Communicating savings to customers

A large service company served the consumer market with a single solution that had so far allowed them to be industry leaders. The value customers perceived, both from the brand and the service attributes, was clearly superior to that of competitors. However, the company increasingly felt threatened by the entry of new competitors offering lower-priced services with fewer benefits.

​To stop the loss of market share, management decided to launch a campaign communicating the savings that the company's premium service allowed customers to achieve. Unfortunately, the initiative did not yield the expected results, and customer losses continued at the same pace as before. What did this company do wrong? Were they not able to effectively quantify and communicate the benefits of their value proposition?

Communicating value alone is not enough
The savings communication campaign (economic value) executed by this company would have worked perfectly if all market customers had the same needs. When companies quantify the benefits of their solutions, they generally do so for specific usage conditions.

Customers who use the solution intensively fully perceive the economic value of the value proposition. However, there is always a large group of customers who do not require all the features that high-value solutions offer. For them, the communicated savings of premium solutions are, at best, somewhat unrealistic, because the benefit quantification does not correspond to their actual use of the product or service.

Communicate options
Does this mean that the practice of quantifying and communicating the economic value of a product/service’s benefits is a waste of time? Not really. What happens is that this practice, by itself, does not guarantee customer preference. Since the needs of different customer segments vary, the quantification of benefits perceived by each is also different.

Communicating the benefits of a single solution cannot appeal to all customers in a market. For that, it is necessary to offer multiple options, each with different levels of price and value. Additionally, the company must be able to quantify and communicate economic value for any level of usage of the offered solutions. This ensures that any customer, regardless of how much they value the solution’s attributes, finds an attractive quantification of benefits in one of the company’s offered solutions.

In summary...
The company in the example did not fail in quantifying and communicating the benefits of its service. It failed because it only had one type of solution available. It needed to redesign its solution portfolio to include lower-priced and lower-value options for customers with more basic needs. By doing so, it was able to retain high-value customers without lowering prices. More importantly, it could acquire new customers it had previously been unable to serve.