The first step in creating a culture that embraces the need to develop customer understanding is to understand WHY it is integral to the sustainability and profitability of your business.
Recorded live on April 12, 2023 was the first installment of Applied Frameworks Principal Consultant, Kim Poremski’s webinar series “I Don’t Know My Customers … Help!” Throughout the series, she will go into all the specifics of why and how to engage in research and cultivate feedback from your customer base. In the first installment of this series, Kim will explain why customer understanding is integral to the sustainability and profitability of your business.
Agenda
- Introduction
- Discuss the importance of developing customer understanding
- Explain how customer research supports all aspects of design thinking
- Explore common anti-patterns that impede our efforts to achieve strong customer understanding
- Explore how customer understanding is directly tied to the sustainability and profitability of your business
- Discuss how to effectively build a cross-functional team of players to build a complete picture of customer understanding
- Bring Questions for a live Q&A
Transcript
*Transcribed using otter.ai, please excuse any grammar and spelling errors.
Laura Caldie 00:03
Hi there, Kim. How’s it going?
Kimberly Poremski 00:05
It’s going, how are you, Laura?
Laura Caldie 00:07
Doing just fine. Thank you. So we’ll let people hop into the webinar here. So we’ll give the folks maybe two or three minutes before maybe two minutes before we get going. But in the meantime, now’s the time to grab grab a glass of water as everyone else joins. If you need a cup of coffee, and I’m on the West Coast, normally, I’m not a bit it’s it’s still morning here. I feel like I can use maybe one more cup of coffee at some point. How’s your day going?
Kimberly Poremski 00:36
It’s going really well. It’s nice and sunny here today here in Charleston, South Carolina. So nice to weather turning.
Laura Caldie 00:47
Yeah, actually. So I’m, I live in Chicago, but I’m in Sunnyvale this week with our first partner kickoff week, which is super excited to be doing here in California. But what I hear is it’s in like in the mid 70s. Dan was at in Chicago. So I think when I get that there’ll be like actual real bugs on trees and flowers popping up and things like that. So that’ll be fun. Yes, definitely. All right. So why don’t we get going. And for the folks who are on the call, we’re obviously reporting, you’ve had that little message pop up, we’ll share the recording. And the slide deck at the at the end of the webinar usually takes us about a day to get that out to everybody. But we’ll send an email with the links. And then also the any questions that are asked, and we would put them into the q&a, if we don’t get to them? Or we think we could provide even a more comprehensive answer to some of those questions. We’ll do that in the follow up email. So it’s worth everyone’s time to pop the question and q&a, because we will address it either during or both. Sometimes we will talk about it in a webinar. And then we’ll also add some more information in the follow up email. So with that, I will turn this over to Kim Poremski who is a principal consultant here at Applied frameworks and PMI. You can say more about yourself, but I’ll just let everybody know that the breadth of experience that you bring to this topic into your clients, I think is pretty exciting. So thinking about, you know, what customer understanding really means and how that helps companies deliver profitable solutions. I think it’s a timely topic. And so with that, I will turn it over to you. And we’ll, we’ll get going.
Kimberly Poremski 02:26
Okay, terrific. Well, thank you so much, Laura. And thank you everyone for taking the time to join today. As Laura mentioned, I am a Principal Consultant at Applied frameworks. I’m also a certified scrum trainer through the scrum Alliance. And prior to being in a consulting role, I spent many years working in various industries in finance, banking, insurance, health care, benefits, and so forth. And in my consulting role, I have had the opportunity to expand that even further. And even though I’ve played numerous roles, whether it be prior to becoming an agile list, or after becoming an agile list back in 2008, I have always had a little bit more of a product related role, and a customer understanding and really focusing on understanding what to build for customers, and really how to help them and deliver value for them. It has always been a passion of mine. And so I wanted to create this series, this is the first in a series. So I’m glad you’re catching it at the beginning to be able to start to delve into some of these topics that I’m really passionate about. So I’d like to, again, welcome you to this very first offering of this webinar series. It’s entitled, I don’t know my customers help. And in part one of the series today, we’re going to start with why. Why is developing customer understanding, so critical? And why do we struggle to do so? What are those barriers that get in our way? We’re all familiar with the demise of companies and products that once dominated the markets and our lives. Names like Kodak and Nokia, MySpace, and Blackberry. And I found this interesting article about blackberry and it was discussing how they just really fell short because they didn’t realize or understand that their customer segments had evolved. So smartphone users that used to focus a lot on the hardware aspects of the product, were now more focused on software applications. And those consumers that you know, used to care about things like battery life or security. They were now caring more about the applications that they could get on their devices. And the article had this really insightful quote, in one of the insiders that the company stated that the problem wasn’t that we stopped listening to customers. Rather we believe we knew better what our customers needed long term than they did it. And I was just like, that’s just really mind blowing to me because in this case, it wasn’t that they didn’t do their due diligence but they really just didn’t care to focus in and truly understand their customers and to listen to them. Here’s another example. Lululemon. So back in June of 2013, Lululemon co founder Chip Wilson sparked a huge public outrage, accusations of fat shaming and the like when he claimed that Lululemon athletic wear wasn’t built for some bodies. There was some a defect, one of the products and that’s actually what was causing this issue, but he kept claiming it was because larger folks were trying to wear the clothes and they shouldn’t be. So he went on to explain that well, you know, manufacturing these this plus size clothing, it takes 30% more fabric, and it would be too expensive to manufacture. And oh, our customers would never pay more. They’re too sensitive. So it, it was a public relations disaster. It caused the share price to drop 20% Wilson ended up stepping down as the chairman and the company’s CEO resigned as well. And the Huffington Post even reported that Lululemon employees had said that, well, that was part of their brand strategy, they discouraged plus sized customers. In reality, they were limiting their total addressable market, though, and they were losing a lot of potential profit, because at that time, in 2011, at least, the average dress size for an American woman was a size 14, and the plus size market was generating $19.4 billion in women’s clothing sales alone. And that’s 18% of the total women’s clothing market. And also, at that time, in 2013, consumers were expected to spend about $332 million on athletic wear sold at plus sized clothing stores. And that didn’t even include the plus sized clothing that was offered at other other stores. So again, another example of not fully listening to our understanding customers. Understanding customers is critical in this very fast paced economy. And if you are fortunate enough to be like Mark King, CEO of Taco Bell, well, his customers were very vocal about their love of Mexican pizza. I’ll admit, I actually liked their Mexican pizza too. And kink shared that when it was removed from the menu, he had never received so much hate mail. So when our customers speak, it’s important to listen and to truly understand. But here’s the thing, not all of us have this type of customer base, we may not get this type of feedback. So we may just blindly waste time and money and resources on new products and features that don’t adequately meet our customers needs. And as a result, we may silently lose customers, lose profits and lose market share. Now, there are some good examples too. So take toggle. This is a division of Farmers Insurance. And they recognize the need to understand what Millennials need and value most Farmers Insurance has been around since 1928. So yeah, it’d be easy to think, oh, you know, older company, they’re set in their ways. But they evolved their product offerings to address a specific customer segment. In millennials, they focused on their pain points, and their pet peeves, and so forth. And they came up with several findings, millennials highly value convenience and transparency. They want a greater sense of control and flexibility. They’re used to getting what they want when they want it. And they often have a need to have like immediate proof of insurance, for renting and so forth. And so toggle responded, you know, with on demand capabilities, and E notify capabilities and ability to do things directly on your phone and to see incremental increases. So now, I’m kind of interested to learn if or how you engage with your customers and users today. So we have a couple of poll questions that we wanted to pose to the folks that are on the call today. So Laura, I don’t know if you have that handy, or I could get that started. Up here we go. The poll should be up. Okay. So yeah, so this, this first question is, this is all about you personally. So what is the level of customer engagement that you as an individual, have with your customers and end users?
Laura Caldie 09:48
Yeah, this is an interesting one. And I’m curious to see how also it evolves over time. I would imagine that some folks have sporadic access to customers, so it might be heavy and then you From just six months or even a year without talking, so it’ll be interesting to see what what folks come up with here. Okay. All right, we are most helpful participation. Interesting that no one has said never, which is good news.
Kimberly Poremski 10:14
That is, that is very good news.
Laura Caldie 10:17
All right, I’ll end this one. And we’ll go on to the next one. Okay. So we can take a quick look here, this is everyone should be able to see the results of the first question.
Kimberly Poremski 10:28
So what I’m seeing here is encouraging that, you know, or at least getting some feedback from our customers, largely on maybe on a monthly basis, or at least quarterly. A few folks say, oh, yeah, maybe one to two times annually. But to your point, Laura, at least we don’t have any numbers here. So that’s, that’s a good sign.
Laura Caldie 10:48
No one ever is. Yeah. Although I’m sure there were folks would like a little bit more access. But alright, let’s move on to the next one here. All right. Here’s the second question.
Kimberly Poremski 11:06
Okay. So now this one was the first was assuming that this is you directly having that engagement. So now, I want to understand what is just the overall level of engagement that even if it’s not you, maybe it’s others on your team or within your organization that are having those customer engagements? Okay. This is encouraging to see it looks like heavily on at least monthly. Excellent. Have a little bit of it. No, never. So that’s good. Okay. It looks like we’ve got a majority of folks. So we could probably end this one.
Laura Caldie 12:00
Right. Let’s take a look at the results of this one. Yeah, and we’ve got our we go, everyone should be able to see here.
Kimberly Poremski 12:09
Right. So 69% said at least monthly. So that’s very
Laura Caldie 12:13
encouraging. All right. And then final question.
Kimberly Poremski 12:18
Right. So this is this final question that you’re going to share is a multi select one hasn’t popped up?
Laura Caldie 12:26
Maybe? Yeah, maybe I can do something’s not quite happening here. All right. You know what I can for some reason, this one? Oh, I see. I got it. There we go. Oh, sorry, pole problems.
Kimberly Poremski 12:42
For this one. We’re just curious about what are the different ways that you obtain customer feedback. So hopefully, the poll was set up to let you select all that apply? So I’m just kind of curious about this.
Laura Caldie 13:03
Yeah, no, there was one question that came from the person in the audience about the kind of data that you can get from customer support when customers ask questions about something. So I see that a number of people are getting feedback that way. Yep. A
Kimberly Poremski 13:19
lot. A lot of survey usage, which is very common. Sure. Social media. I’m actually surprised that the sales, the sales number is a little, little lower. So after we finish up this poll, we’ll share those responses.
Laura Caldie 13:40
Alright, maybe five more seconds here. And then I’ll end it and we can all take a look. Any last minute participation? All right, let’s have a look at the results here.
Kimberly Poremski 13:52
All right. So it looks like the majority is customer surveys. And then followed by customer support or help desk. And then interestingly, social media comments. And then sprint reviews and the customer interviews are neck and neck and then sales being the smallest number there. So that’s really interesting, because there are organizations that I’ve worked with where their primary feedback does come from sales. So So it’s interesting to see that, that for the
Laura Caldie 14:29
folks who put other just curious if you want to type that into the chat, what other ways that you’re giving feedback. I’d be curious to hear that and then I’ll stop sharing the results here and can we turn it back over to you?
Kimberly Poremski 14:41
Okay, great. I’ll close that out. All right. Well, thank you for sharing that. So one of the things that I was hoping that we could cover today is to discuss 10 barriers when it comes to achieving customer understanding Now, I’m sure we could all brainstorm many others. But I just wanted to share these 10 because they’re some of the common ones that I have personally observed over the years. So for starters, we did talk about BlackBerry early on in this presentation. And this is a very common pitfall you remember that quote, The problem wasn’t that we stopped listening to customers, but we believed we knew better what customers needed long term than they did. And so this this very number one is why I made it number one for me is because we often claim to know our customers better than they know themselves. My team fell into a similar trap many years ago, when I worked at a large bank, and everyone on the team were customers of the bank, we loved our products, and we were big fans of the bank. And there was a feature that we offered back then. And I would say it was kind of like an early Venmo in many respects. And I kind of feel like we were we were somewhat ahead of our time in that regard. But we never achieved the level of adoption that we could have, because we made certain assumptions about how customers used it, because we used it ourselves. And it turns out the employees were the biggest users of this feature. Meanwhile, a lot of our external customers were concerned about account security, and they generally found the feature a little bit confusing to us. And so I believe we fell short of achieving customer understanding, because we put a little bit too much stock into our own experiences as bank customers. Number two, expecting your customers to tell you what they want. It’s kind of like, do you want fries with that? So I feel like there’s a lot of times where we act like order takers at a fast food restaurant, we’re simply asking our customers, what do they want? And we just take orders from them. And that’s not the question that we should be asking. Rather, we should be asking why they want something. So if we have greater empathy and understanding towards our customers and what and we can understand their why, then we can help identify their what?
Laura Caldie 17:06
Yeah, I think what that when I fall into that trap myself, which is I, I know what my problem is, I know what I’m suffering from, you know, I know what my own pain is. But I don’t tell anybody I’ve solution right away by saying, Oh, I know, I’m gonna solve that problem. And then I just asked for a thing, right? And, you know, it’s sort of like, Hey, I have a headache on aspirin. And really, the reality is, I have a, you know, a messed up vertebrae in my neck. And I don’t really need aspirin, I need a little chiropractic adjustment, right. So if I just would have been more open with the problem I had, there’s probably some really interesting solutions that I can’t even come up with. So you’re right, you know, order taken from customers, while sometimes they have great ideas, and they do express it in that way, not digging into the what’s the problem, and why you can miss other opportunities there by not just digging a little deeper.
Kimberly Poremski 17:56
Absolutely. And that’s why numbers two and three kind of go hand in hand, because number three, is focusing more on the solution versus the problem. And so Henry Ford famously said, if I’d asked people what they wanted, they would have said faster horses, right. And there’s no way that the average person could have conceived of the concept of the automobile. Yet we do this all the time with our customers, we expect them to adopt the solutions that we already have. Or we fail to think bigger, bolder and more innovatively. And we simply ask them what they want. We take those orders, instead of exploring their problems further. So Henry Ford, understood the problems, right problem, needing to get places faster. Well, horses have limitations problem, we need reliable transportation, oh, horses get tired, they get sick, they die. problem, we need ease of maintenance. Oh, we have to board the horse, we have to feed it, we have vet bills, and so on. Number four, focusing on outputs, not outcomes. So again, this too, kind of goes hand in hand with numbers two and three. When we don’t have a full understanding of our customers, we tend to focus on delivering a lot of stuff to make customers happy, right? Look at all these things we deliver to you. But we failed to ask how did we make your life better? easier, simpler? What value did we provide you? What did we help you increase or reduce? How do we move that needle for you? So in these cases, too, it’s also helpful to incorporate metrics to help us to better focus on outcomes versus outputs. Number five, neglecting to effectively segment your customers. So the late Clay Christensen was a Harvard Business School professor. He’s best known for his theory of disruptive innovation. Many people simply know him as the guy who created the jobs to be done framework. And one of the ways Christensen explains jobs to be done is based on a milkshake example, you can find videos online where he recounts the research that he and his team conducted for a major fast food chain. They wanted to sell more milkshakes. And so initially that food chain did their standard market segmentation and the focus groups in the whole bit, collected all this data launched a new line of products, zero effect on milkshake sales. So then that’s when the company engaged Christiansen steam, and they spent hours at the location making observations and interviewing actual customers. And the way he described it was that the job to be done was uncovered when they found that most customers bought a milkshake to do a similar job. These folks faced a long boring commute, they needed something to keep that extra hand busy. And to make the commute more interesting. Sometimes they weren’t even hungry yet, but they knew they would be by 10am. And so they wanted to consume something now that would keep them satisfied until lunchtime. And they had other constraints, right? They’re in a hurry, they’re wearing nice clothes, they only had that one free hand. And so they didn’t hire as he described it, bagels and doughnuts, because they were too messy. And they left people with greasy and sticky fingers. So based on this new understanding the company made changes to the product, and to the customer experience and the sales of milkshakes increased seven times. So sometimes just answering the question, Who are you doesn’t yield definitive insight into why you make the decisions that you make. You might need to be asking what Job is are we trying to get done here? And so this is going to help us to understand and segment our customers differently. Maybe you do do extensive customer segmentation. But are you doing segmentation based on demographics or geography is that effective, maybe there’s other ways that we should be segmenting our customers. Number six, relying only on quantitative or qualitative data. So we are increasingly becoming more dependent on data. And data is good. But if we rely on data alone, we lose that full picture. So we want to use the data to help us to delve deeper, we want to use it to help ask specific questions, we want to use it to evaluate patterns that we see in that data in those numbers. So we just simply don’t want to over index on one approach or another. Number seven, not asking enough customers. And this is really important, particularly with customer interviews. And you know, everybody’s like, Oh, well, what’s the right number, we were always looking for that number. And, you know, there’s depending on what you read, you’re going to going to get different numbers. One very popular set of data that we often will rely on is from marketing researchers, Abby Griffin, and Jon Houser. And they had done a bunch of modeling around customer needs, from their interviews, they were doing some research on portable food carrying devices. And based on their research, they estimated that if you interview about 20 to 30, folks, you can achieve about a 90 to 95% saturation of your customers needs. And they even discovered that if you interview only 12 customers, and they’re they’re the right customers, of course, that would represent about 70 to 75% of the population. Now, again, different factors come into play, right? It depends on, you know, what are you researching? What’s the breadth and the scope of your research goals? What’s the diversity of your customer population? How experienced is the interviewer? How much expertise do the folks that you’re interviewing have? How structured are your interviews? So there’s a lot of different factors. But we we definitely want to make sure that we’re interviewing enough customers.
Laura Caldie 24:06
Yeah, I think you said something there, Kim, that I think is important as well, which is, you know, I think part of what happens with the results that people get from their research means that there might be significant changes that they want to make to their products and solutions. And asking enough and asking, you know, the quote unquote, right customers really also helps generate alignment internally around shifts in strategy or shifts in pricing or shifts and market segmentation or how you know, how you want to sell your product moving forward. So it’s it’s that generating internal alignment around the action you want to take is both have you talked to enough customers and who have you talked to meaning Have you talked to are important customers have you talked to so it’s always the challenge of the product manager is to make sure that the scope and breadth is both sufficient and the data points come from credible sources so that you can Create alignment internally around the roadmap for your product.
Kimberly Poremski 25:04
Absolutely. You don’t want to make big strategic changes in, you know, your business models without making sure that you’ve done your due diligence. And you’ve kind of looked at it from multiple perspectives. So it’s a great point. Absolutely. All right, let’s see, number eight, exhausting the same customer base. So once we build those relationships with certain customers, I’ve observed that a lot of times we’ll revisit those customers on multiple occasions and talking to customers can be difficult. And it’s time consuming, it’s time consuming to talk to them, it’s time consuming to find new customers to talk to. And frankly, it’s also intimidating at times. And so when we build and have that comfort level, we tend to not want to deviate. But we do need to vary our exposure and our engagement to be able to gain new and valuable insights. And Laura, I feel like that kind of goes back to what we were saying, For number seven, right? Like who have you actually talked to like we, we don’t again, want to over index on this one particular group. So absolutely. Number nine, not connecting with actual end users. So a lot of times, there’s an intermediary between us and our actual end users, right? Maybe the end user is our customer. But we interact with a brokers well, maybe we work in a b2b model where another company is our customer, but they’re not actually the end user. So this results in a broken chain of communication, kind of that missing link. And we need to find ways to engage directly with actual end users of our products and services. And then lastly, number 10. Failing to make customer discovery, a team sport. And that’s kind of why I had asked that, that third survey question that multi select one like, well, how are you doing that customer understanding, because I’ve worked with clients whose primary engagement with customers is through sales. And for others, it’s primarily through the customer support team, for others, that’s reserved for the user experience team. And so while none of those interactions are invalid, they don’t always give us the complete picture if we’re only relying on one or the other. So we want to kind of create this cross functional team, right? cross functional teams aren’t just for Scrum teams. And if we can involve more people in helping to do customer research, involve r&d, involve sales, involve customer support, operations, marketing, it products, so forth, you’re going to help to alleviate some of those barriers that we’ve just been discussing. All right. I wanted to stop here really quick to see if there were any questions or anything that had popped up, Laura,
Laura Caldie 27:49
I think we’ve answered them along the way. So yeah, so I think, in thinking about these 10 areas, I would imagine we’ve all fallen into either not being conscious of them, or hey, I know I’ve fallen into talking to the same customers too often. Because hey, you end up trading relationships, though, you know, it’s easy to sometimes accidentally fall into some of these. I appreciate you calling them out.
Kimberly Poremski 28:15
Absolutely. All right. So, at the very beginning of this presentation, I mentioned that one of the goals is to understand why developing customer understanding is so important. But I don’t actually think that anyone listening to this webinar, or any product professional or any organization would actually say that customer understanding is not important. Of course, they’re not going to say that. I mean, after all, if we kind of go back to our agile roots here, you know, agile principle number one states, our highest priority is to satisfy the customer through early and continuous delivery of valuable software. And by the way, Agile has expanded beyond software over the years. And so a lot of times I just truncate this to continuous delivery of value. And when I think back to when I was first introduced to Agile and Scrum in 2008, I’m not so sure that the customer was always at the heart of what we did, even though we thought they were, there was a really heavy emphasis on execution within software development teams, focusing on building things, right, and with high quality and as fast as possible. So some customer, you know, undertones there but kind of more focused on like our ability to execute. And over the years, I’ve observed a much needed and long overdue shift, to first focus on building the right thing. And sometimes we do get it right. But often, even when we think we’re solving the right problems, and we’re building the right solutions, we still come up short. So why is that? Well, I believe that this is because we have failed in some aspect of our customer understanding. So even though we claim to Know why customer understanding is important, I believe that our understanding of why is a little bit more narrow in scope than it should be. And because we have this narrower scope, then how we go about developing customer understanding isn’t as effective as it could be. And this ultimately has a big impact on the success of our products and the profitability and sustainability of our business. So I want to say that, again, this is really key. Developing customer understanding is critical to building and maintaining a profitable and sustainable business. So let’s explore that in more detail. So as I mentioned, not only do we need to build things the right way, we need to build the right things. And knowing what the right things are, for our various customer segments, helps us to offer the right price for each of those segments. And that is how we sustain our business over time. So of course, we want to satisfy our customers. But we need to do so in a way that supports a mutually beneficial relationship between our customers and our business models, so that we can remain successful and profitable over time. And I can assure you that one way to not satisfy your customers is by going out of business. So that’s where profit streams Canvas comes into play. The Applied frameworks team has developed a new framework, and we call it the profit stream canvas. And it extends an organization’s value streams into profit streams. And while I would love to explore the framework itself in depth with you today, we don’t have the luxury of that in our allotted time. So I do briefly want to just say that if you’re interested in learning more about profit streams in general, well, we’ve got an entire book on the subject that we just published earlier this month. And we have numerous webinars that we’ve produced that cover various aspects of the framework. We have course offerings related to the framework, and we have a rapidly growing partner community. So again, I do invite you to connect with me afterwards, if you want to learn any more about any of these offerings, I just don’t want to set the wrong expectation for what we’re going to cover for the canvas today. So for today, my goal is to familiarize you with the canvas, because I believe it helps to broaden that scope of why customer understanding is so important to business sustainability. So let’s take a glimpse into some of these components of the canvas. So as I mentioned, the profit stream Canvas is all about creating a sustainable business. And there’s three types of sustainability to think about. You have solutions, sustainability, and that’s all about delivering value to your customers over time, you have economic sustainability, and that’s centered around ensuring that you’re making a profit and that your customers perceive that the value they’re receiving from your solutions is greater than their investment. And then you have relationship sustainability, and that delves into the all the agreements, and the compliance considerations that support our relationships with our customers, and our suppliers and our partners and so forth. Now, you could also dissect this canvas another way, by looking at it through the lenses of customer solution, monetization and compliance, we’re not gonna focus quite as much on compliance today, I really want to hone in on those lenses of customer solution and monetization as they relate to customer understanding. So let’s start with customer because after all, this is a presentation about customer understanding. So notice some of the prompts that are listed here, right? What are their goals and aspirations? What problems are they trying to solve? How do they perceive value? So there’s that word value again, remember our highest priority to satisfy the customer through early and continuous delivery of value. So let’s now delve a little deeper into what we mean by value. So value is a very nebulous term in product management. And when we try to describe it or quantify it, it’s kind of difficult for product managers and product owners because it’s one of those things that you know what, when you see it, but when it’s not there, it’s hard to describe its absence. And so value is a kind of like what’s depicted on this slide. It’s a value is not the building. We can describe the building the building’s tangible, it’s concrete, it’s measurable. So the building represents the solution. And the value is the fog that surrounding the building. And like fog value sometimes feels very nebulous and intangible. And in reality, we need it not to be. So maybe if we had a better definition for value, it would kind of help to snap things into focus. So here’s our definition of value. Benefits, a customer receives less their cost. So as a product manager, I can conduct a customer benefit analysis, to categorize benefits for my customers, as well as the economic impact that they have for the customer. And keep in mind that these economic benefits, they can be tangible or intangible. And generally, when we want to identify tangible benefits, we can break it down into two simple verbs reduce and increase. And there’s various ways that we can talk about reduce, right, conserve, decrease, eliminate, lower, short and minimize. And there’s ways that we can talk about increase, expand, upgrade, maximize, accelerate, enhance, but they all boil down to reduce or increase. So what do customers want to reduce? Oh, costs, time? Capital Expenditures, compliance, risk, effort, right? Lots of things. And then what do they want to increase? Revenue, productivity, ease of use optionality data, right? Lots of ways we can increase data, right data timeliness, the breadth of the data, the accuracy of the data, the precision, the scarcity of the data, and so forth. And then we also want to take into account those intangible dimensions that customers also want to reduce or increase. So we want to maximize safety and security and competence, fun aesthetics. And we want to minimize frustration, stress, fear, so forth. But here’s the key. customer benefit analysis is specific to a customer segment. different segments value different things. So just like the millennials value different things than traditional Farmers Insurance customers do. And this is where I believe we fail our customers and our businesses, because we fail to truly understand our customers in enough enough depth, so that we can distinguish those different segments. And this is how we can provide the right solutions to the right customers. So I just spent a lot of time talking about value and customer benefit analysis and the importance of customer segmentation. But that’s really just one block in this whole canvas. So let’s talk a little bit about customer ROI as well. We go back to that definition of value. We don’t just care about the benefits to our customers, but also their costs, right? What are the economic impacts of our solutions on them? Can we make our customers more sustainable as well. So understanding their motivations, and their drivers and so forth will help with that. So let’s explore another block and the canvas value exchange. value exchange defines how a customer will exchange money with us for the value we provide to them. Now, without going too deep, just know that there are seven value exchange models. And at the bottom of the slide, which you can get access to later, I’ve also included a link to a past webinar, where we delve more deeply into these different models. But just as an example, your customers may pay per transaction. Or they may pay based on how much of something that they’re consuming. Maybe they’re paying for performance, right achieve this result, and I will pay you for that. So in order to establish a realistic profit stream for a customer segment, you need to understand your customers well enough to be able to identify what value exchange models would work best for them. And if you get that wrong, that could make or break your business model. So another block within this canvas is pricing. And pricing is essential to the sustainability of our business as well. Our profit stream pricing model consists of four elements. So you have pricing strategy, and that defines how you intend to compete and position your product in the broader market. And then you have pricing structure. And knowing your customers and what they value allows you to develop a pricing structure that offers unique pricing for your different customer segments. A lot of times this takes the form of what we call price fences. And a price fence is essentially designed to prohibit customers in one segment from purchasing lower prices. Questions designed for another segment. So one example of a price fence might be slack where they have their pro their business plus and their enterprise offerings. Then we also have price specifics, and that delves into the actual dollars and cents, right? How do we pinpoint what we’re actually going to charge from on a monetary basis. And then we have price policies. And those policies help us to maintain and support the price structures that we set up. And those pricing policies are really important too. And you need to have a good understanding of your customer segments as well. Because knowing your segments, is going to help you understand whether that segment is value driven, brand driven, price driven, or convenience driven, so that you can create proactive pricing policies for those various customers. And then, of course, I’d be remiss if I didn’t also mention the solution side of the profit stream canvas, obviously, the solution is how we provide the value to our customers. So if you remember back to our skyscraper in the fog, the building was the solution, the fog was the value that surrounded it. And when we can see through the fog to understand what customers value, then we can deliver the solution. But remember, the benefits that one solution offers to one customer segment won’t hold the same value for a different segment. And we do this all the time, we create a single solution, and we expect all of our customers to use it and value it in the same way. So I started off this section by stating, and then I restated that customer understanding is critical to the profitability and sustainability of your business. So I’m hoping that you now see how customer understanding informs a large portion of this canvas. When we focus on understanding our customers. It helps us to segment those customers better to identify the value that each segment desires. It helps us help our customers achieve greater ROI. It influences how we exchange value with different customers. It guides our pricing structures and our policies for these different segments. It helps us to identify the right solutions to deliver and achieve value delivery for each segment. And in doing all of this we can ensure the highest levels of customer satisfaction, we can maximize our profitability, and we can ensure that business sustainability and longevity for our customers and for ourselves. So there you have it, you already knew that customer understanding is important. But what I’m hoping is that I’ve brought in your scope of why it’s so critical to the profitability and sustainability of your business, and why we so often fall short. And so this is again, the first in a series and our next webinar series, we’re going to be holding that on May 24. And in that webinar, we’re going to focus on who and when, right, how do you know which customers to talk to and when it’s appropriate. And then we’re going to keep building on that we’re going to delve into the what, what are some of the tools and techniques that we can leverage to help us build understanding, and then even future webinars? We’ll highlight some of the how right how do we kind of delve into some of these tools and techniques. And so with that, kind of just want to open it up for some questions and discussion and see what’s on your mind.
Laura Caldie 43:43
Yeah, so cam, one of the things that I think is interesting about using a canvas as the way to frame this is, you know, one of the questions I remember a long time ago, Luke Holman who wrote the innovation games are always reminding people is that when you ask your customers for information, and you start learning from them, you need to have in your mind about what are you going to do with that information? How are you going to act on it? And when you start to frame the reasons why customer insights and customer understanding is so important is that, you know, one action you want to take is to improve the profitability of your solution. So when you come at it from that perspective, how can I make my solution, sustainable and profitable over time, right? How can I make the relationships more sustainable when you know, that’s the action you want to take is to increase profitability, framing the data and insights that you get using the profit stream canvas, I think is really valuable because it connects the insights into the action that you want to take.
Kimberly Poremski 44:42
Right? And I think sometimes we hear that word profit, Laura and people, you know, kind of go to like, oh, you know, they’re just in it for the profits. And what the Canvas does is it brings it together, right? Because it’s not about forsaking our customers in the interest of profit, but we also don’t want to forsake our business in the interest of satisfying our customers. And so it by using that Canvas, it kind of creates that, that full picture to create that balance and achieve that sustainability.
Laura Caldie 45:16
Yeah, it’s it really is that balance of value, where the, the solution built there provides value that is important and needed by the customer who wants to pay for it, because they need the problem solved. Right. And so I think that’s the interesting way of just making that super clear, right, that these are the things that we know, these are the changes we might want to make. And then what comes out of that Canvas lens can then appear on that product roadmap, right? The the additional capabilities that you want to deliver or changes to your own infrastructure that you want to make so that you can maybe target a new customer segment with a new value exchange model.
Kimberly Poremski 45:56
Yep, absolutely.
Laura Caldie 45:59
All right. Well, I think this might be a good place to stop. While we do a little bit more housekeeping if anyone else has any additional questions or thoughts. I mentioned it in the beginning. But if we don’t answer them here, we do put more information into the follow up email. So whatever else you want us to cover, please let us know in the q&a. And Kim, I just appreciate you putting this together. Because I think, again, the Yes, we all know it’s important to understand your customers. But knowing what you want to do with that insight and why it’s important than how you want to take action. I think that’s really where product professionals can add a lot of value to the whole organization as is knowing exactly why they need that the insights. And so I appreciate you in the way that you kind of weigh that out for us today. Great.
Kimberly Poremski 46:45
Well, thank you. As I said, I’m passionate about the topic. So I look forward to some subsequent webinars to further delve in.
Laura Caldie 46:54
Excellent. Well, we’ll follow up with everybody within a day and appreciate everyone being here and see you next time at our next webinar. All right, thanks again, everyone. Thanks, Kim. Bye bye
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