Creating Value Start With Customer Value or Business Value?

 

Someone sent me this video posted to LinkedIn where Teresa Torres explains why you should start with business value. Here’s a transcription:

“An opportunity solution tree starts with a business need, the outcome, at the top of the tree. Next, we map out the opportunity space by exploring unmet customer needs, pain points, and desires. Some people ask, ‘Why don’t we start with customer needs?’ A product team’s job is to create value for the customer while creating value for the business. If we ignore business value, our solutions won’t be viable over time. If our products aren’t viable over time, our products will be shut down. Or worse, our company will go out of business. When that happens, we don’t create any value for our customers. So to maximize customer value, we have to start with business value.”

Oh, put on your critical thinking hats! This one’s easy.

Are we customer-centric?

We can’t say we’re customer-centric or user-focused if users and customers aren’t considered first. Customer-centricity doesn’t mean we ignore or work against business value. Claims or implications of this type are straw men.

Companies are unlikely to work on projects that don’t create enough business value. But you can start by looking at what the customer needs and then tie that to business goals. Work to balance both of them to create more win-win scenarios in your products and services.

But “our solutions won’t be viable over time if we ignore business value!”

1. Nobody said we should ignore business value. Straw man again. You always balance customer needs and business value. The better you understand customer needs and deliver value related to those unmet needs, the more business value you will likely create. Better word-of-mouth, more loyalty, higher spending, more frequent spending… so many wonderful business positives await teams and companies who are customer-centric.
2. It’s true that your solutions won’t be viable over time without business value because the business is unlikely to put resources or budget behind something from which it doesn’t gain revenue or achieve goals. So that makes sense.
3. But your solutions won’t be viable nearly immediately if you aren’t focusing on the real needs and tasks of potential and current customers.

Let me say that again.

Your solutions won’t be viable nearly immediately if you aren’t focusing on the real needs and tasks of potential and current customers.

I am worried less about “the solution won’t be viable over time” if the solution is partially or wholly wrong (for our customers) now.

Customers expect quality, value, solutions, help, efficiency, speed, and satisfaction. If this is secondary at your company, customers know it. You can tell. As a customer, you can tell when a product, service, website, app, or something else was really designed for you, what you need, and how you think. You can tell when a product, service, or something else was created to improve something in the business, but you are a pawn, an afterthought, or in unethical cases, a victim.

Since most companies right now pray at the altar of speed over quality, customer-centricity, quality, and value can be your differentiation. You can stand out from other companies by being the one that took the time to conduct qualitative research with current and potential customers, deeply understand them, and craft the right solutions to the root causes and real problems. And that’ll make you wild money because people love that. 🙂

Does starting with business value maximize customer value?

This sounds like, “We will put business goals and needs first. And then we’ll do whatever we think is best or good enough for customers within the box of what we pre-decide is best for the business.”

Starting with business goals doesn’t guarantee any customer value. We might be business-centric and product-led straight into our usual cycles of building the least we can and hoping that we fool customers into thinking it’s good enough. This fantasy should be replaced by the harsh reality of the costs and negative effects of Customer Support utilization, complaints, poor ratings or reviews, and Sales having trouble selling whatever it is that we offer. But we normally hold on to the fantasy, and look for the KPIs the business wanted to see.

I have not yet seen a company put business goals first and have that translate to “maximum” customer value. I think about crappy KPIs that leaders and execs are focused on, and how projects become the creation or optimization of product to push more business value.

Starting with business value is business-centric. We can hope that we will still create some or a lot of quality and value for the customer. But it sounds secondary because it is.

If the customer needs a car, the business sees more value in building the customer a bicycle, and we build a bicycle, did we maximize customer value? Did we care about customer needs or value? Can we say #empathy and, “We really empathized with our users”?

We know how often we didn’t deliver enough or any customer value.

We might pretend everything is just fine, but we know when our teams didn’t deliver customer value.

• We are wondering how to get our NPS higher.
• We are wondering how to reduce Customer Support utilization about our feature or the area of the product our team owns.
• Salespeople report that customers are threatening to leave, leaving, or downgrading because of whatever we just released, or the lack of the features and fixes customers really needed.
• We want to start optimizing and A/B testing changes and fixes in the hopes that things look better for somebody, usually the business.
• We miss our own KPIs or OKRs for the project, and should be accountable to someone. But PMs and teams are rarely held accountable, which is another problem.
• The Voice of the Customer says our product is broken. Tweets, posts, reviews, and complaints say that this doesn’t work how it should.

These and more are signs that you built for the business and not for the customer. They’re also signs that you didn’t have or didn’t work from great early generative qualitative research, which would have supplied the evidence on which you would base strategies and decisions.

Product Management should be strategic, not just taking orders from the business.

The best Product Managers will know how to create business strategies, goals, and decisions around customers’ unmet needs. If the business wants a customer to click Button X more, but the customer wants to click Button X less, a great PM needs to show the business the longer arc of how catering to the customer creates short- and long-term business wins.

This is part of the product and service strategy work that we do at Delta CX. We start with great qualitative research. We learn who target audiences are, what they need, how they do things, and what we have the opportunity to improve or innovate. We then tie those to goals the business already had. Or we advise companies on new goals or changing their strategies because of the opportunity for even greater gains when we truly deliver high quality and value to our customers.

Is there a tree or map that puts the customer first?

I created my Delta CX Impact Map to be the opposite of normal impact maps, opportunity trees, and other diagrams that only or mostly represent business value. My Impact Map starts with something the customer needs, maps the root causes (which we would know based on qualitative, preferably observational research), highlights the negative impacts on the business without this solution, and some of the KPIs and positive business impacts we’ll see if we create what the customer needs. Win-win.

You can learn more about the Delta CX Impact Map in my YouTube video or in chapter 18 of my book, “Customers Know You Suck.” Article coming in the future. 🙂

Be careful of logical fallacies and other tactics used to distract and confuse you.

It can be hard to separate good and bad ideas when claims escalate quickly to, “The company will go out of business and you will lose your job.” Your natural reaction is, “OMG! I don’t want to lose my job! I’d better put business value first!”

Stop, breathe, process what you heard, and think critically about it. Be careful of straw man arguments. You can (and should) be customer-centric while identifying and growing business value. These don’t have to be opposites, and shouldn’t be played as such.

I expect people who offer customer-peripheric (anti customer-centric) advice, training, books, etc. to double down, and possibly use more of these logical fallacies and fear tactics. If they switch to being customer-centric now, that would undo everything they’ve sold you so far, which would be bad for them; you’d have many questions about those books or training you paid for. Rather than have to explain why they now recommend the opposite of their book or training, I expect these authors to double down and use logical fallacies to try to make you think you must do it their way.

Keep that critical thinking hat on, and consider what authors and trainers (including me) suggest.

Business Goals Should Stay Away From The Tactical

 

One common mistake I have seen business leaders and executives make is to be too specific about goals and metrics. They might demand that product teams create or optimize for a particular button to be pressed. This is where the business is now interfering with the strategic nature of product teams, over-focusing on the tactical, and treating their teams as order takers.

This is where you need a strong person and critical thinker in a Product Management role, whether or not that is their title. Perhaps they are an Experience Strategist, Service Designer, or CX/UX Researcher. This person should be working with leaders from various domains, and possibly executives, to push back against these demands or peel away the layers of the onion. Executives might imagine that we should focus our efforts on this single button, but is anybody asking why or what we are really trying to achieve?

We must also consider our North Star Metric, which should be an early leading indicator of customer or user success. If the NSM is “get people to press this button more,” this is probably the wrong KPI. Teams and leaders should speak up about this rather than just accepting that their efforts will be aimed at raising the wrong number.

The Experience Strategist should capture key business goals and desired business outcomes. This might come from high-level leaders, strategists, or executives. These are likely to be broad and common goals such as increasing revenue, increasing customer satisfaction, more leads, more conversions, and higher retention. The business will have specific targets for these goals in a given quarter or year; next year, we expect our NPS to go up 15 points, conversion rate to go up 2%, and 5% higher retention than this year.

From there, leaders should trust their project teams to be close enough to our products, services, and target audiences to make the right decisions and arrive on the best mechanisms to achieve business and customer goals. Teams can research, strategize, prioritize, design, test, and iterate before Engineering writes a line of code or we experiment on the public. Teams will cycle their way to finding the best experiences they can create, solving customers’ problems while achieving business goals.

If you want to empower your project teams, the business must stay out of their day-to-day work and decisions. Project teams forced to be order takers might not enjoy their work, and might quit the first chance they get. They might find their work uncreative and not strategic, especially if they disagree with the orders they have been given. Great project teams are problem finders and problem solvers for the business, and potential and current customers.

Stop telling teams to make people click this button more. Don’t tell them exactly how a product page should lay out, how checkout should work, how people should save their money, or sign up for enterprise software. Give your teams the higher-level business goal, and let them find the best win-win scenarios for everybody in your internal and external ecosystem.

How Much Money Is Worth Losing A Customer?

 

Every company wants to attract new customers, make them happy, and keep them. We claim to care about customer loyalty, and we love to survey people to see if they are likely to recommend us to friends. But when they have a problem, how far will we go to resolve it in the customer’s favor?

If a customer wanted a $5,000 refund that we didn’t think they fully deserved, is it worth refunding them to keep that customer? What if they wanted a $500 refund or a $50 refund?

What amount are we willing to spend to retain a customer even when we believe they are in the wrong or don’t deserve the refund?

We should be clear on this number, and then we need to train and empower our Customer Support staff to be able to make the call, and offer a partial or complete refund.

We might calculate this number based on average Customer Lifetime Value (CLV). If our CLV is $5,000, it doesn’t make sense to give a $5,000 refund just to keep one customer. If our CLV is $10,000, and they want a $500 refund that we don’t think they deserve, it could be worth extending a “one-time” courtesy refund try to keep them happy and retain their loyalty.

The earlier we lose a customer for any reason, the more likely it is that our CLV will decrease.

I thought about this after an extremely unpleasant experience with RentalCars.com and Avis rental car over $450 USD.

Even though I was picking the car up in Dallas, Avis claimed that they would not honor the reservation unless I could produce an Italian driver’s license. I told them that I live in Italy and carry proof of Italian residency, but do not yet have an Italian driver’s license. I explained that all of my other RentalCars.com reservations have never required an Italian driver’s license, only a valid driver’s license. Plus, I’m in America and I’m showing them an American driver’s license.

Ultimately, Avis decided that they would not honor the reservation. They would mark me as a no-show and cancel it. Since the reservation was prepaid through RentalCars.com, they told me to contact RentalCars.com to pursue a refund.

The next day, I contacted RentalCars.com and told them the story. They told me that they would consider giving me a $300 refund if I booked another car through them right now.

Is this extortion?

I have never seen any terms and conditions that require me to immediately do additional business with a company to get a refund on previous business done with the company. I’m angry. I’m dissatisfied. I’m asking for a refund. I do not want to book another car with RentalCars.com.

While I waited for the chat agent to escalate this and get advice from someone else, I checked the terms and conditions of my rental, which indicated that I only needed to show a valid driver’s license. I don’t need to show a license of any particular country. Ultimately, my rental car booking was cancelled by Avis because they invented terms and conditions that didn’t exist.

RentalCars.com would not back me up on this for reasons they could not explain. They just kept writing (in the chat), “We’re sorry, Deborah.” They would only offer me a partial refund if I booked another car with them immediately. This does not resolve my problem, and only served to make me angrier and more frustrated.

I lost trust for both companies.

But this ripples out. RentalCars.com is owned by Booking.com. I’m starting to think that my loyalty is best placed in the companies with whom I have had good experiences and my brand loyalty was rewarded.

I was loyal to RentalCars.com. I had recently decided to try being 100% loyal to Booking.com, booking every hotel room I needed through them. Now I’m thinking it will be better to go back to booking both my rental cars and hotel rooms directly with companies, and utilizing their loyalty programs.

Rental car and hotel companies can make this easier on me by charging the same or less than I would find on Booking.com or RentalCars.com because ultimately, this feels like a crappy game for everybody.

In this story, Avis loses a first-time customer. RentalCars.com loses a longtime customer. And although I’m just a few stays away from Genius Level 3 on Booking.com, they’ve probably also lost a customer.

I understand that none of these companies might care that they’ve lost me. They might not care that I’m talking about it or writing an article about it. And I don’t really expect them to care because I can tell from the way that my complaints were treated, someone decided that my $450 was worth playing games with what should have been clear terms and conditions.

Someone at these companies decided that it was better to keep my $450 than to make an exception, if they thought I didn’t deserve the refund.

Perhaps this indicates that on average, there is a very low CLV for Avis and/or RentalCars.com, and that people are generally not loyal. Because as we estimated earlier, a customer worth $10,000 might be worth giving even an undeserved $450 refund to smooth over a problem and win their loyalty. At a CLV of $1,000, perhaps it’s not worth it to give away $450 refunds when you don’t believe the customer deserves it.

These companies probably hold meetings asking how they can generate more customer loyalty and a higher CLV. I wouldn’t have all of the answers for them without researching their internal processes, quantitative data, and doing some qualitative research with potential and current customers. But I do believe that part of the answer lies in this story.

We can claim that we care about customers, but we mostly care about them in numeric form: the lines on a spreadsheet and the numbers we present in slides.

It is evidently more important for Avis or RentalCars.com to show my $450 in revenue this month, quarter, or year — plus the revenue of others in situations like mine, where they didn’t get a refund they deserved — than to consider the unfairness of the situation and give an appropriate refund where one is due.

Just to be done with this situation, I might have accepted a $300 refund from RentalCars.com, but that was extended with conditions that were unacceptable. Again, this signals a need to “make the numbers” versus prioritizing customer satisfaction, especially in a case where the terms and conditions were in my favor and I deserve a full refund.

Making a partial refund contingent on an additional purchase shows a desperation to inflate numbers like CLV or the total number of bookings the average customer makes in a period of time. This is where we see KPIs and metrics being treated as more important than customer experiences.

Make sure your teams and company are having conversations about the value of a customer. The customer should always receive a refund when they are in the right and the terms and conditions are in their favor. How much of a refund are you willing to give a customer who you believe is in the wrong and does not deserve the refund?

Also consider the power of loyalty and word of mouth.

Have you ever tracked complaints, disputes, and claims in your system and how often those customers buy from you again? Do you have a sense of what percentage of angry and frustrated customers return when they feel a sense of resolution versus when the situation is not resolved in their favor?

If you have estimated or calculated that, you have a sense of how likely it is that the customer who believes that the situation was not satisfactorily resolved will buy from you again. You understand the risk of knowingly leaving them unhappy. You’ve already made them unhappy. And now you’re going to leave them unhappy and — to them — unresolved. The ticket may be closed and marked “resolved.” But it is probably not resolved from the perspective of the customer.

It’s hard to estimate or calculate how much business you lose when an unhappy customer tells friends about their experience. That might be a Facebook post, a tweet, a blog post, or just a friendly conversation. Someone says, “Hey, we’re going on vacation, and we’re going to get a rental car.” And the other person says, “Well, whatever you do, don’t book with Avis or RentalCars.com. Listen to my story.”

Over 15 years ago, I heard the statistic that due to social media, an unhappy customer can quickly share that unhappiness with 3,000 people. That seems possible when we consider how many connections and followers people might have on social media sites, where they might broadcast unhappiness with a brand.

This then ripples out to people I don’t know. Someone says, “I have to travel out of town to go on a business trip, and I’m going to need to rent a car.” And the other person says, “Oh, I follow Debbie on LinkedIn, and she wrote this wild post about Avis and RentalCars.com. It sounds like you shouldn’t book with them.”

The people in all of these hypothetical conversations might still have brand loyalty and certainly have free will. They might still book with Avis or RentalCars.com. But we must consider the risk of negative word of mouth.

We have direct losses from the customer we couldn’t retain. But we might also have indirect losses from the people who heard a negative story first-hand, second-hand, or third-hand from the unsatisfied customer.

I’m not suggesting that you throw high-value, undeserved refunds at low-value customers.

While I care about customer satisfaction and the customer experience, I know that the bottom line is money, and we must make calculated and deliberate decisions. I’m suggesting that we be clear about the value of a customer whose loyalty we are hoping to win and keep, and how we empower Customer Support Representatives to provide more satisfactory resolutions to problems we caused or are ultimately responsible for.