It used to be received wisdom that ‘a good product speaks for itself’. You don’t hear that so much nowadays. Why? Because the product alone contributes a diminishing proportion of the overall lifetime value from each customer.
It certainly helps to have a great product at the heart of your proposition. What I’m saying is that this can only account for so much of the value that a customer perceives and is willing to keep paying for. The rest is ‘service’.
Deciding to differentiate your offer in terms of service is by no means straightforward. It invariably requires cultural change as well as an organizational evolution.
But in many instances, businesses can gain faster market traction – and make more of a difference to customers – focusing at least as much on the service route as by trying to create a unique product.
Service enables distinctiveness and authenticity
And speaking of unique products – aren’t these becoming as rare and elusive as the proverbial unicorn? Do any of them get their uniqueness from an inherent aspect of product design or capability? Think about it. It seems far more likely they will have achieved differentiation via the distinctive value or ‘personality’ of their service experience.
What’s more, service is what brings customers coming back – increasing their LTV. The Pareto Principle, where 80% of future revenue is anticipated to come from 20% of your current customers, can’t entirely hinge on getting your product honed to perfection.
This is skewing further toward ‘service’ as consumers deepen their engagement with the growing subscription economy where everything is a constant experience and providers’ products are constantly updated.
This happens regardless of whether or not your product is offered on a subscription basis, by the way. Welcome to Digitalizationville where even car manufacturers (e.g. Tesla) provide regular over-the-air updates that enhance product features and functionality – all as part of the service. This is what customers increasingly expect.
But think about this for a moment.
It means that the actual, physical product you buy is now capable of doing things it couldn’t do a moment ago. That’s actually quite an incredible leap.
Your car can go faster, or be more efficient. Your phone can measure distances or understand new languages. The product you buy today can morph and adapt over time to bring you a better experience.
Customers love the sound of Sonos
There are plenty more examples where businesses have grasped the opportunity to deliver an experience rather than a commodity.
Take Sonos, who have succeeded in capturing significant global market share and a great reputation through an awesome combination of product and service.
Sonos is the wireless home audio product that gives users great flexibility and control over listening to their media, at very high quality.
But the product is only half the story. Whether you’re visiting one of its boutique, experiential stores, cruising the website or phoning up its award-winning tech support, Sonos is extremely focused on maximizing the customer experience.
The accent is on wanting to help customers get the very most out of their Sonos purchases, rather than nakedly trying to make more sales.
Customers love the Sonos product, and that counts for a lot in terms of the overall value mix. But as the graphic below illustrates, throughout the customer lifecycle – trying out, buying, getting used to how it works, living with it for potentially years, and then looking to replace – service plays an increasingly dominant role. The product is not just physical – it is a blend of the physical unit with the Sonos app, the Sonos Alexa skill, future updates and usability, the support and the service all rolled into one.
Service is the competitive edge
What Sonos as an organization completely understands is that, as much as its product is innovative and high quality, other consumer electronics offerings out there deliver much the same functionality.
That’s why they set about slaying the competition on customer experience; not just delivering exceptional standards of service but setting the right tone in how they engage with and support the customer throughout their lifecycle.
Crucially, Sonos is able to cultivate and increase the yield of its service delivery by using it to drive business intelligence that feed improvements back into the customer experience.
In other words, while the product itself contributes a fairly static and predictable level of value, the way that Sonos (and others) uses its customer service/support delivers two streams of fluctuating value: one that seeks to address and anticipate customer questions and requirements – thereby delivering high levels of satisfaction – and another that collects and analyzes real-time feedback so that the business learns how to improve its product and service proposition – thereby safeguarding additional LTV.
If you want more feedback on how your service organization is doing, in an increasingly LTV-driven world, give Customer Thermometer a spin for free.
We’re the service feedback experts; actionable customer insight, in just one click.