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Customer Value Creation / Featured Slider / Sales

Which came first, the Product or the Customer Outcome?

Customer Outcome

It is along towards ten o’clock one April evening in 1990, and I am sitting in a restaurant in west London with my friend John Frazer-Robinson – JFR for short. We went there for lunch and are now nine hours in to a lively conversation about the future of sales and marketing. (Total Quality Marketing[i] was published in 1991.) One of the topics we discuss is his theory of three generations of selling. I am immediately fascinated. It’s the genesis of an obsession with Customer Value Management that has stayed with me to this day.

Value Creation =Customer Outcome

All buying decisions (all decisions, in fact) are based upon Value judgements, where ‘value’ is an individual’s or group’s assessment of what something is worth, weighing the benefits of whatever is on offer against the costs of accessing those benefits. This, as we all know, is far from simple because benefits and costs come in a range of rational and emotional guises, and although some assessments are based upon careful, conscious analysis, we are now learning more and more about the host of decisions formed or modified in the nanosecond it takes for a neuron to spark.

Companies have, of course, always tried to win by ensuring that their Customers will decide that the benefits on offer are equal to or greater than the costs, for the very good reason that corporate survival depends upon profitable sales. Which means, of course, that Value Creation is not new. It is, in fact, as old as the hills. So why has it now become a hot topic? Let me use JFR’s three generations of selling to help illustrate my view.

First generation (G1): Production

If we go back to the Industrial Revolution, the whole buzz started with products. The relative absence of ‘stuff’ at that time meant that new products, in and of themselves, were sufficient to attract Customers and inspire further innovation. In ‘Portrait of an Age’, a famous essay about the Victorian era, historian G.M. Young pointed out that:

“Gas-lighting of the streets was hardly an improvement so much as a revolution in public safety, cheap cotton goods in personal cleanliness, paraffin lamps in domestic comfort. … Production was the thing itself.”[ii]

Which helps explain why the first generation of selling, which started with the Industrial Revolution and reached its apotheosis in the 1960 and 1970s, was all about production and quantity sales.

As the decades rolled by more and more products were created. Consider, for example, the output of just one, admittedly exceptional, contributor. Thomas Edison was born in 1847 into a lamp lit, parochial, pen & ink world that took its pleasures quietly and conducted its business, mostly, at short range. The world he left in 1931 was ablaze with electric light, dancing to jazz records on the Victrola, scanning the tickertape for an upturn in its fortunes, tuning valve radios to world news, dictating letters onto wax cylinders and mimeographing the transcriptions, doing transatlantic and transpacific deals by automatic telegraph and carbon-miked telephones, and escaping its troubles watching (and hearing!) the new talkies in the plush depths of motion picture theatres. Naturally, lots of other life-changing inventions had joined the party in the intervening years, but, for millions of Customers, that really created value.

However, by the 1960s the huge and still-burgeoning amount of ‘stuff’ out there was leading inevitably to features-based hard selling. To quote JFR: “The language of this generation was aggressive and, in its literal sense, offensive. They ‘attacked’ a market. Their whole modus operandi was military. … The sale was everything; the commission cheque mere confirmation that winning the great sales race was what life was all about.”[iii]

Second generation (G2): Productivity

Equally inevitably, aggressive volume selling resulted in competitive discounting, wars of attrition and diminishing returns. Was there a way out of this trap? Well, yes, assisted by the fact that, at the same time, computing technology had become the main change driver[iv], an alternative was found – ‘add value’.

JFR puts it nicely:

“The five-year warranty and extended service package were invented. Computers came with programs and games; televisions with infrared remotes. ‘Have a nice day’ came to Europe. Those who bought copiers because they copied bought them now because they copied faster, collated, did back and front and plain paper, and came with a service contract. … Suddenly, the added-value age was upon us. It sold the product but with the skills that helped you get the best out of it. … However, in this generation it was a fairly cosmetic operation.”

Third generation (G3): Customer Outcome (Ideas/Opportunity)

All of which brings us to today. A quarter of a century ago, JFR’s best guess at the future was a world where:

“the seller and the buyer join together to decide what the buyer needs and how best it can be supplied. … For more and more markets, the product is becoming a know-how product. Oddly, since know-how is being sold and ideas, therefore, are being bought, it seems to me that finally selling’s evolutionary process has arrived at a conclusion where, possibly in many markets, the two have become the same for the very first time. Both represent opportunity. That is what is being sold and that is what is being bought.”

Given that few could have predicted how far computing technology would advance, and how comprehensively it would connect and empower us all, I think that’s a pretty inspired stab at the future. The key takeaway is that, when you maybe weren’t looking, Value Creation hopped from the Products themselves (a.k.a. value in exchange) to the Customer Outcomes (a.k.a. value in use) that empowered Customers increasingly expect.

So which came first, the Product or the Customer Outcome?

So far as any answer to that question makes any sense, the Product came first because, until very recently, the technology did not exist to enable that Ideas/Opportunity commonality of goal between seller and buyer that now enables the identification and delivery of valued Customer Outcomes. Now, however, the capability does exist.

So what? Well, perhaps this brief overview of a theory of the evolution of sales practice might prompt some useful questions. For example:

  • What do you sell: G1 – Product; G2 – Productivity; or G3 – Customer Outcomes (Ideas/Opportunity)?
  • If you are still working with G1 or G2, is that appropriate?
  • Are you intellectually on board with G3 but emotionally unable to escape G1 or G2?
  • If you want to change to G3, how best to go about it?
  • Does any of this matter?

The answer to that final question is an emphatic YES! Why? Because your decision about what happens at the seller-buyer interface defines your organization’s Primary Value Focus (PVF™). And, at Value Genie, we regard your PVF™ as the foundation upon which everything else must be built. And I mean everything. The elements that are customarily regarded as business foundations – Purpose, Vision, Mission and Values[v] – can only be properly determined after the PVF™ has been decided upon.

Right now, what’s possible at the seller-buyer interface is in a state of astonishingly dynamic flux. The science and art of identifying and responding to individual Customer Needs is, if not in its infancy, perhaps somewhere around the small child stage (full of life, enthusiastic, learning fast, but prone to falling over and still with a huge amount to learn). To get to understand the new capabilities and standards that will lead to the mature stage of this Customer Value revolution, the Value Genie team is privileged to be working with experts in information technology, psychology, neuroscience, marketing, sales and more. If you’d like to know more, please just ask.

[i] Total Quality Marketing: what has to come next in Sales, Marketing & Advertising, John Fraser-Robinson, Kogan Page (1991)

[ii] Portrait of an Age, G.M. Young, 1936

[iii] Fraser-Robinson (1991)

[iv] Some sectors and companies also tried to hitch new capabilities enabled by computing technology to first generation selling techniques. This led to financial short-termism and turbo-capitalism, culminating in the disastrous 2008 economic crisis

[v] These words tend to get thrown around so, for the sake of clarity, let me state my broad definitions. Purpose = why a business exists. Vision = what it aims to achieve. Mission = how it intends to achieve it. Values = the beliefs that will guide its progress.

 

Valuegenie is the answer to the perennial challenge for businesses – how to attract and retain customers?

Contact david.pinder@valuegenie.com or david.rattray@valuegenie.com  to find out more.

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I'm a Value Proposition and value creation expert, co-author of "Creating & Delivering Your Value Proposition", Associate Editor at Journal of Creating Value, and member of the Board of Directors at Customer Value Creation International.

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