5 major business thinking traps
Published on Saturday, 21 March 2015 09:47
Trap number 1: The only thing customers care about is a low price!
‘Low price’ became a mantra. Sellers in all industries constantly complain to their firms that prices are too high. Sales managers then complain to their directors – that prices are too high. Marketers, in turn, are upset because prices are falling and there is no way to raise them! It is visible everywhere that prices are cut, decreased, killed - professionally, amateurishly, effectively and in all other ways. Why?!? The perception that all consumers care about is a low price is completely wrong!
Alright. True. Among all of the factors which were considered when conducting our analysis, the factor which was ranked as being the first in terms of importance was indeed the one which contained the word ‘price’, having received 18.18 per cent of all votes. However, what is worth noting is that when it was voted for, it was in combination with other words or phrases. Customers indicated that they expect ‘prices which are consistent with the quality’! ‘Low price’ was only ranked fourth, having been selected by 6.99 per cent of the respondents.
Conclusion: Be careful and make sure your offer does appear on the “fair line” determined by the price to value ratio (which should be defined according to the customers’ perspective, not yours dear Reader).
Trap number 2: Effective sale is sufficient – afterwards everything will go well
Not true! The customer expectation which was ranked second in the survey was of the following form: “supplier keeps their word”. As we all know, salesmen, in an attempt to meet their targets, tell stories which sometimes are far from reality. The problem is their promises should be delivered. If there is no common understanding within the firm regarding the expectations of the consumers as well as who exactly is responsible for delivering the VALUE to the customers, it is easy to make a mistake to present and promise a vision which is slightly ‘brighter’ than reality. This mistake could be made both through marketing and trade. But in the era of social networks and wide availability of a range of tools for communication, customers can very easily share and verify their views and opinions.
Conclusion: Make your own communication such that all of your employees know exactly what VALUE your firm is offering. Support the desired behavior of your workers with motivation systems which are adequate and incentivize employees to make the right decisions and act in a right way. And prevent your salesmen and marketers from making empty promises.
Trap number 3: If he loves, he will wait!
This is not true! „Fast delivery” was ranked 3rd in the survey, having received 12.94 per cent of the share of all votes. The customer might perhaps wait once, maybe twice. But when forced to wait for the third time, he will leave - very often trying to attract a lot of attention by complaining or having an argument. What makes it even worse is that the customer can do it all online! Furthermore, even if the customer will wait for the fourth, maybe even fifth time, he will get angry and the chance is, he will try to spread his anger and frustration among neighbors, friends on Facebook, family etc. If there will be any other supplier that would be able to deliver the product on time at the same price, the customer will not hesitate. He will buy from the supplier who is able to deliver the product fastest and who is also prepared to go the extra mile to satisfy the customer! Here it is worth noting again that price could be regarded as a necessary, but not a sufficient condition – the price should be low and consistent with the quality, because, as the customer would say “everyone cuts prices for me”. But you can distinguish your firm among other firms only through promoting VALUE – price is not enough.
Concluison: Check how your customers understand the word “fast”. Check how “fast” your competitor is and make sure you are 5 minutes faster. But there are a number of industries where everyone wrongly thinks that customers simply want to have their products delivered in the shortest possible time, while the customers may understand punctuality in a different way. They may want to have their product delivered “when I need it” or “when I can pick it up”. “Speed” can therefore take a number of forms. It is important to truly understand what “punctuality” or being “fast” means to customers in your industry.
Trap number 4: Our famous procedures make it easier to achieve operational excellence
For you, dear suppliers, this statement is probably true. But at the same time procedures limit your flexibility in terms of delivering the VALUE, while “Flexibility in cooperation” was ranked 5th in our survey of customer expectations, having received 5.59 per cent of the votes.
Unfortunately, a number of firms are trying to cut their costs through TQM-, BPM- or 6∑- standardization of their own procedures, systems or processes. And then they are surprised looking at results which are disappointing. Why? Because in the process of reengineering they concentrated on flexibility and comfort. But on their own flexibility and comfort. Not on the VALUE for the customer.
Conclusion: Do not try to improve business processes in your organization if you are not sure what exactly is valued by your customers and what factors such as flexibility mean to them. To THEM. Not to YOU.
Trap number 5: What consumers buy is the product. Therefore we should focus on the product alone, rather than on other things.
In the light of the results of our survey of customer expectations, this statement is completely false. Assuming that the VALUE could be delivered to the customers in three ways, namely, through the quality of the product, the quality of the service (distance, emotions) and a low price, it turns out that the QUALITY OF THE PRODUCT came last in the survey, having received only 20 per cent of the votes. Factors related to PRICE AND ADDITIONAL COSTS (including, for example, extended deadline for payments) came second, with 28 per cent of the votes. The QUALITY OF THE RELATIONSHIP turned out to be undoubtedly the most important factor, with 57 per cent of the votes. Interestingly, the customers responses mentioned a number of other ways to build the VALUE, precisely through the building the relationship. For example:
- Salesman helps me to organize the sale
- The customer control panel is easy to use
- The salesman contacts me in a way which is adequate to my needs and not to his externally imposed standards
Conclusion: Given the prevalent high degree of commoditisation of goods and services, it will be much easier to differentiate your firm among your competitors through the focus on factors building the VALUE for the customers which are product-unrelated rather than through investing in “forced” innovation or, for example, more functions available on the device that you sell...
If you want to know more about business thinking traps and the ways to avoid them, you know who you should contact ;) In addition, I would recommend reading ‘Thinking, Fast and Slow’ by Daniel Kahneman.
About our research:
In 2014, like many other times in the past, EC conducted a research survey in which it interviewed a couple of hundreds of customers within a number of industries, ranging from finance industry, through trade, to production. The research was conducted using the CEM methodology. Each time we asked our respondents about their expectations from specific industries. The results have been systemized (according to the meaning of the responses) and grouped depending to the way of creating value. There were over a hundred of different expectations. The outcomes presented in this article were the result of the analysis based on the twenty expectations which were mentioned most frequently.
Please note: Thinking traps which were described in this article are the result of comparing the opinions which were prevailing in the firms for which we conducted our research and the real expectations of their customers.