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October 12, 2007

New Perspectives

CARING Thoughtware and Customer Value

by Professors Larry Chonko and Buddy LaForge


Most people are familiar with Lewis Carroll’s classic Alice in Wonderland. Remember when Alice comes to the fork in the road and the Cheshire Cat is sitting in the tree? When Alice asked which road to take, the Cheshire Cat asked where she was going. Alice didn’t know, so the Cheshire Cat replied then it didn’t matter which road she took.

How does this relate to direct selling? Well, this may be a stretch, but the customer is where direct sellers should be going—satisfying needs and wants, asking them about products and services, querying them about ideas for new products, and so on. If direct sellers don’t know their customers, it doesn’t really matter what they do. The customers should be a primary driver of what direct sellers do in the creation of value.

It is our contention that customer value is a thoughtware. There’s an analogy between thoughtware and software because just as software must continually be upgraded, so must people’s thoughtware. All components must be present and operating in order for a business to succeed at its vision and mission. The thoughtware component is the array of techniques, attitudes, conceptual frameworks and methods of approach that businesspeople bring to their daily work activities. It’s what makes the other stuff work.

In other words, thoughtware is a process through which people rethink the way in which they approach, organize and apply skills on behalf of a business and its supporting systems and assets. Thought is the ancestor of all action. People’s thinking is the basis for everything they do and all behavior is rooted in thought. Change the thoughtware to one of customer focus and the business will change itself and create an unmatched capability to handle the future—whatever it brings.

When it comes to direct sellers, customer focus is a thoughtware. Customer needs, wants and preferences change and direct sellers must upgrade their thoughtware to accommodate those changes. Creating customer value is a process, then. Today’s value may become obsolete if the direct sellers do not keep up with customers. Failure to keep up will result in the following truism: “It costs a lot to provide poor value.” That means direct sellers must always be in sync with what customers consider value and must engage in continuous learning about what customers really want.

Here’s a story. See if you can determine how it deals with customer value. The Reverend Billy Graham was early in his preaching career. He came to a small town to preach a sermon and asked directions to the post office from a young boy. Thanking the boy, Graham said, “Come to the local Baptist church tonight and I’ll tell you how to get to heaven.” The boy replied, “I don’t think I’ll be there—you don’t even know how to get to the post office.”

The Reverend lost credibility in the eyes of the boy because he didn’t know how to get somewhere in a place he had never been; perhaps a foolish conclusion on the part of the boy, but understandable just the same.

Here’s another example. The famous painter Picasso wanted to buy a special piece of furniture. He sketched out on a piece of scrap paper the kind of cabinet he wanted. When he finished the sketch he asked the cabinetmaker what the price would be. The cabinetmaker responded, “No charge, just sign the sketch.” Value is in the eye of the beholder—the customer by another name.

An acronym is a great way to simplify ideas, like applying the concept of thoughtware in a way that will help you as a direct seller. If you can remember the acronym, you often can embrace the concepts for which each letter stands. Since a lot has been written on caring about customers, CARING might be a good acronym.

C is for capability. Direct sellers must continuously demonstrate the capability of keeping up to date with customer needs and wants and demonstrating the capability of satisfying them.

A is for agility. This is something we wrote about last year. Direct sellers must be able to either respond quickly to changes in customer needs and wants or anticipate them.

R is for reliability. Much can be said about this, but there has to be a constancy of product quality and service quality that customers can rely on.

I is for integrity. Direct sellers must always be forthright in their dealings with customers. We learned a great deal about that from Doris Christopher and how integrity permeated all aspects of the Pampered Chef’s operations.

N is for nurturing. Direct sellers must not only find customers, they must grow them. In an ideal world, a customer would always seek out the direct seller because of the previous history of dealing with integrity. That would be the ultimate in nurturing.

G is for gratification, a synonym for satisfaction. Direct sellers must be viewed by customers as a source of satisfaction. Relationships with direct sellers must please the customer.

As you can see, value is a key to sustaining competitive advantage in the marketplace. At the Annual Meeting in San Diego we learned that much is changing in the world of direct selling. Globalization is moving at warp speed. The Internet seems to have taken over the world. The industry is under fire on several fronts. Customers are becoming more demanding in their efforts to seek the truth and scrutinize it. Folks say there are no fundamentals on which direct sellers can rely. But we don’t buy that. There have to be some principles on which direct sellers can build their businesses.

One principle is that sustainable competitive advantage brings profitability. So direct sellers must engage in constant thoughtware, like CARING, to determine what can contribute to sustainable competitive advantage.

A second is that true competitive advantage must be sustainable, and sustainability isn’t found in price cuts or discount deals or overloading product features. Those are all easily copied.

Third, sustainable competitive advantage exists in the minds of customers. But customers change their minds and that’s where the idea of thoughtware comes in. Direct sellers’ thoughtware must have some benchmarks on which to rely—like providing customer value. But how that value is provided may change constantly. And the changes required can only be known if direct sellers stay “in touch” with customers.

Finally, true competitive advantage is based on customer perceptions of value. And since customer value perceptions can change, the key is to find something not easily imitated and considered to be of value by customers, and can be implemented in ways superior to competitors. Then you must articulate it so people understand it, embrace it and recognize its value.

Naturally, the ability to sustain competitive advantage through people starts at the top of direct selling organizations. In that respect, direct selling companies are no different than other companies—they must have top management committed to excellence. The challenge is to ensure that top management commitment is manifested in the myriad of ways that direct sellers come in contact with customers—the independent contractors, Web sites, public relations, government relations, consumer advocacy, and so on. Customer value creation is critical, but it must go well beyond the corporate strategic planners.

Customer value creation must be evident at all points of contact with customers.

Raymond (Buddy) LaForge is the Brown-Forman Professor of Marketing at the University of Louisville. Larry Chonko is the Holloway Professor of Marketing at Baylor University. E-mail your questions and comments to professors@directsellingnews.com.