Customer Expectations Levels & Relative Derived Value: Bridge for Growth or Risk Dying

Think back to your last major purchased items or supplies in the last two years, or briefly reminisce on your recent engagements with your services providers (auto repairer, mobile network operators, logistic fulfillment firms, insurance companies, consultants, management firms, SaaS & IT providers, suppliers, brokers, bank…etc.)

…or the last five to eight apps you’ve tapped on your smartphone today, or the last ten websites you’ve visited on your desktop browser in the last 72 hours...

...maybe the last time you visited an administrative agency or requested the "typical stuffs" from your local municipal office, or your last couple of meals at a restaurants or in general, your last procured services or goods that were of interest to you.

You probably remember how you felt when you were done, and your approximation of such service(s) or product(s)' worth in actual value, and your intrinsic experience in retrospect.

How was it?

Did you like the experience or despise it?

What do you think of the company, entities or people that provided the services or supplied the products? 

How would you have described your feelings afterward?

Suckered or Wow?

Or just indifferent - not bad and not cool? Just tepid...

Did you wish there were better alternatives? 

Moreover, if you were to do it over again with all the prevailing conditions, will you procure the same service or purchase that product from the same company or provider?

Customer Expectations Levels in our Changing Times - The Boom or Doom of Businesses

At this moment in time, we’re arguably in the middle of the Fourth Industrial Revolution, and during a period of frenzy, such as the current one, things do change at a higher pace than in other periods.

And unless you’ve been living under a rock somewhere in a far far away land of Fantasia, you must have definitely been acquainted with the enormous power customers wing in today’s global economy and how swift the winds of change in terms of trends, customer’s tastes and preferences are dictating innovation pioneering, the landslide disruption potential of high valued products and services across cross-sectional industries and the resultant net decline. 

If you doubt that, ask the Eastman Kodak’s management executives of 1975, or Nokia’s managing executives of 2007, or the Borders’ management, Blockbuster’s CSuites, or Yahoo!’s innovation board, or the good ol’ Taxi industry and many B2B and B2C defunct or declining entities who were once the perfect paragon of growth and innovation. 

While every company fundamentally wants to create brand loyalists so that their customers or potential users could continue to want more and buy more, on the other hand, today’s customers and the "average Joe" is increasingly becoming commercially savvy on the other end of the rope.

Invariably, we are in the best and worst of times for business decision makers.

Why?

Usually, most businesses aren’t too concerned in asking “How do we provide more value to our customers by delivering on their expectations or surpassing them in order to achieve our overarching objective of growth?”

Irrespective of how sophisticated or commoditized your business line is, i.e. space travel business or just homemade lemonade drinks production; you can bet that majority of your customers know more about your product or service in terms of strengths, weaknesses, quality ratio to material costs, approximate worth of your product, your historical performances, your competitors’ offerings of similar product or service, future alternative and etc.

And thanks to today's technology and related advancement in our highly networked and informed society, a typical customer could easily do his/her homework in regards to a provider of service or product within the click of a button.

Without a doubt, customers are now in the top section of the business pyramid – in the driver’s seat of business continuity and center core of business strategy. Thus, today’s business growth focus has shifted away from the mere sales of products and services to delivering a great wholesome customer experience as a catalyst for sustainable growth.

Now, it's plain simple, bridge expectations with derived value for your customers or risk dying over time.

CUSTOMER EXPECTATIONS LEVELS & RELATIVE DERIVED VALUE

How Are They Connected? - Summarized Equations 

• Customer Expectations Levels = Total perceived benefits promised to the customer (directly or indirectly) … (Equation. i.)
• Relative Derived Value = Actual (real) deliverables or outcomes from the consumption of products/services by the customer … (Equation. ii.)
• Customer Experience = Customer Derived Value – Customer Expectations Levels (Equation i. - Equation ii.)

Understanding these three interrelated components are important to configuring a worthwhile experience for your customers.

Your customer's experience is the relative derived value that your customer extracted in the consumption of your product or service in relation to his or her expectations levels (total perceived benefits promised).

So, What Influences Customer Expectations Levels?

Think back again about the major purchases you have made recently, the information put out by the companies or businesses in the media, from salespeople, advertising, personal research, recommendations from friends and colleagues, or based on your interaction with the product or service.

This information directly and indirectly influences our expectations as customers in terms of:

1. Perceived value,
2. Quality,
3. Evaluative metrics (ability of the product/service to meeting our needs)

The 2 Major Types of Customer Expectations across Industries?

In general, we (customers) hold 2 major types of expectations, explicit & implicit expectations.

1. Explicit Customer Expectations: 

This is a clear and obvious perceived target for product performance and identifiable performance standards. 

For example, if a mobile phone battery had been stated to last 15 hours of battery time in use, your expectation for such product would be the exact 15 hours of battery time. A deviation in actual observed performance will be a shortfall. i.e. the product actually delivering 3 hours of battery time.

2. Implicit Customer Expectations: 

Refers to the established performance norms. i.e. industrial standards.

For example, if most mobile phone batteries in the industry deliver 15 hours of battery time, an expectation would be made by the customer regarding any particular mobile phone battery in comparison to the industry standard.

See an illustrated example below:

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The 6 Summarized Insights of Customer Expectations Across Industries

A research study was conducted by Parasuraman, Berry and Zeithaml across 16 focus groups with customers in six major sectors, and their findings were published in the MIT Sloan Management Review. I have summarized their key insights below:

1. Every customer have a perceived expectation
2. Customers expect business or companies to exceed expectations
3. Desired level of service is what the customer hopes to obtain
4. Sufficient level of service is what the customer deem acceptable
5. Customers want to be “relationship customers”
6. Customers expect business to manage their promises for competitive appeal

As exemplified above, understanding and managing customer expectations is a prerequisite to delivering a great customer experience.

Why Do You Need to Get a Grip on Your Customer Expectations Levels?

1. It allows you to focus on what’s really important
2. You know the minimum performance levels required to keep your customers happy and afford you the opportunity to exceed expectations
3. Once you know what’s expected, you can set, fix, and manage the expectations you put out, and evolving with time in regards to your relative performance.

BRIDGING YOUR CUSTOMER EXPECTATIONS LEVELS & RELATIVE DERIVED VALUE

A satisfied customer is the one that has had his/her expectations met at the minimum by the surplus of observed performance in relation to product/service procured and relative enhancement in the overall customer journey.

And as such, an experience the customer remembers is an observed performance that wows the customer’s expectation. Such experience is normally passed onto friends and associates and unsolicited referral whereby trust is earned and positive impression of such business provider or company is formed.

Factors that Causes Shortfall in Your Customer Relative Derived Value

At certain times, businesses could fall short in delivering a consistent level of performance to meeting customer’s expectations due to varying factors. This might be due to internal factors or intrinsic cores like:

• Inadequate understanding of the customer, market and shifting related trends
• Narrow focus on one aspect of your enterprise (i.e. production only, or materials supply..etc)
• Herd following behavior (just doing or copying what the competitor does without logical rationale)
• Poor quality of products or services levels
• Sticking to the average industrial standards
• under-trained front-line employees
• Poor customer-centric culture across the organization, poor customer service,
• over promised marketing and sales messages or campaign
• Unmanaged expectations
• Not attending to the dynamics of the industry or sector etc. 

How Can You Fix the Shortfall in Your Customer Relative Derived Value?

Fixing the shortfall in your customers' relative derived value in relation to their expectations require significant investments, relentless improvements, and collaboration across your customer channels and business functions. My summarized recommendations below:

1. Begin by clarifying who your customers are and what they are trying to get done ("pains & pleasure")
2. Take full inventory of your capabilities, services levels & products fulfillment "promise" to fully understand where you stand internally, industry-wise, in relation to your markets and emerging trends
3. Start with the data you have as you identify problems and set priorities to tackle them. There chances that you already have a wealth of information (complaints from your customers, indirect feedback from your products' users, industry pain points...etc.)that just needs a creative application
4. Consider what you already know about your customers that might not have been formally analyzed.
5. Identify the different segments of your customer base and their journeys to understand what matters to them, and thus sharpen your focus. 
6. Consider whether commercial data sets, social-media information, internal employee hoarded information or other publicly available data can fill the gaps and provide useful insights
7. Deduce from the insights objectively where you have failed in the past in order to kick-start your internal remedying plans
8. Get quality feedback from all connected angles (users, employees, quality assessment, final delivery nuance...etc) and acknowledge where you have failed
9. Prioritize the areas that need to be addressed based on your capabilities, customer resonance, rate of customer preference change, etc. in order to respond quickly and work through the issues,
10. Look beyond surveys and individual customer interactions to understand the full range of factors affecting people’s experiences
11. Rally support from all connected stakeholders (employees, board members, suppliers, etc.) and get their buy-in for the new shift
12. Implement your set plans in fixing the related derived value levels
13. Measure what matters and tweak continuously by tracking customer-experience performance over time in order to celebrate changes that are improving satisfaction and outcomes while taking a fresh look at those that are not.

Ultimately, bridging your customers’ expectations depends largely on two things: the reality you deliver and their expectations. At times, you might need to reset the expectations and improve the reality to further maximize your customers’ experience

You Decide - Bridge for Growth or Risk Dying

Bridging customer expectations levels and the relative derived value can be an engine of profitable growth, but it demands a common vision and new levels of coordination, and establishing cross-functional implementation in the provision of insinuated promises.

There are many examples of companies and businesses that have failed to meet customer’s expectations, but have since gone a long way to fixing it, and bringing the performance up to par with the expectations or exceeding it over time.

From many documented surveys and even in my consultations with many business decision-makers, nearly all of them wished to provide a great customer experience or at least utilize customer experience as a competitive advantage in their industry or functioning sector.

According to a recent Forrester research, 95% of business leaders say providing good customer experience is their top strategic priority.

The question here is why do many businesses or companies fail to implement the strategic components that could ensure great customer experience delivery?

Well, implementation of such strategic components does not immediately add-up to the top-line in the short run and it requires commitment, dedication of business leaders to a customer-centered strategy to achieving a great customer experience.

In conclusion, the unsaid truth is that a customer knows when the derived value from your product or service wows or sucks!

Your customer’s expectations levels and the relative derived value sets the bar for the overall customer experience which is revealed by the customer’s satisfaction levels, which in turn effects customer loyalty that further translates into increase in revenue & lower cost to servicing such customer in the long run, and with more advocacy by such customers to other potential customers for that company's or business' products or services, it thus drive such business' growth.

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