Want to Convert More Leads? Dig Deeper into What Customers Value

June 1, 2008

By Christopher P. Blocker, PhD

Today's consumers are demanding and more sophisticated than ever. They have a world of information at their fingertips - and in a crowded real estate market they know they have choices when picking a real estate agent. Buying or selling a home also carries high stakes for consumers, so expectations rise and emotions can get involved as they start to meet with real estate agents. In response, successful agents recognize these tensions and handle prospective clients with care. Seasoned agents maximize the short time they have to showcase their abilities and deliver well-crafted presentations that they hope will strike a chord with consumers. The problem is that sometimes consumers don't hear the music. That is, consumers form key impressions of an agent during initial meetings and sometimes sense a mismatch or disconnect between their desired value and the value they perceive an agent is offering them. The usual result for an agent when this happens? Unreturned phone calls and consumer sound bites about deciding to "go a different direction." Unfortunately, many of these unconverted leads might have progressed into clients if agents had a more vivid picture of what those consumers' truly value in an agent, and in turn had used that insight to propose a more compelling vision for the agent-client relationship. In a fairy-tale world, agents could peer into consumers' minds to find out just what it is they value. Fantasy aside, there is some hope here. Customer value research has made significant strides in the past few years. Specifically, studies in this area can help agents: - Understand what customer value really means to consumers - Gain insight into how consumers assess the value of salespeople - Learn how marketers can better uncover what customers value, and - Craft meaningful value propositions for potential clients

What is Customer Value, Really?

Although customer value is a fundamental concept in marketing, it has been defined in so many ways that it can seem like a nebulous concept. To some, value is just another word for satisfaction. For others, value represents a selling style where salespeople focus on providing a "value-add" to consumers. In recent years, however, experts have been building a consensus on a few distinctions that salespeople can hang their hat on. For one, customer value involves a customer's ideas about what they want and believe they get from buying and using a product or service.1 This means that customer value is perceived by customers and different from a popular concept like "customer-lifetime-value," which takes a seller's viewpoint and tries to calculate what a customer's patronage is worth in dollars over the lifetime of the relationship. Customer value is strongly related to, yet distinct from, customer satisfaction. Satisfaction is a customer's positive or negative feelings about the value they received as a result of using a product or service. Customer value, on the other hand, is a customer's perceived trade-off between benefits (what you get) versus sacrifices (what you give) in a given situation.2 The difference between the two may seem subtle, but it becomes important to realize that insights about customer satisfaction largely give salespeople a report card, whereas customer value insights can give salespeople direction on "what to do." In other words, while satisfaction can tell a salesperson how much further they have to climb, customer value can tell a salesperson which wall they need to be climbing.

To Understand Customer Value - Focus on Three Areas

Customer value perceptions are a blend of three areas an agent can pay close attention to: cvthreethings (1) a consumer's personal values and goals, meaning their central beliefs about right and wrong and goals that motivate them, (2) a consumer's use-situation, meaning the specific context, purpose, and relevant circumstances surrounding their purchase decision, and (3) a consumer's perceptions of the product, where a product is broadly defined to encompass any combination of products or services being offered. The diagram above shows how value resides at the heart of this interaction of product, person, and purpose.3 Take for example a twenty-something, first-time home buyer who has been out of college for several years and begun advancing in her career. Taking into account this individual's personal values and goals may reveal that she really likes being a part of a community, but feels boxed-in by apartment living, where her neighbors are transient and security can be a concern. Her use-situation may take shape around where she works geographically in town, where her friends live, shopping areas she frequents, as well as her budget for a down-payment. These factors place boundaries on what she will value in this specific purchase. That is, even though she might love the aesthetics of a home far away from her workplace, if she can't stand long commutes, it will not be valuable to her. Her perceptions of homes (a product) may be shaped by social influences such as family and friends, regional/cultural values, or a variety of other factors. Finally, the way she perceives value in an agent (a service) - whether she realizes it or not - likely draws upon her history of working with salespeople in various contexts, her preferences for the kinds of interactions she likes to have with salespeople, the degree of trust she is willing to extend under various circumstances, interpersonal styles, as well as a host of other beliefs about how an agent can help her accomplish her goals of buying the right house. All of these factors and more interact and come together to form this individual's perceptions of customer value. Furthermore, these elements can be just the tip of the iceberg. This is especially true when one considers the fact that a consumer's value perceptions can change, sometimes rapidly. During the purchasing process from start to finish, consumers can learn a great deal, be influenced by various people, and re-orient their priorities and preferences based on how their experiences unfold.

How Do Consumers Assess the Value of Agents?

So, if the nature of customer value is clear, how then do consumers assess value in agents? The subjectivity involved in value perceptions means that "value is in the eye of the beholder." An agent's mother might think he or she is a fabulous salesperson! But each client brings their own set of lenses about what makes a great agent as they see it. Still, research reveals at least two major factors consumers generally consider important in salespeople: a salesperson's expertise and trustworthiness.4 With regard to agent expertise in a real estate context, consumers have raised the bar. In contrast to the traditional approach of buying or selling real estate in years past, consumers today commonly do a lot of homework online before even approaching an agent. As such, they often come with a list of detailed, even technical, questions about the process, particular properties, etc. Consequently, the first test for an agent might be their ability to quickly demonstrate that they understand the issues and can apply expertise beyond what a consumer can exercise themselves. Furthermore, research shows that establishing expertise requires the ability to use and convey accurate, current, and specialized knowledge in a way that offers a tailor-made service experience.5 With regard to trustworthiness, consumers rely on their perceptions of this trait in granting their loyalty to salespeople.6 Mistrust of marketers is currently at an all time high and, unfortunately, many consumers have been jaded by one or more sour experiences with salespeople.7 Typically these experiences involved a breach of trust, an invasion of privacy, awkward feelings of being prodded to buy before they were ready, or some combination of these. As such, an agent must assume that a consumers have had these experiences and carefully navigate through their initial feelings of doubt. Research shows that consumers extend trust when they see salespeople as being dependable, honest, competent, customer-oriented, and likeable. It is also critical to note that consumers' feelings of risk and vulnerability in home buying or selling might be imposed upon how they feel about agents. In these situations, consumers may not share the information agents actually need to understand what they value and create the right solution. Put simply, some level of trust is needed before an agent can even assess what a consumer wants from them. Understanding the value consumers' desire from salespeople is an area in need of further research, but other factors that consumers likely use to assess the value of agents include 8: - Superb listening and understanding needs - Easily accessible - Being an excellent problem solver - An advocate, first-rate negotiator for them - Highly responsive to needs that arise - Ability to keep consumers up to date - Commitment to a successful outcome - Competitive pricing

How Can Agents Better Assess What Customers Value?

Traditional ways of assessing customer value for a market involve conducting surveys, focus groups and, on an individual customer basis, asking questions like "tell me the top three things you are looking for in an agent (a home, etc.)?" While these approaches can yield some useful results, marketers feel these methods have tapped out their potential and are looking for innovative ways to gain deeper insights about customers.9 The drawback to traditional approaches is that they skim the surface and fail to uncover nuances about consumers' personal values/goals, specific use-situations, and idiosyncratic perceptions about the product-service based on their life history and experience. More recently, some research firms and experts advocate the use of softer, qualitative approaches to understanding customer value.10 For individual customers this means creating intentional space to ask clients very open-ended, unstructured questions with a goal of eliciting their "stories." This is no doubt a skill that an agent can hone, but requires thoughtful reflection and persistence. Individual agents may broach or phrase these questions differently in the context of a conversation, but some examples are: "If you could create a dream home-buying experience, what would it look like?" "Tell me about the last time you made a major life decision (large purchase)," with additional probes like "How did it go?," "Who else was involved?," "What roles did they play," or "What made the process more/less painful?" Questions along these lines consistently reveal deeper insights into customer value. Another technique to use is called the "grand-tour approach."11 In this case, when asking questions like the ones above, consumers are gently guided to structure their response in as much detail as possible, as if they are giving a "tour" of what they saw, heard, and felt - or are replaying a movie of what it was like to be there. Ultimately, researchers are finding that techniques like these can reveal fresh, powerful insights.

Crafting Compelling Value Propositions

Ultimately, agents want to craft compelling value propositions that resonate with consumers. Often times, salespeople want to give consumers a holistic sense of the value they can provide, so they are prone to present a laundry list of benefits and talking points. Experts suggest that these days focus is what counts.12 Honing in on one or two important points of difference between the value one can offer relative to the nearest competition makes it easier for consumers. In the process, agents should strive to craft value propositions that are distinctive, memorable, measurable, and sustainable. The prevailing market conditions might influence potential clients to put undue focus on an agent's commission rate and not listen to their pitch. In response, successful agents will go out of their way to understand what creates value for consumers and help them to believe in their superior ability to facilitate that journey.

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1Bagozzi, Richard P. and Utpal Dholakia (1999), "Goal Setting and Goal Striving in Consumer Behavior," Journal of Marketing, 63 (Special Issue), p. 19-32. Woodruff, Robert B. (1997), "Customer Value: The Next Source for Competitive Advantage," Journal of the Academy of Marketing Science, 25 (2), p. 139-54. 2Smith, J. Brock and Mark Colgate (2007), "Customer Value Creation: A Practical Framework," Journal of Marketing Theory and Practice, 15 (1), p. 7-23. 3Woodruff, Robert B. and Sarah Fisher Gardial (1996), Know Your Customer: New Approaches to Understanding Customer Value and Satisfaction. Cambridge, MA: Blackwell Business. Ratneshwar, S., Allan D. Shocker, June Cotte, and Rajendra K. Srivastava (1999), "Product, Person, and Purpose: Putting the Consumer Back into Theories of Dynamic Market Behaviour," Journal of Strategic Marketing, 7 (3), 191-208. 4Liu, Annie H., and Mark P. Leach (2001), "Developing Loyal Customers with a Value-adding Sales Force: Examining Customer Satisfaction and the Perceived Credibility of Consultative Salespeople," Journal of Personal Selling & Sales Management, 21 (2), p.147-156. 5Ibid. 6Ibid. 7Sheth, Jagdish N. and Rajendra S. Sisodia (2005), "A Dangerous Divergence: Marketing and Society," Journal of Public Policy & Marketing, 24 (1), 160-162. 8Johnston, Mark W. and Greg W. Marshall (2005), Relationship Selling and Sales Management. New York: McGraw-Hill Irwin. The Chally Word Class Sales Excellence Research Report: The Route to the Summit. (2007), accessed from https://www.chally.com, April 2008. 9Donath, Bob (2005), "Customer Knowledge Takes Priority in Study," Marketing News, 39 (20), 7. Oliva, Ralph A. (2005), "Know Thy Customer: The Very Heart of Marketing--Understanding Customer Needs and What They Really Value--Tops Business Marketers' Priorities," The Pennsylvania State University Institute for the Study of Business Markets (Ed.). Nussbaum, Bruce (2004), "The Power of Design," in Business Week, May 17th, 2004, Issue 3883, 96-103. 10Ibid. 11McCracken, Grant: The Long Interview. Sage, Beverly Hills, CA, 1988. Spradley, J. P.: The Ethnographic Interview. Holt, Reinhardt & Winston, New York, 1979. 12Anderson, James C., James A. Narus, and Van Rossum (2006), "Customer Value Propositions in Business Markets," Harvard Business Review (March), 91-99.

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About the Author:

Chris Blocker, PhD, Assistant Professor of Marketing, Baylor University

Chris completed his PhD at the University of Tennessee in marketing. His research focuses on understanding the dynamics of customer value and its implications for important strategies like relationship management and segmentation. Prior to pursuing a PhD in marketing, Chris held various marketing/sales positions in the high-tech sector, including work in professional services and as a global account manager for AT&T and in business marketing at Sprint. He has published research in respected journals such as Industrial Marketing Management, The European Journal of Marketing, The Journal of Business and Industrial Marketing, and in the proceedings of several international marketing organizations.