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Customer value management

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Kobi Vider
Kobi Vider
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Customer Value Management November, 2002 From anywhere… to anyone Customer Value Management
From anywhere… to anyone Introduction to Customer Value Management Presentation Objectives •Define customer value management (CVM), •Understand the difference between customer value and customer satisfaction, •describe key CVM concepts and tools, and •communicate the importance of measuring quality in the eyes of your clients.
From anywhere… to anyone Introduction to Customer Value ManagementWHY invest in CVM? To become a world leader in providing innovative delivery solutions, creating value for our customers, employees and all customers
From anywhere… to anyone Introduction to Customer Value Management What is Customer Value? Quality Price VALUE Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998
From anywhere… to anyone Introduction to Customer Value Management Sub-attributes Sub-attributes Product Quality Customer Service Marketing Sales Order Fulfillment Overall Quality Relative Price Competitiveness Overall Value Satisfaction Customer Value Defined
From anywhere… to anyone Introduction to Customer Value Management Quality Attributes Performance Rating Importance Weight ABC XYZ Product Information 50 6 8 Advertising and Promotion 20 6 7 Customer & Consultation 20 9 6 Customized Solutions 10 8 7 100
From anywhere… to anyone Introduction to Customer Value Management Stage One Stage Two Stage Three Stage Four Minimum Requirements Customer Focus Customer Attitudes Competitive Focus on Targeted Markets Conformance Quality • Delivering what we promise • Meeting standards Customer Satisfaction • Providing what customers want • Responding to customer complaints Customer Loyalty • Retaining our customers • Getting them to recommend us Customer Value • Meeting critical needs of targeted customers • Outperforming competitors • Creating new, unique benefits 21st Century Growth Company Source: Adapted from Managing Customer Value by Bradley T. Gale, (New York, The Free Press, 1994)
From anywhere… to anyone Introduction to Customer Value Management I can’t get no (customer) satisfaction… •Satisfaction in itself does not lead to customer loyalty •Positive empirical relationship between value focus and link to market share Where are leading-edge companies headed? Satisfaction = Satisfy Existing Customers Better Value = •Improve Your Competitive Position •Attract and Retain Targeted Customers
From anywhere… to anyone Introduction to Customer Value Management Satisfaction Current Service The Entire Customer Relationship Lag Indicator Lead Indicator Company Performance Company Vs. Competition Tenuous Link to Business Performance Proven Relationship to Business Performance Value
From anywhere… to anyone Introduction to Customer Value Management INPUTS •Customer Value Management Council •External/Internal Data Sources OUTPUTS • Customer Value Tools and Data • Competitive Value Proposition • Customer Loyalty and Market Share Analysis GOAL To establish CVM as a core competence for the Canada Post Group of Companies. KEY MEASUREMENTS Customer Loyalty Market Share Profitability Customer Retention DEFINITION Customer Value Management is a process designed to develop and execute value-based strategies which impact marketing, strategic planning, competitive positioning, branding, pricing, and selling.
From anywhere… to anyone Introduction to Customer Value Management Ideal Customer Value Process Capabilities Performance Improvement CUSTOMER-CENTRIC
From anywhere… to anyone Introduction to Customer Value Management 1. Assess Market Opportunity 2. Conduct Analysis 3. Commit to a Value Proposition 4. Measure and Reward Performance Customer Value Management
From anywhere… to anyone Introduction to Customer Value Management Value Analysis Tools Value Scorecard Performance Scores Weights for: Dimension Attribute Filto Walter Envir Brite Clarion Average Attrib. Value Benefits Product Chloroform Removal 10.0 10.0 2.0 10.0 2.0 6.8 12.0 Lead Removal 10.0 10.0 10.0 8.0 10.0 9.6 10.0 Taste 8.0 10.0 8.0 6.0 6.0 7.6 9.0 Clogging 8.0 2.0 10.0 4.0 8.0 6.4 25.0 Service Reliable supply 5.0 5.0 7.0 9.0 9.0 7.0 16.0 Technical spport 2.0 1.0 3.0 1.0 7.0 2.8 14.0 RelationshipRelationship 7.0 9.0 5.0 5.0 9.0 7.0 14.0 Weighted benefit scores 7.0 5.8 6.7 5.8 7.5 6.6 98.3 Costs Selling priceCapital cost 17 40 30 37 25 30 100.0 Other costs Disposibles cost 120 160 54 85 130 110 100.0 Weighted cost scores 137 200 84 122 155 140 -1.7 Value Map for Commercial Filtration -- Base Envir Walter Filto Brite Clarion 60 80 100 120 140 160 180 200 220 5.6 6.0 6.4 6.8 7.2 7.6 Performance Price ($) High Cost Filto Value Relative to Average -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Chloroform Removal Lead Removal Taste Clogging Reliable supply Technical spport Relationship Capital cost Disposibles cost Relative value impacts - Filto vs. Average Differential worth of performance advantages and disadvantages Dimension Attribute Filto Walter Envir Brite Clarion Average Benefits Product Chloroform Removal 22 22 -34 22 -34 0 Lead Removal 2 2 2 -9 2 0 Taste 2 13 2 -8 -8 0 Clogging 23 -64 53 -35 23 0 Service Reliable supply -19 -19 0 19 19 0 Technical spport -7 -15 2 -15 34 0 Relationship Relationship 0 16 -16 -16 16 0 (a) Total differential worth of benefits 25 -44 9 -43 53 0 Costs Selling price Capital cost 13 -10 0 -7 5 0 Other costs Disposibles cost -10 -50 56 25 -20 0 (b) Total cost advantage 3 -60 56 18 -15 0 Price Performance Profile Value Map Head-to-Head Comparisons
From anywhere… to anyone Introduction to Customer Value Management Price Performance Profile Performance Scores Weights for: Dimension Attribute Filtro Walter Envir Brite Clarion Average Attrib. Value Benefits Product Chloroform Removal 10.0 10.0 2.0 10.0 2.0 6.8 12.0 Lead Removal 10.0 10.0 10.0 8.0 10.0 9.6 10.0 Taste 8.0 10.0 8.0 6.0 6.0 7.6 9.0 Clogging 8.0 2.0 10.0 4.0 8.0 6.4 25.0 Service Reliable supply 5.0 5.0 7.0 9.0 9.0 7.0 16.0 Technical support 2.0 1.0 3.0 1.0 7.0 2.8 14.0 Relationship Relationship 7.0 9.0 5.0 5.0 9.0 7.0 14.0 Weighted benefit scores 7.0 5.8 6.7 5.8 7.5 6.6 98.3 Costs Selling price Capital cost 17 40 30 37 25 30 100.0 Other costs Disposibles cost 120 160 54 85 130 110 100.0 Weighted cost scores 137 200 84 122 155 140 -1.7 Slope of fair value line 58.5032
From anywhere… to anyone Introduction to Customer Value Management Value Map Value Map for Commercial Filtration -- Base Envir Walter Filtro Brite Clarion 60 80 100 120 140 160 180 200 220 5.6 6.0 6.4 6.8 7.2 7.6 Performance Price ($) High Cost
From anywhere… to anyone Introduction to Customer Value Management Value Scorecard Differential worth of performance advantages and disadvantages Dimension Attribute Filtro Walter Envir Brite Clarion Average Benefits Product Chloroform Removal 22 22 -34 22 -34 0 Lead Removal 2 2 2 -9 2 0 Taste 2 13 2 -8 -8 0 Clogging 23 -64 53 -35 23 0 Service Reliable supply -19 -19 0 19 19 0 Technical support -7 -15 2 -15 34 0 Relationship Relationship 0 16 -16 -16 16 0 (a) Total differential worth of benefits 25 -44 9 -43 53 0 Costs Selling price Capital cost 13 -10 0 -7 5 0 Other costs Disposibles cost -10 -50 56 25 -20 0 (b) Total cost advantage 3 -60 56 18 -15 0 (c) Total value advantage = (a)+(b) 28 -104 64 -25 38 0 (d) Actual price (or cost) 137 200 84 122 155 140 (e) Fair Value Price = (a) + (average price, 140 ) 165 96 148 97 193 140 (f) Total value advantage = (e)-(d) 28 -104 64 -25 38 0
From anywhere… to anyone Introduction to Customer Value Management Head-to-Head Comparisons (Average) Filtro Value Relative to Average -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Chloroform Removal Lead Removal Taste Clogging Reliable supply Technical support Relationship Capital cost Disposibles cost Relative value impacts - Filto vs. Average
From anywhere… to anyone Introduction to Customer Value Management Identify Value Drivers Measure Value Creation After Transaction Business Process Improvement Conduct Baseline Study On-going Transactional Surveys Develop Action Plans Measure Market Perception On-going Market Surveys feedback
From anywhere… to anyone Introduction to Customer Value Management The Value Proposition Deployment Process Define/ Refine Value Proposition Build Commitment To Value Proposition Process & Organization Gap Analysis Changes To Deliver Value Proposition Internal Tracking & Measurement Tracking Market Impact Plan/Do/Check/Act Plan/Do/Check/Act Internal Management/ Staff Group of Companies
From anywhere… to anyone Introduction to Customer Value Management Customer Value Yields Big Dividends • Doubled profits in a single year • Moved from being a market “nicher” to the market leader Wireless Telecom Company Heavy Equipment Dealership Underground Mining Equipment Manufacturer / Distributor International Health and Leisure Firm • 50% reduction in customer churn • Improved equipment delivery time from 10 days to 2 days • Total estimated bottom line contribution = $4.5M • Doubled sales revenue – from $250M to $500M+ • Tripled market share in a strategically important market: 4% - 12% • Increased employees from 600 to 1000+ • Achieved record profitability last year • Reclaimed more than $8mm in lost sales • 30% improvement in on-time deliveries • Improved margins on equipment repairs from 11% to 28% Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998
From anywhere… to anyone Introduction to Customer Value Management MODELING EMPLOYEE VALUE The Right Workforce” Positive Turnover AcquisitionRetention Employee Value Relative Compensation Relative Job Quality Base Salary Work Life Balance Brand Equity Manager Quality BenefitsBonusPay Equity
From anywhere… to anyone Introduction to Customer Value Management The “Value” of Customer Value • Strengthen value propositions – value is the basis for customer decisions • Identify responses with the greatest impact on customers’ future purchase behaviour • Hone in on winning client strategies • Discipline and focus—across all functions • Dramatic impacts and performance gains The key to attracting, satisfying, and retaining customers.
Customer Value Management November, 2002 From anywhere… to anyone

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Customer value management

  • 1. Customer Value Management November, 2002 From anywhere… to anyone Customer Value Management
  • 2. From anywhere… to anyone Introduction to Customer Value Management Presentation Objectives •Define customer value management (CVM), •Understand the difference between customer value and customer satisfaction, •describe key CVM concepts and tools, and •communicate the importance of measuring quality in the eyes of your clients.
  • 3. From anywhere… to anyone Introduction to Customer Value ManagementWHY invest in CVM? To become a world leader in providing innovative delivery solutions, creating value for our customers, employees and all customers
  • 4. From anywhere… to anyone Introduction to Customer Value Management What is Customer Value? Quality Price VALUE Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998
  • 5. From anywhere… to anyone Introduction to Customer Value Management Sub-attributes Sub-attributes Product Quality Customer Service Marketing Sales Order Fulfillment Overall Quality Relative Price Competitiveness Overall Value Satisfaction Customer Value Defined
  • 6. From anywhere… to anyone Introduction to Customer Value Management Quality Attributes Performance Rating Importance Weight ABC XYZ Product Information 50 6 8 Advertising and Promotion 20 6 7 Customer & Consultation 20 9 6 Customized Solutions 10 8 7 100
  • 7. From anywhere… to anyone Introduction to Customer Value Management Stage One Stage Two Stage Three Stage Four Minimum Requirements Customer Focus Customer Attitudes Competitive Focus on Targeted Markets Conformance Quality • Delivering what we promise • Meeting standards Customer Satisfaction • Providing what customers want • Responding to customer complaints Customer Loyalty • Retaining our customers • Getting them to recommend us Customer Value • Meeting critical needs of targeted customers • Outperforming competitors • Creating new, unique benefits 21st Century Growth Company Source: Adapted from Managing Customer Value by Bradley T. Gale, (New York, The Free Press, 1994)
  • 8. From anywhere… to anyone Introduction to Customer Value Management I can’t get no (customer) satisfaction… •Satisfaction in itself does not lead to customer loyalty •Positive empirical relationship between value focus and link to market share Where are leading-edge companies headed? Satisfaction = Satisfy Existing Customers Better Value = •Improve Your Competitive Position •Attract and Retain Targeted Customers
  • 9. From anywhere… to anyone Introduction to Customer Value Management Satisfaction Current Service The Entire Customer Relationship Lag Indicator Lead Indicator Company Performance Company Vs. Competition Tenuous Link to Business Performance Proven Relationship to Business Performance Value
  • 10. From anywhere… to anyone Introduction to Customer Value Management INPUTS •Customer Value Management Council •External/Internal Data Sources OUTPUTS • Customer Value Tools and Data • Competitive Value Proposition • Customer Loyalty and Market Share Analysis GOAL To establish CVM as a core competence for the Canada Post Group of Companies. KEY MEASUREMENTS Customer Loyalty Market Share Profitability Customer Retention DEFINITION Customer Value Management is a process designed to develop and execute value-based strategies which impact marketing, strategic planning, competitive positioning, branding, pricing, and selling.
  • 11. From anywhere… to anyone Introduction to Customer Value Management Ideal Customer Value Process Capabilities Performance Improvement CUSTOMER-CENTRIC
  • 12. From anywhere… to anyone Introduction to Customer Value Management 1. Assess Market Opportunity 2. Conduct Analysis 3. Commit to a Value Proposition 4. Measure and Reward Performance Customer Value Management
  • 13. From anywhere… to anyone Introduction to Customer Value Management Value Analysis Tools Value Scorecard Performance Scores Weights for: Dimension Attribute Filto Walter Envir Brite Clarion Average Attrib. Value Benefits Product Chloroform Removal 10.0 10.0 2.0 10.0 2.0 6.8 12.0 Lead Removal 10.0 10.0 10.0 8.0 10.0 9.6 10.0 Taste 8.0 10.0 8.0 6.0 6.0 7.6 9.0 Clogging 8.0 2.0 10.0 4.0 8.0 6.4 25.0 Service Reliable supply 5.0 5.0 7.0 9.0 9.0 7.0 16.0 Technical spport 2.0 1.0 3.0 1.0 7.0 2.8 14.0 RelationshipRelationship 7.0 9.0 5.0 5.0 9.0 7.0 14.0 Weighted benefit scores 7.0 5.8 6.7 5.8 7.5 6.6 98.3 Costs Selling priceCapital cost 17 40 30 37 25 30 100.0 Other costs Disposibles cost 120 160 54 85 130 110 100.0 Weighted cost scores 137 200 84 122 155 140 -1.7 Value Map for Commercial Filtration -- Base Envir Walter Filto Brite Clarion 60 80 100 120 140 160 180 200 220 5.6 6.0 6.4 6.8 7.2 7.6 Performance Price ($) High Cost Filto Value Relative to Average -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Chloroform Removal Lead Removal Taste Clogging Reliable supply Technical spport Relationship Capital cost Disposibles cost Relative value impacts - Filto vs. Average Differential worth of performance advantages and disadvantages Dimension Attribute Filto Walter Envir Brite Clarion Average Benefits Product Chloroform Removal 22 22 -34 22 -34 0 Lead Removal 2 2 2 -9 2 0 Taste 2 13 2 -8 -8 0 Clogging 23 -64 53 -35 23 0 Service Reliable supply -19 -19 0 19 19 0 Technical spport -7 -15 2 -15 34 0 Relationship Relationship 0 16 -16 -16 16 0 (a) Total differential worth of benefits 25 -44 9 -43 53 0 Costs Selling price Capital cost 13 -10 0 -7 5 0 Other costs Disposibles cost -10 -50 56 25 -20 0 (b) Total cost advantage 3 -60 56 18 -15 0 Price Performance Profile Value Map Head-to-Head Comparisons
  • 14. From anywhere… to anyone Introduction to Customer Value Management Price Performance Profile Performance Scores Weights for: Dimension Attribute Filtro Walter Envir Brite Clarion Average Attrib. Value Benefits Product Chloroform Removal 10.0 10.0 2.0 10.0 2.0 6.8 12.0 Lead Removal 10.0 10.0 10.0 8.0 10.0 9.6 10.0 Taste 8.0 10.0 8.0 6.0 6.0 7.6 9.0 Clogging 8.0 2.0 10.0 4.0 8.0 6.4 25.0 Service Reliable supply 5.0 5.0 7.0 9.0 9.0 7.0 16.0 Technical support 2.0 1.0 3.0 1.0 7.0 2.8 14.0 Relationship Relationship 7.0 9.0 5.0 5.0 9.0 7.0 14.0 Weighted benefit scores 7.0 5.8 6.7 5.8 7.5 6.6 98.3 Costs Selling price Capital cost 17 40 30 37 25 30 100.0 Other costs Disposibles cost 120 160 54 85 130 110 100.0 Weighted cost scores 137 200 84 122 155 140 -1.7 Slope of fair value line 58.5032
  • 15. From anywhere… to anyone Introduction to Customer Value Management Value Map Value Map for Commercial Filtration -- Base Envir Walter Filtro Brite Clarion 60 80 100 120 140 160 180 200 220 5.6 6.0 6.4 6.8 7.2 7.6 Performance Price ($) High Cost
  • 16. From anywhere… to anyone Introduction to Customer Value Management Value Scorecard Differential worth of performance advantages and disadvantages Dimension Attribute Filtro Walter Envir Brite Clarion Average Benefits Product Chloroform Removal 22 22 -34 22 -34 0 Lead Removal 2 2 2 -9 2 0 Taste 2 13 2 -8 -8 0 Clogging 23 -64 53 -35 23 0 Service Reliable supply -19 -19 0 19 19 0 Technical support -7 -15 2 -15 34 0 Relationship Relationship 0 16 -16 -16 16 0 (a) Total differential worth of benefits 25 -44 9 -43 53 0 Costs Selling price Capital cost 13 -10 0 -7 5 0 Other costs Disposibles cost -10 -50 56 25 -20 0 (b) Total cost advantage 3 -60 56 18 -15 0 (c) Total value advantage = (a)+(b) 28 -104 64 -25 38 0 (d) Actual price (or cost) 137 200 84 122 155 140 (e) Fair Value Price = (a) + (average price, 140 ) 165 96 148 97 193 140 (f) Total value advantage = (e)-(d) 28 -104 64 -25 38 0
  • 17. From anywhere… to anyone Introduction to Customer Value Management Head-to-Head Comparisons (Average) Filtro Value Relative to Average -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 Chloroform Removal Lead Removal Taste Clogging Reliable supply Technical support Relationship Capital cost Disposibles cost Relative value impacts - Filto vs. Average
  • 18. From anywhere… to anyone Introduction to Customer Value Management Identify Value Drivers Measure Value Creation After Transaction Business Process Improvement Conduct Baseline Study On-going Transactional Surveys Develop Action Plans Measure Market Perception On-going Market Surveys feedback
  • 19. From anywhere… to anyone Introduction to Customer Value Management The Value Proposition Deployment Process Define/ Refine Value Proposition Build Commitment To Value Proposition Process & Organization Gap Analysis Changes To Deliver Value Proposition Internal Tracking & Measurement Tracking Market Impact Plan/Do/Check/Act Plan/Do/Check/Act Internal Management/ Staff Group of Companies
  • 20. From anywhere… to anyone Introduction to Customer Value Management Customer Value Yields Big Dividends • Doubled profits in a single year • Moved from being a market “nicher” to the market leader Wireless Telecom Company Heavy Equipment Dealership Underground Mining Equipment Manufacturer / Distributor International Health and Leisure Firm • 50% reduction in customer churn • Improved equipment delivery time from 10 days to 2 days • Total estimated bottom line contribution = $4.5M • Doubled sales revenue – from $250M to $500M+ • Tripled market share in a strategically important market: 4% - 12% • Increased employees from 600 to 1000+ • Achieved record profitability last year • Reclaimed more than $8mm in lost sales • 30% improvement in on-time deliveries • Improved margins on equipment repairs from 11% to 28% Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998
  • 21. From anywhere… to anyone Introduction to Customer Value Management MODELING EMPLOYEE VALUE The Right Workforce” Positive Turnover AcquisitionRetention Employee Value Relative Compensation Relative Job Quality Base Salary Work Life Balance Brand Equity Manager Quality BenefitsBonusPay Equity
  • 22. From anywhere… to anyone Introduction to Customer Value Management The “Value” of Customer Value • Strengthen value propositions – value is the basis for customer decisions • Identify responses with the greatest impact on customers’ future purchase behaviour • Hone in on winning client strategies • Discipline and focus—across all functions • Dramatic impacts and performance gains The key to attracting, satisfying, and retaining customers.
  • 23. Customer Value Management November, 2002 From anywhere… to anyone