Customer demands may spell a new world order

Which would you prefer: a signed, authentic original by Picasso, or a blank canvas, with Pablo himself standing next to it brush in hand, ready and willing to paint the picture you ask for? If you, like me, would opt for the man himself, you would be part of a growing trend.

According to a new book out this week, consumers’ increasing desire to access companies’ overall capabilities (Picasso himself) rather than just finished products (the painting) is a trend sending shock waves sweeping through the world of marketing and brands.

Marketing buzzwords such as customer service, loyalty, relationship marketing, and customisation are all part of this shock wave. But they fail to recognise its full import which is, argue Simon Knox and Stan Maklan in Competing on Value, that customer value “stems increasingly from processes outside the remit of traditional product brands and brand management” and that as a result, “a gap has developed between customer value and brand value”.

Many marketers will find Competing on Value an uncomfortable read – one senior packaged goods marketer remarked that it is “a vision of hell”. But the challenge it presents is compelling.

Take some simple customer “wants” such as the following: “I want to know that I can reach this company the moment I need help (whatever the time is) and that I will get this help without major hassle or being made to feel a complete idiot”. Or “I want to know that the spare part I need will be delivered by tomorrow morning”. Or, “If the company itself can’t solve this aspect of my problem, can it provide someone else who can – whose quality of work and honesty it will vouch for?”

Questions like these are increasingly important to customers in both business-to-business and consumer markets. But the answers aren’t coming from brand managers. Instead, they’re coming from those charged with responsibility for customer service, logistics, strategic alliances and so on.

What companies now need to do, argue Knox (professor of brand marketing at Cranfield School of Management) and Maklan (a principal consultant with CSC Computer Sciences) is to shift from a “make and sell” to a “listen and serve” mentality. They need to move away from product brands and their unique selling points to building up the organisation’s overall ability to serve its customers – what they call its unique organisation value proposition, or UOVP.

While USPs are often visualised as a series of concentric rings, Knox and Maklan reflect their process-oriented approach by depicting UOVP as a cable which connects with customers through five wires which deliver value, plus a sheath (made up of things like reputation, brand and customer portfolios, and products and services) which aligns these wires to create a uniquely differentiated offer.

The five internal wires ram home the revolution in marketing envisaged by Knox and Maklan. The first wire is supply partnerships. Traditional product brands hide these from customers because their focus is the USP. With UOVPs, however, organisations’ ability to rally the right partners becomes an explicit part of their brand proposition.

Take cars. As brand manufacturers become less able to design and specify critical components (such as microchips and specialist materials) they rely increasingly on suppliers to create new consumer benefits through their understanding of evolving technologies, argue Knox and Maklan. At the same time, they are trying to round out their offer through additional services such as after-sales service and, in the future, navigational aids. Result? “Car makers will move from being ‘metal bashers’ to business systems designers,” they predict. Whoever forges the best partnerships will have the best brand story.

Likewise, the second wire of asset management. For some customers, knowing that the organisation has a special physical asset or expertise can be “an effective differentiator”, the authors claim.

The third wire is what they call resource transformation: the organisation’s particular skills in turning inputs into outputs. Again, this was invisible under the old model but is becoming an increasingly important brand differentiator. Dell Computers, for example, has made the fact that it only makes to order and deals direct with its customers an explicit part of its brand proposition.

The fourth wire is customer development. “In many organisations, there is a gap between the management of customers and products,” the authors argue. Rather than seeing customer relationships “merely as a by-product of the sales of individual products or services” they should be “based upon the estimated life-time value of each customer across the organisation’s brand portfolio”.

That sounds blindingly obvious, but it has far-reaching implications. Take a company like Nestlé. The Nescafé brand manager may know his own consumers intimately, and so may the managers of Kit Kat and Buitoni. But does Nestlé know how many Nescafé brand loyalists also buy Kit Kat and Buitoni? If it could gather this information, what could it do to increase the value, not of its brands, but of its customers, by finding ways to encourage them to buy across the whole portfolio?

Which leads to Knox and Maklan’s fifth wire of marketing planning. Through UOVP it moves to a new level: developing the organisation’s overall ability to maximise the value of its customer relationships, as well as its brands.

Twenty years ago, marketers won their business spurs by being what Knox and Maklan would call excellent “business systems integrators”. They aligned and connected companies’ internal productive know-how with external customers through brands. Today, brand building for its own sake is “a self-indulgence”, declare the authors (both of whom cut their marketing teeth with Unilever). Marketers need to redirect their talents towards “developing business systems that add value to customers”.

It’s easier said than done. Few of the emerging elements of customer value described by Knox and Maklan fit marketing departments’ traditional obsessions. Yet if they are right, the more marketers ignore them, the faster the gap between brand and customer value will grow, and the more marketers and their brands will be sidelined.

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