Is ‘Value-add’ Demand ‘Exceeding Expectation’ In Clients?
Customer Satisfaction is crucial given the cost of acquiring new clients versus that of retaining and mining the existing ones. However is “Customer Satisfaction” being reduced to ‘necessary but not sufficient’ criteria towards revenue? Customer satisfaction is a leading indicator of consumer purchase intentions and loyalty for an organization.
However the relationship between customer satisfaction and repeat business is not as simple and straight as painted by the conventional wisdom. There are many reasons for this concern including ever-changing market dynamics. The most critical reason is that clients consider ‘over-dependence’ on a service provider as a risk and consciously develop alternate vendors.
Hence, many a time customer is satisfied with a service provider but seeks someone else who could ‘add more value’. This proves that the equation between customer satisfaction and customer loyalty seems to have one or more missing parameters. One of them for sure is ‘Being perceived as a Value-adding partner’.
Wiki defines Value as “Economic value is a measure of the benefit that an economic actor can gain from either a good or service. It is generally measured relative to units of currency”. The concept of ‘Value’ is closely related to ‘Expectations’. While ‘Delivery Value’ typically maps to ‘Meeting Expectations’, ‘Value-add’ demands ‘Exceeding Expectation’. We’ve seen that Value generation doesn’t happen by accident. It is a process - a well-engineered one that has to be run consistently if it has to serve as an organization strategy. One of the mechanisms piloted is a Value Register.
The basic mechanism is a simple one wherein team members log their ideas which, according to them can generate value for client. In the context of an IT service provider, the suggestions could be around enhancing the client product – its functionality or user experience or performance. Sometime the suggestion could add value to both client and organization. For example produce a re-usable artefact which can save schedule for client and effort for the service provider in current and future projects towards other clients as well. But primarily, it must be client-facing. To ensure better impact on customer, typically the suggestions from the team are reviewed internally before presenting to the client.
A point to note is that the relationship between client and service provider should facilitate such discussions. Service provider will have to create platforms such as Quarterly Business Reviews which would facilitate such discussions.
A lot of ‘priming’ is needed before a team can start generating value-adding ideas to client. For example, the team may need focussed education on client, his business and competition. Otherwise, the larger team may not have a deeper appreciation of client’s business and may operate in a ‘client says, I do’ paradigm. In fact, the fundamental shift from ‘Service Provider’ to ‘Value-adding partner’ is all about this.
In one of the successful pilots of Value Register, 30% of the project team participated in Value-generation. 84% of suggestions generated by the team were accepted by the client. At the end of pilot period, the team found that about 40% of assignments channelized to this team (proportionate to the revenue generated) by the client was triggered by the team itself. Client explicitly appreciated the urge of the team to add value to his business. Very interestingly, the practice of Value-Register was seen to have an impact on employee engagement and hence on attrition and morale.
Institutionalizing of the process may need measures and metrics around value-generation. Some measures that could be considered include “Number of value-add suggestions received”, “Percentage of team participating in value-generation” and “Percentage of projects actively using value register” (org-level). This again implies that the organization must have internal reviews to continuously monitor and ensure the working of this engine.
Implications about Value-add Process:
ð The definition of “Value” changes with time. What was perceived to be value-add at a given time soon becomes a part of expectation and hence ‘basic value’. The service provider must have ongoing mechanisms to ideate and identify avenues to maintain the perception of Value-adding service provider.
ð Value-add is not the only parameter that explains the gap between customer satisfaction and repeat business. Other reasons include change in client’s IT plans due to financial and business reasons etc.
ð Value-generation is not a substitute for basic project practices of the company. Delivering the right product, on-time and within cost continues to be the core and a part of “Necessary” conditions to leverage Customer Satisfaction.
Taking into consideration the above caveats and investing in a robust and sustainable value-generation process is likely to increase the customer loyalty and repeat business.
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