Customer experience strategy is about creating value for customers. It is as simple as that. But, what does this mean? I had a chance to discuss this topic with Mark Addleman, who is a technologist and an economist. This article hopefully explains how CX strategy sees customer value.
What is value:
I believe CX Strategy is about creating value for customers. Before we go further, let’s take a look at the meaning of “Value”.
Wikipedia says, Economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured relative to units of currency, and the interpretation is therefore “what is the maximum amount of money a specific actor is willing and able to pay for the good or service”?
I would like to show a simpler definition of value shared by Mark Addleman. According to him,
“Value = Happiness“
Value is happiness. Humans get happiness from many different ways. For example, a cup of coffee in the morning makes many people happy. When the weather is cold, you might want to have a jacket to keep you warm. Staying warm is another form of happiness. People use money as an exchanging method to get happiness. It might seem obvious but it is important to clarify this concept.
Variation of values depends on the needs:
Happiness (Value) is relative. It often depends on the amount of needs, and how much needs there are depends on the person and time. We are going to define “needs” as “happiness glow” for the sake of making is easier to visualize.
Example: Let’s say there is a cup of coffee. The value of a cup of coffee from an adult who got up in the early morning to prepare for work vs. that same adult sleeping in on a vacation. What about the same cup of coffee in the morning vs. in the evening? Many people appreciate a cup of coffee in the morning than in the evening.
Happiness glow changes depending on the person and the time.
Double inequality of value — Value exchange between two parties:
Now we are going to look at two different people who have different needs. Here, I introduce two people. Nate and Dave. Nate wants to drink a cup of coffee in the morning before he goes to work. Dave runs a coffee shop that opens early in the morning brewing fresh coffee every day.
One day at 7am in the morning, Nate has a $1 bill in his pocket to purchase a cup of coffee. $1 bill has a happiness glow of about level 1. He steps into Dave’s coffee shop and see a cup of coffee that Dave serves. A cup of coffee has level 3 of happiness glow. The illustration below shows the happiness glow from Nate’s perspective.
Nate’s Happiness Glow:
On the other hand, for Dave, the happiness glow on a cup of coffee is about level 1. But the happiness glow on a $1 bill is level 3.
Dave’s Happiness Glow:
The relativities of happiness glow that are illustrated above show the idea of double inequality of value.
Now value exchange happens between Nate and Dave. By exchanging the smaller value to bigger value, both parties gain bigger value for themselves. Both Nate and Dave got more happiness glow at the same time. The important point in this example is that the Happiness Glow (value) is relative. Because it is relative, it is possible to elevate the total amount of value (happiness) in the world based on their exchange. This can be explained as
Total value = Customer profit + Business profit
In this case, “Customer profit = Glow on the coffee - Glow on a dollar”. And “Business profit = Glow on a dollar - Glow on the coffee”
CX Strategy is about elevating Customer profit:
As a CX Strategist, my job focuses on elevate the total value by increasing the customer profit. Let’s take a look at Customer profit. If you express Customer profit specifically, it looks like this.
Customer profit = Customer revenue - Customer cost
If we apply this to the Nate’s coffee example, it looks like this.
Customer(Nate’s) profit = Glow on the coffee - Glow on a dollar
As a CX Strategist, how can we increase customer profit? There are two things can be done to increase Customer profit. One is to increase Customer revenue, and second is to decrease Customer cost. Examples based on the Nate’s getting a cup of coffee example are:
- Make a coffee taste especially good
- Friendly barista
- Lower the price of the coffee
- Easy parking
- Hard to spill cup
- No wait
- Clean store
As you can see from these examples, there are many ways that Customer profit can be increased if we look at the entire experience of Nate(customer) getting a cup of coffee. It is not only about the coffee but the experience and process of getting coffee is the place where hidden opportunities exist. Looking at the customer experience holistically gives this discovery opportunities.
By elevating the customer profit, CX strategy increases the total value for both customers and business.
CX strategy in business strategy:
CX strategy focuses on the Customer profit most of the time. But the most important thing is to make sure that the value that the customer is receiving is balanced with the value the business is receiving. CX strategy elevates the Customer profit in order to elevate the Business profit as well. The ultimate goal is to elevate the total happiness (value) in the world.