Value Enhancement is All You Need in Times of Inflation Part 1
In times of inflation, Churn Rates increase as customers buy less. With Value Enhancement, you can retain customers and stay ahead of inflation.
Inflation is a major global concern for employees, business owners, and customers.
With an annual inflation rate of 7.1%, it's not surprising that this term was the 15th most popular word in the English-speaking world (source).
As prices and unemployment rates continue to increase,
Customer Success Managers must be prepared for what the future might hold.
Most importantly, you need to start enhancing value if you want to stay ahead of inflation.
What is Inflation?
To understand inflation, we need to start with the Consumer Price Index (CPI).
CPI measures the changes in the price of a set basket of goods and services that a sector needs in order to thrive.
What is included in this basket?
Well, every country creates its own basket of goods and services based on society's requirements.
Generally speaking, this basket includes:
Food and beverages
CPI + Price Increase = Inflation
Inflation is the increase in the prices of goods and services included in the CPI.
The rate at which the prices change is described by the inflation rate.
When prices go up, one unit of money (let's say USD) can buy fewer goods and services,
and as a result, our purchasing power goes down.
Let's take the 2022 annual inflation rate as an example;
The price of the U.S. basket of goods and services has gone up by 7.1% (passing what most economists consider a "normal" inflation rate).
What does it mean for us - Customer Success Professionals?
As the power of our money goes down, customers are likely to buy less.
Anything that is not considered a necessity is at a higher risk of being cut off.
But, don't lose hope just yet, there is a solution -
Enhancing your product's value.
What is Value Enhancement?
Every customer has a Job to be Done.
If they believe that your product will help them get their job done, they will "hire" you.
Having said this, your product's value is not only measured by its ability to help customers with a specific job,
it's also measured by its ability to help customers succeed at their jobs and gain a positive reputation within their company.
The customer's perceived value = their willingness-to-pay.
Let me rephrase it;
the higher the customer's perceived value of the product is, the higher their willingness-to-pay.
When customers see enough value, they will be willing to pay for your product,
and in some cases, regardless of the price you're asking for it.
Value Enhancement is essentially the increase (or improvement) in the customer's perceived value, which in return will increase their willingness-to-pay.
A few paragraphs ago, we mentioned that with a 7.1% inflation rate, customers spend less on anything that is not a necessity.
The secret of staying ahead of inflation is quite simple:
You must enhance your product's value and turn it from
a luxury into a necessity.
You can enhance your product's value in four easy ways.
To make this even easier, we will cover the first way in this post and the remaining three in the next blog post.
#1 - Identify the Value
Let's start with a short exercise.
On a piece of paper, answer the following questions:
What are your customers' Jobs to be Done?
What is the value of your product?
Do you know the answers?
If not, stop reading and go find them.
You can't enhance the value of the product if you don't know it or if it's not well-defined.
Here's where it gets complicated:
Different customers will find different values in your product.
If you truly want to succeed, you need to identify the value that is relevant for the customer you're speaking to.
Otherwise, you might as well try to enhance the value of gasoline for a person who's looking for luxurious food -
It's not going to work.
Identifying the value starts with listening to customers.
Every meeting you have, whether it's a Kickoff Meeting or a troubleshooting session, must start with discovery questions.
You need to ask the right questions with only one agenda:
Being the customer's trusted advisor.
Here are a few discovery questions that help me identify customers' perceived value:
What made you come to [company] now? What changed?
What are you hoping to achieve with [product]?
What are your team's goals for the year?
What does success look like for you?
Most forecasts indicate that prices will continue to increase. This means that we have no other option - we need to start enhancing value.
The next blog post will cover the last three ways: Product Innovation, Value Communication, and Additional Services.