> "The secret of staying afloat in business is to create something people will pay for."
> — Thomas Edison (1847–1931)
Sounds simple, right? It's not.
Most people think they just need to offer a good service. and they are Dead wrong. You need to think about the whole experience. The entire thing. From the moment a customer thinks about calling you to the moment they walk out your door.
You need a value proposition that beats what else is out there. And I mean beats it.
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What Even Is a Value Proposition?
Michael Lanning (who is regarded as a smart guy and has worked at Procter & Gamble and McKinsey) explains it like this:
> A value proposition is everything a customer experiences when they deal with you, including the price. Customers compare this to other options. Is yours better? Worse? The same? Sometimes your offer is a tradeoff. Maybe you're slower but cheaper. Or faster but more expensive.
The point is: customers are always comparing.
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What Do You Usually Brag About
When you talk about your value proposition, you say stuff like:
- We're trusted advisors
- We have a long history
- We have a good reputation
- We have technical expertise
- We're knowledgeable
Blah blah blah. Everyone says this stuff. It means nothing.
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The Four Things That Actually Matter
Customer experiences boil down to three areas (You might already know this as Lanning's framework):
1. Quality
2. Price
3. Service
Let's add a fourth one:
4. Intellectual Capital
Why Intellectual Capital Matters
| Traditional View | Expanded View |
|-----------------|---------------|
| Services only | Services + Networks + Ideas |
| Current customers | Customers + Associations + Partnerships |
| Revenue sources | Revenue + Social capital |
Example: Google makes 97% of their money from ads, but most of their services (Google Earth, Google Books) add value to regular users, not advertisers.
Your associations, your alumni network, your vendors, your partnerships? That's all intellectual capital. That's all value.
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You Can't Pick Just One
Let me guess, you are already thinking about which one you will focus on and build your pitch around. It doesnt work like that, you need ALL FOUR of these things working together. You can't just focus on one and ignore the rest.
Let's look at Southwest Airlines
- They were a Low-fare leader
- They had On-time flights
- and on top of that they had Excellent service
What if they only had low fares? Would anyone fly with them? No.
> "We don't even buy the cheapest toilet paper."
> — Reed Holden
People aren't price-sensitive. They're value-conscious. and that is the Big difference.
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Forget SWOT Analysis (not really, let me explain)
Some of you love to do SWOT analysis:
STRENGTHS | WEAKNESSES
OPPORTUNITIES| THREATS
That's fine. It's useful. But it doesn't tell you what customers actually experience when they deal with you.
The Problem is that these are half-measures unless you connect them to real customer experiences.
The Solution is that service excellence is how you build a real value proposition.
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"Moments of Truth"
Karl Albrecht (the guy who started the Total Quality Service movement in America) came up with this concept called "Moments of Truth."
Definition
> A Moment of Truth is any time a customer interacts with your business and forms an impression.
Any time. Even tiny things:
- [x] How easy is it to park at your office?
- [x] How your receptionist answers the phone?
- [x] How clean your bathroom is?
- [x] How quickly you respond to emails?
- [x] How comfortable your waiting room is?
The Key Insight
> "When moments of truth go unmanaged, service quality drops to mediocre."
> — Karl Albrecht & Ron Zemke
Every. Single. One. Matters.
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Beyond Service: The Experience and Transformation Economy
Most professional firms think they're in the service business. They're selling intangibles. And sure, that's true.
But there's a bigger opportunity here. Let me show you the hierarchy:
The Economic Value Progression
| Level | What You Sell | What You Charge For | Example |
|-------|---------------|---------------------|---------|
| Commodities | Physical goods | Stuff | Coffee beans |
| Services | Activities | Actions performed | Coffee brewing |
| Experiences | Time & engagement | Time spent with you | Starbucks atmosphere |
| Transformations | Outcomes | Results achieved | Personal trainer |
Most businesses (read you) are stuck at the service level. Very few think about being in the experience business. Almost none think about transformations.
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Why Not Charge Admission?
But here's the thing: visiting a professional firm could be an experience. Why not?
People pay admission to enter Disney theme parks. Why? Because the experience is valuable.
Thought Experiment
> What if you charged admission to enter your firm?
Crazy? Maybe. But it changes how you think about value.
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Transformations: The Highest Level
The Hierarchy of Economic Offerings
- Commodities & Goods: Tangible
- Services: Intangible
- Experiences: Memorable
- Transformations: Lasting
Transformations are different from everything else. They change people.
When someone buys a transformation, they're saying "Change me." They become the product. They aspire to be someone different, something better. naturally, dont you feel the same?
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Gym Membership vs. Personal Trainer
The Difference
| Gym Membership | Personal Trainer |
|----------------|------------------|
| Charges for access | Charges for results |
| No responsibility | Takes responsibility |
| Accepts anyone | Selective about clients |
| Generic approach | Personalized analysis |
| Low cost | High cost |
| Commodity/Service | Transformation |
Why trainers cost more:
1. They take responsibility for your outcome
2. They're picky about clients
3. They analyze you up front
4. They assess your willingness to change
If you're not willing to follow their advice, they can't transform you. So they won't take you on.
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What does this mean
Today's customers want more than just service. They want:
1. ~~Service~~ → Value
2. ~~Transactions~~ → Experiences
3. ~~Activities~~ → Transformation
and What you should do is:
> Capture the consumer surplus which is the gap between what customers would be willing to pay and what they actually pay.
- [ ] Close that gap
- [ ] Deliver more value
- [ ] Create better experiences
- [ ] Transform your customers
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