Davos 2018: Bain Breakfast

Read the transcript below.

ORIT GADIESH: Morning. My name is Orit Gadiesh. On behalf of our partners here, welcome to our 14th annual Davos breakfast, and welcome back to many of you. At the heart of every business is an exchange of value with customers.

A company sells a product or a service in exchange for something from their customers. But what customers truly value and are willing to pay for can be difficult to pin down and psychologically complicated. A rigorous understanding of customer value allows a customer to come up with new combinations of delivered value.

This is particularly critical in our digital age when entrepreneurs are relentlessly finding ways to deliver new types of value and when customers' experiences of value is constantly migrating. We are fortunate this morning to have three speakers who are uniquely qualified to address this topic. From LEGO, Jørgen Vig Knudstorp. From Publicis, my longtime friend Maurice Lévy, chairman of the supervisory board. Kicking off the session is Eric Almquist, also my friend and fellow partner at Bain & Company.

ERIC ALMQUIST: Today, 55% of all e-commerce searches in the US begin on Amazon, not on Google. And 50% of all e-commerce sales in the US will go to Amazon within three years. And Amazon will capture 70% of all the growth over the next five years of e-commerce.

But what I'm going to talk about is, I think, the fundamental reason, and that is that Amazon is delivering more value and more types of value to its customers than any other discount retailer. We've identified 30 fundamental types of value in the B2C world, and we call these the "elements of value." And it's the elements of value that actually in the end allow products and services to rise above commodity status. And I'd like to share with you some of the insights, some of the patterns that we have seen from that fundamental research on the elements of value.

First, it's important to deliver on multiple elements of value. For companies that are delivering on four or more of the elements on the pyramid, their growth rates average around 13%. The second insight is to strive to move above the functional level if you can. On average, the emotional elements of value—they're that second rung up the pyramid—are worth about twice what any functional element is worth in predicting NPS. If you look at what Amazon is doing with Echo and with the acquisition of Whole Foods, one interpretation is that they are trying to move up the pyramid and to become more of an emotional player.

The third insight is that value is what ultimately creates promoters among your customer base. I would ask you to think about a few things. One is, ask yourself the question: What value am I really delivering to my customers?

And are there gaps against competitors? And secondly, are there one or two elements of value, as you look at the 30 that are in this framework, are there one or two that you could work on that perhaps you could add as a new element of value? Thank you very much.

JØRGEN VIG KNUDSTORP: Let me talk about protection. Because when I talk about protection, I'm not talking about trademark protection. That is important also. I'm talking about protecting that product experience, that you really deliver the element of value, and you tested yourself.

I wanted to share with you a little funny story about that. When I had become CEO in 2004, the year after, I traveled in the middle of the summer with our third-generation owner to George Mason University in Washington, DC, and we had a LEGO Fair. And we have about 500 events around the world. But actually talking about elements of value, I spent the three following days sitting with small groups of them, getting a sense of what they value in the brand and what was the area where we needed to dial up the most.

And so I think in that way I would really encourage everybody, using also Eric's framework, to think about protecting what is most dear to those who are very much at the core of your business. And then making sure you're upholding that promise, that you're long-term committed to it and you get the people on board who are willing to do this. I also wanted to address developing the brand and how we think about that. And I think so often development is thought of—let's make a new campaign.

I think brands are not built through campaigns. They're built through product and experiences. I think we talk about leveraging the brand, and it really takes two directions.

One is sort of how do we increase our affinity. So those who are already in love with LEGO, are users, perhaps through generations, how do we build an even closer relationship? How can we offer them even more because of their deep dedication? And the other element of leverage is how do we recruit more? We think we are talking to perhaps 200, 300 million children.

MAURICE LÉVY: The brand consumer bargaining power has changed and has shifted to the consumer. They have a voice. And they can with a click compare prices and make a decision. So bottom line, what makes a brand in our four-point oeuvre?

I believe it's worth dwelling on six elements that could echo Bain's 30 elements of value. First things first, the brand's foundation is underpinned by three core elements: utility, affordability and design. Utility, a brand must deliver on its core promise of utility. A detergent is a detergent, and it must deliver cleaners, period. If it doesn't, it has no right to exist.

Affordability, or put it differently, value for money, it means that the brand should have intrinsic value. Last but not least, design. It is key, it is paramount, on those three building blocks you add what will increasingly command value in the future and already in our days. The brand's promises, and once again, you have three elements to discuss: experience, cultural resonance and transformation.

Let's start with experience. We all know that experience is the brand, and the brand is experience. Think about taste for food or service and the quality of the service. The experience is probably the most important element of value from a consumer point of view.

The cultural reasons, each company has developed its own culture. Last but not least, transformation. And for me, transformation sits at the top of the pyramid. But ultimately, I believe it's for the brand to transform the user, the consumer, myself.

Over the last 10 years, the most successful brands have been those that allowed people to have transformational power. Facebook to connect, Amazon to shop the everything store, L'Oreal to feel good, Wal-mart to feel a smart shopper, et cetera, et cetera. I do believe that the day you lose the ownership of the brand and it has been transferred to the consumer, that day you have won. The very exciting—it is a very exciting time for creative agencies whose major task is to create new bonds, new links with connected consumers and value that will accelerate growth. Thank you.

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