jul 2011

In the second part of his ‘Getting Started Online’ series, Charles Crouch evaluates the online retail value chain and discusses how retailers can leverage this.

Let’s face it. Customers do not come to shop at an online store because it uses the latest technology or has stunning video and graphics. They come hoping the store offers solutions to their problems and needs. They are looking for value, as they see it!

Customers arrive thinking in terms of activities and solutions, but too often companies respond with products and services. While you may be anxious to tell visitors about your product’s newest features or your service’s great benefits, they simply want to know how you can solve their problems.

Companies who can help customers solve problems by providing offerings which fulfill their needs, not just a list of features and benefits, will prevail because they will be perceived as providing real value.

Value Chains Create Value

Creating customer value is frequently illustrated as a value chain: a series of steps that changes raw inputs into finished goods and services. A general example of a linear value chain is shown in Figure 1 – demonstrating how each step follows from the previous one. A company can create value for its customers by adding unique features, benefits, services, etc, at each step in this process. However the customer must see these additions as adding overall value to the offering.

Power Retail - Linear Value Chain

Figure 1. A typical linear value chain.

The Changing Online Value Chain

When moving online, the value chain changes from a linear flow of physical goods and services to a multi-directional information flow. At each step in the production process, information is collected, analysed and distributed to others – this information can also be used to produce real customer value.

For example, customers shop at a given store for more reasons than just low prices, some of which retailers can leverage to create added value to their offering. These may  include:

  • To save time – help customers find the goods and services they want quickly and easily.
  • To lower risk – provide complete information to help each customer to make the best buying decisions.
  • Find products they love – offer products/services customers really want to have.
  • Create a sense of ‘status’ – create communities with special offerings not available to everyone.

All of these factors depend on having robust information about products, services, customers, markets and partners, then collecting, processing and distributing this information in ways your customers find useful.

Power Retail - Information Online Value Chain

Figure 2. Information-based value chain.

Creating Customer Value

There are several ways to create value for your customers that work particularly well online.

  • Releasing Trapped Value for increased efficiency. Creating efficient markets where people can find goods and services easier and at better prices has been done many times online. eBay is a classic example which transformed the local garage sale into a 24-hour worldwide marketplace.
  • New-to-the-World Value creates an entirely new opportunity that consumers will find useful and valuable. For example, the way in which Apple introduced the iPod™, giving consumers the ability to carry a thousand songs in their pocket. Other ways to create new value include providing customised offerings for each visitor, enabling people to build communities of shared interests, and enabling collaboration among people separated by time and distance.
  • Value Bundles/Combinations can produce some of the most powerful ways to create new value. The online world is a flexible place where companies can try new offerings and quickly see what works best. Combinations can be used to disrupt current pricing structures while extending reach and access around the world.

Whatever value creation scheme is selected, providing better information is a proven way to create lasting customer value.

Finding Places to Create Value

Where does one go to find places to create value? An excellent place is activities, which are ready for a change from current practices such as:

  • New-to-market practices.
  • Providing a unique experience for each visitor.
  • Offering special prices, packaging, delivery options.
  • Using and implementing innovations from other business sectors.
  • Helping frustrated consumers complete an existing process.

Many of these activities also involve connecting with stakeholders internally (e.g. operations, finance, etc.) and externally (e.g. suppliers, competitors, customers, etc.) – improving these relationships with better information can create lasting value.

Finally, whenever you hear the phrase ‘Wouldn’t it be great if someone could find a way to ___,’ – then listen carefully. Whatever fills in the blank, there is an opportunity to create customer value.

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