Analysis on the generation of market perceptions to work together with customers: a new approach to the generation of value in our industry.
by Pablo Aragón and Jose Chouza*
Background: At present, the supply of basic products or services available to manufacturers and end users is enormous. Such an environment complicates product and price differentiation, leading to a commodity market and a global perception of low value. Even in this type of market, participation can be significantly improved if the products or services differ with solid fundamentals, rooted in the market (the real needs and values) in which they are competing.
However, the true value of a product or service goes beyond price. Value is based on the perception of the total offer, as well as on the experience that the product or service offers in itself. Many authors call this a sensory market. A product or service that is excellent today might not be useful tomorrow, as the perception of value is constantly changing and evolving (Figure 1) as consumers evolve.
If we understand this, it becomes clear that knowledge of customers' intrinsic values and needs is critical to success in the marketplace. Customized solutions must be designed according to the needs of the client, and the former must evolve at the same pace as the latter.
Figure 1. Evolution of products/services
Concept: To this end, a process called "Downstream Value Chain" (DVC) was designed so that actors at the beginning of the value chain understand any specific segment of the industry from different perspectives (reference product/service, marketing and end-user perception), which allows them to identify specific opportunities that add value to their own customers.
This process helps those industries that are at the beginning of the chain to create value other than merely product performance for their transactional customers, which are primarily B2C (business-to-consumer) companies. At the same time, it allows different people in the organization to communicate with different levels of the customer organization, introducing value throughout the customer structure.
The result of the DVC process is a value perception map, where the fundamental parameters of a product or service are drawn according to the values and needs of users with respect to the price in the market. This value perception map allows the provider to identify clear opportunities from the user's perspective. In a computer world, data analytics and insights generation are of great value, and many companies appreciate these insights when considering their short- and long-term strategy, as analytics can provide a different perspective on customers' current perspective.
Although this approach has been explored in the past by different researchers and methodologies, CSD (Figure 2) allows companies to have a multi-perspective approach by combining each stage of the process into a perception-generating map. Such insights will provide significant value in a collaborative environment between customer and supplier.
Figure 2. Downstream value chain process
CSD is a process that can help companies at the beginning of the value chain identify joint opportunities with their transactional customers, which go beyond product performance to downstream value creation, and allows managers to improve their level of communication with their customers. For a commodity business, CSD can be the key to its success. It can enable the creation of collaborative projects and avoid the frustration of purely transactional operations. This process is not a direct top-down approach, but an ongoing process that allows the creation of constant innovation in collaboration with customers.
The opportunities for value generation originate in the voice of the market, not in the supplier, so the adequacy with the client's strategy will be greater and, in fact, could constitute a revelation.
Because customer perception plays an important role, this process leads to true collaboration with the customer, rather than focusing on the differential price, which is the added value of the traditional supplier. In this case, collaboration leads to a long-term value generation process for companies, which involves several levels and is not limited to the transactional process (sale - purchase) (Figure 3).
Figure 3. Approach to the differences between customers
Methodology
The process can be useful for both product and service providers at the beginning of the value chain and support customers who offer products to consumers. The intention of the methodology is to influence, rather than change, the value generator of the supplier and create innovation, while working together with customers.
The process is primarily aimed at industries that are in the commodity business and those whose products require a complex manufacturing process or experience in customer interaction along the value chain, among others, the architectural coatings industry, packaging, food, banks, hotels, etc.
Below we summarize the steps of the process:
1. Select the segment of the industry in which you are going to work.
2. Define the main attributes of the reference product/service.
3. Collect and evaluate information about the performance of the product/service in the selected segment.
4. Understand the structure and dynamics of prices and the different channels.
5. Collect the voice of the customer, or VOC, (purchase decision) in different channels and define the main decision makers.
6. Collect the voice of the customer, or VOC, (quality and value generators) in the main decision makers.
7. Create the value perception map, based on the quality and value generators, the reference product/service and the price dynamics.
8. Develop a prototype and test in a focus group made up of key decision makers.
9. Demonstrate to customers the preferences of the focus group and the viability of the product/service in the market
10. Provide marketing/technical support to the client in the development of their new product/service offerings until market launch.
Main lessons from the implementation: During the implementation of this methodology in the industry of coatings and master mixtures for plastics, the authors obtained several learnings that facilitate the advancement of this process.
1. Commitment and coordination must come from management and extend throughout the customer organization
2. The supplier's organization must be trained at all levels in process matters and solutions/VOC to approach customers, enabling customer-facing conversations.
3. The key to the process is to connect all the information along the value chain that can be useful to approach customers. There is no one-size-fits-all solution, everything is customized!
4. The process should start piloting with a trusted customer and then do it with large global accounts.
5. The insights generated during this process will create the need in the customer. This is an attraction strategy.
6. Connecting all actors in the chain in a single process helps create a synergistic effort along the value chain.
Results and conclusions
During the last two years, this process has been implemented in Mexico, Central America, dominican Republic, Colombia and Peru, providing significant value to our clients. The following are some examples of these collaborative actions motivated by the analysis of customer perceptions:
• Client 1: Development and launch of a new product aimed at the high-end architectural coatings market with a joint brand to guarantee quality and performance, in order to maintain market leadership.
• Client 2: Reinforcement of the current portfolio of architectural coatings products to improve competitiveness, and design of a new high-quality product to increase profit margins.
• Client 3: Design of a training program for the client's sales team with the purpose of increasing their competitiveness and promoting the differentiation of their products.
• Customer 4: Reduction of customer complaints and recall of products from the market through the optimization of your production system.
The process is a revolutionary approach to commodity sales, and will allow companies to achieve greater differentiation in their market. The process has proven its effectiveness in achieving value and will be piloted in different segments in the near future.
* The authors of this study have more than 30 years of joint professional experience in the chemical industry, thanks to their work in a global company that has operations throughout the Latin American region. Both have MBA degrees, with undergraduate studies in marketing, experience in Six Sigma and have given lectures on technical and marketing topics in different countries in Latin America.
