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The Smiling Curve Tells You What Clients Value the Most

In the minds of many firms, deliverables are what it’s all about. However, what matters to clients usually takes place long before and after an agency deploys their code or emails their designs. Use the Smiling Curve to uncover that value.

While you might call yourself a “financial advisor” or “web design agency,” your clients are expecting you to do more than that.

Giving sound advice or building websites that load quickly will never make you stand out. Those are your entrance tickets. To win at the game, you need to do more.

The so-called Smiling Curve illustrates well what this “more” is.

A Smiling Curve for Consumer Electronics

The Smiling Curve is an invention by Stan Shih, founder of computer and electronics Acer. Back in 1992, Acer wasn’t a very known brand. Shih was wondering what Taiwanese companies, like his Acer, could do to command the prices that American brands did.

His realization was that the things that commanded most value in the eyes of consumers were at the beginning and the end of the “value chain.” The term value chain refers to the full range of activities needed to bring a product or service from idea to market.

In Shih’s industry, these ends are conception (come up with ideas) and marketing (make people want your inventions). Shih applied these insights to successfully reposition Acer from being an unknown manufacturer to being a well-known PC and technology brand.

To illustrate this concept, Shih drew a curve, shaped like a smile. The vertical axis represented the perceived value and the horizontal axis showed time. Underneath were the titles of departments that are usually responsible for the activities:

The Smiling Curve, as applied to a consumer electronics brand.The Smiling Curve was born.

A Smiling Curve for Professional Services

Initially, the Smiling Curve was intended to apply to the manufacturing industry. That was Shih’s home turf.

However, a similar curve can also be made for the IT service industry. In the book “Implementing Value Pricing“ by Ron Baker, a Smiling Curve for IT firms is provided.

The Smiling Curve, as applied to a professional services firm.If I asked what person, department or office in your firm that provided “implementation” I’m sure you could answer it immediately. However, if I asked about the high-value items in the chart above, “determining value to solve” and “ongoing support,” you might not have an answer so readily available.

Fact is, many agencies and firms pay way too much attention to the things that customers value the lowest.

Now the labels on the Smiling Curve above are generic and may not apply perfectly to your specific industry. Even so, the model holds as multiple case studies have shown. What’s even more interesting is that the curve seems to deepen as the cost of production drops and competition gets more fierce. The production of services and goods is getting less and less value-bringing compared to conceptualizing and marketing them.

The Smiling Curve is an excellent tool for identifying activities that can bring even more customer value and fetch higher prices.

Fill in the Blanks on Your Own Smiling Curve

To make this more concrete and actionable, I urge you to draw a Smiling Curve for your company and populate it with your data. The critical point here is “data.” Not guesswork but actual feedback from real, living customers.

Are you providing the highest possible value to your customers?

If not, what products and services could you provide with your current, or adjacent and easily obtained, skill set?

In other terms, your job is to fill those white spots on the map that take place outside of where you put your focus right now.

The Smiling Curve, with activities hidden, for you to fill in.Your Turn: Fill in the Blanks

Learn What Your Clients Value the Most

Here are some ideas for filling those white spots with ideas for products and services that provide high value to your clients:

Interview Clients to Get Their Perspective

Meet them over lunch and pick their brains. Ask open questions and aim to understand what worries and excites them. Many companies have come up with their solutions to common problems that irk them frequently. These are opportunities to provide services.

Organize a Client Retreat for Meaningful Conversations

Invite a group of clients to a day of learning and sharing of experiences. Bring in external speakers and use the opportunity to learn more about your clients’ challenges and where you can be of help and service.

Wine and Dine to Hear Honest Opinions

If a retreat sounds too ambitious, invite clients for dinner. Wine and dine them and provide an empathetic ear in learning about how they view the world. Don’t justify or pitch your ideas or solutions. Instead, ask open and honest questions about their challenges.

Organize a Workshop to Think Together

If you want to organize something in your office, invite them to a workshop. Many will probably decline as they will assume it’s another sales effort. Key here is to make the theme and topic something that is truly relevant to them. This will require some prior research. However, well done, it could be a fantastic opportunity to learn about their needs as well as showing your consulting skills in solving problems together.

My friend Stefan Mellsjö, also suggested the following ways to collect insights. These are Stefan’s ideas, paraphrased by me:

Do a Survey to Get Many Opinions, Quickly

It won’t result in as much information as interviewing but if you focus the survey on one topic or area, you’ll get a lot of information with relatively little effort.

Log All Interactions and Look for Patterns

Logging all interactions with customers and potential customers. Then follow up and trying to understand: Why does this customer contact me? Why now? What are the causes? Is there a trigger?

Interview Support and Sales Teams Who Know Clients Best

Interviewing customer support and sales staff. They are the most knowledgeable at a company when it comes to customer needs. Stefan says they might even know more about the customers than the customers themselves. This knowledge is usually not structured and sometimes tacit and hard to convey formally. In many technology companies, the engineers rule, not market and sales, Stefan adds.

Summary

The Smiling Curve illustrates what your clients value and where you can do the most for them. By mapping the value chain and determining the value provided at each point, you can discover opportunities for innovation. It helps you create new valuable products and services that solve real, painful and immediate problems for your clients.


This post originally appeared on the Bondsai Blog, the blog of Leancept's personal CRM, now known as Elately.

This article is available in multiple languages

Svenska 🇸🇪 SvenskaEnglish 🇬🇧 English
Article written by
Jakob Persson
Founder/CEO
Last updated
2024-02-27
Originally published
2018-07-26

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