Client Value Management (CVM) A FlackVentures Process Example

Goals for CVM Strategy Client-driven continuous improvement Closer relationship with clients and vendors Encourage employee innovation and creativity by establishing a supporting structure, systems, and culture Value-Centric Vision for Client Base Higher Profits via Value Equation (Value = Product Quality + Service Quality + Corporate Image + Client Relationship + Price)

Client-driven continuous improvement

Closer relationship with clients and vendors

Encourage employee innovation and creativity by establishing a supporting structure, systems, and culture

Value-Centric Vision for Client Base

Higher Profits via Value Equation (Value = Product Quality + Service Quality + Corporate Image + Client Relationship + Price)

Objectives for CVM Strategy To get closer to the Client To measure continuous improvement from the Client’s perspective To solicit Client input as the driver for Product and/or process improvement To measure competitive strengths and weaknesses To link CVM data to internal performance and reward system measures

To get closer to the Client

To measure continuous improvement from the Client’s perspective

To solicit Client input as the driver for Product and/or process improvement

To measure competitive strengths and weaknesses

To link CVM data to internal performance and reward system measures

Evolution of Value Stage 1 Conformance Quality “ Do it right the first time” Stage 2 Add simple customer satisfaction data from current customers. Design quality begins. Stage 3 Add external benchmarking to determine competitive strengths and weaknesses. Stage 4 The external data is used and acted upon by cross-functional teams that seek continuous improvement. Internal Feedback Loop Competitive Profiles State of the Art Management

The Financial Impact of CVM Market Share Client Retention Share of Spend Process Improvement Stock Price

Market Share

Client Retention

Share of Spend

Process Improvement

Stock Price

The Financial Impact of CVM: Market Share Client “Delight” drives Market Share (Higher the Satisfaction, higher the Loyalty) Client “Delight” drives Client Share (Higher the Satisfaction, Lower Probability of Multiple Suppliers) The Higher the Client Satisfaction, the less the Client is interested in Product Price

Client “Delight” drives Market Share (Higher the Satisfaction, higher the Loyalty)

Client “Delight” drives Client Share (Higher the Satisfaction, Lower Probability of Multiple Suppliers)

The Higher the Client Satisfaction, the less the Client is interested in Product Price

The Financial Impact of CVM: Client Retention The higher the Rating, the higher probability that the Client will be retained. Score (5 point scale) 5 Excellent 4 Very Good 3 Good 2 Fair 1 Poor Retention Rate (1 year later) 92 - 97% 80 - 85% 60 - 65% 15 - 20% 0 - 5%

The higher the Rating, the higher probability that the Client will be retained.

The Financial Impact of CVM: Share of Spend Highly Satisfied Clients will spend a larger percentage of their budget with USi. Satisfaction Level Delighted Clients (Top Box - 5) Satisfied Clients (Second Box- 4) Revenue Growth XX% X%

Highly Satisfied Clients will spend a larger percentage of their budget with USi.

The Financial Impact of CVM: Share of Spend Continued The higher the Rating, the higher probability that the Client will upgrade for more functionality. Rating 5 Very Satisfied 4 Satisfied 3 Neither 2 Dissatisfied 1 Very Dissatisfied Revenue Growth +59% +32% +6% +3% +0% Annual Maintenance Contract

The higher the Rating, the higher probability that the Client will upgrade for more functionality.

The Financial Impact of CVM: Process Improvement Identify Key Drivers of Value Map Processes Best Practice Benchmarking Process Improvement Teams EXAMPLES: GE recognized $750 million Savings in 1998 - 1.5 billion in 1999 GTE recognized 3-5% average annual cost reduction

Identify Key Drivers of Value

Map Processes

Best Practice Benchmarking

Process Improvement Teams

EXAMPLES:

GE recognized $750 million Savings in 1998 - 1.5 billion in 1999

GTE recognized 3-5% average annual cost reduction

The Financial Impact of CVM: Stock Price Per Client: There is a direct correlation between Very Satisfied Clients and Share Price : 0.88 Variance Per Nation: There is a direct correlation between % change in the Dow Jones Industry Average and % change in American Customer Satisfaction Index

Per Client:

There is a direct correlation between Very Satisfied Clients and Share Price : 0.88 Variance

Per Nation:

There is a direct correlation between % change in the Dow Jones Industry Average and % change in American Customer Satisfaction Index

Client Value Triad Product Quality and Service Quality are the pillars that support Value Based Prices. Client defines the appropriate Product Quality, Service Quality and Price Image Relationship Product Quality Service Quality Value Based Prices

Product Quality and Service Quality are the pillars that support Value Based Prices.

Client defines the appropriate Product Quality, Service Quality and Price

Client Value Basics Client Expectations are formed relative to the competition Client expectations are dynamic Clients will expect more each business cycle Value is delivered by the whole Company Maximizing Client Value requires total organizational involvement and commitment

Client Expectations are formed relative to the competition

Client expectations are dynamic

Clients will expect more each business cycle

Value is delivered by the whole Company

Maximizing Client Value requires total organizational involvement and commitment

Research Methods to obtain Client Feedback Transactional Surveys Service satisfaction survey of Clients following a service encounter Mystery Shopping Researchers become “Clients” to experience and evaluate the quality of service delivered New, Declining and Lost- Client Surveys Surveys to determine why clients select the firm, reduce their purchasing, or leave the firm

Transactional Surveys

Service satisfaction survey of Clients following a service encounter

Mystery Shopping

Researchers become “Clients” to experience and evaluate the quality of service delivered

New, Declining and Lost- Client Surveys

Surveys to determine why clients select the firm, reduce their purchasing, or leave the firm

Research Methods to obtain Client Feedback, continued Focus Group Interviews Directed questioning of a small group of Key Clients. Questions focus on a specific topic. Client Advisory Panels A group of clients recruited t o periodically provide the firm with feedback and advice on service performance and other issues. Data is obtained in meetings, over the telephone, through mail questionnaires, etc. Service Reviews Periodic visits with Clients to discuss and assess the Client Relationship. Should be a formal process with a common set of questions, capture of responses in a database, and follow-up communications with Client.

Focus Group Interviews

Directed questioning of a small group of Key Clients. Questions focus on a specific topic.

Client Advisory Panels

A group of clients recruited t o periodically provide the firm with feedback and advice on service performance and other issues. Data is obtained in meetings, over the telephone, through mail questionnaires, etc.

Service Reviews

Periodic visits with Clients to discuss and assess the Client Relationship. Should be a formal process with a common set of questions, capture of responses in a database, and follow-up communications with Client.

Research Methods to obtain Client Feedback, continued Client Complaint, comment and inquiry capture System to retain, categorize, track, and distribute Client complaints and other communications with the company. Total Market Surveys Surveys that measure the Clients’ overall assessment of a company’s service. Research includes both external clients and competitors’ clients, I.e., the total market. Employee field reporting Formal process for gathering. Categorizing, and distributing employee intelligence about service issues

Client Complaint, comment and inquiry capture

System to retain, categorize, track, and distribute Client complaints and other communications with the company.

Total Market Surveys

Surveys that measure the Clients’ overall assessment of a company’s service. Research includes both external clients and competitors’ clients, I.e., the total market.

Employee field reporting

Formal process for gathering. Categorizing, and distributing employee intelligence about service issues

Research Methods to obtain Client Feedback, continued Employee Surveys Surveys concerning the service employees provide and receive, and the quality of their work lives. Service Operating Data Capture A system, to retain, categorize, track, and distribute key service-performance operating data, such as service response times, service failure rates, and service delivery costs

Employee Surveys

Surveys concerning the service employees provide and receive, and the quality of their work lives.

Service Operating Data Capture

A system, to retain, categorize, track, and distribute key service-performance operating data, such as service response times, service failure rates, and service delivery costs

Example: Breakdown of Client Survey Information Worth What Paid For Quality Price Product Service Initial Cost Life Cycle Cost Reliability Ease of Use Features Sales Implementation Billing Accuracy, No Surprise Resolved On-First Call Easy to Understand

Using the Data Communicating the Data Common Metrics Communicating with Clients Suggestion Programs Group Discussions Task Forces Teams Linking CVM and Financial Performance

Communicating the Data

Common Metrics

Communicating with Clients

Suggestion Programs

Group Discussions

Task Forces

Teams

Linking CVM and Financial Performance

Using the Data - Communicating the Data Spread Data widely Link to internal metric Identify “Wins” Build on Short Term Success

Spread Data widely

Link to internal metric

Identify “Wins”

Build on Short Term Success

Using the Data - Communicate with Clients Sales Force Here’s the Data! Consistent with your views? How to improve

Sales Force

Here’s the Data!

Consistent with your views?

How to improve

Using the Data - Internal Uses Suggestion Programs Group Discussions Task Forces Teams

Suggestion Programs

Group Discussions

Task Forces

Teams

Using the Data - Develop Action Plans Specific Requirements and Responsibilities Timeline Desired Outcomes Strategies

Specific Requirements and Responsibilities

Timeline

Desired Outcomes

Strategies

Using the Data - Managing Complex Change Vision Skills Incentives Resources Action Plan Change Lacking Vision Skills Incentives Resources Action Plan Confusion Vision Lacking Skills Incentives Resources Action Plan Anxiety Vision Skills Lacking Incentives Resources Action Plan Gradual Change Vision Skills Incentives Lacking Resources Action Plan Frustration Vision Skills Incentives Resources Lacking Action Plan False Starts

Using the Data - Reward Systems Intrinsic Rewards Personal Satisfaction Extrinsic Rewards Recognition Consistent with Corporate Values Objective and Measurable Timely and Meaningful Winners and Winners Employee Involvement Compensation

Intrinsic Rewards

Personal Satisfaction

Extrinsic Rewards

Recognition

Consistent with Corporate Values

Objective and Measurable

Timely and Meaningful

Winners and Winners

Employee Involvement

Compensation

Using the Data - Benchmarking Historical (internal) Baseline Industry Average Competitive Best-In-Class

Historical (internal) Baseline

Industry Average

Competitive

Best-In-Class

Top 10 Rules of CVM Top Management will be involved Know the Clients Let the Clients define what attributes are important Know the Clients’ requirements, expectations, and wants Know the relative importance of Clients’ decision criteria

Top Management will be involved

Know the Clients

Let the Clients define what attributes are important

Know the Clients’ requirements, expectations, and wants

Know the relative importance of Clients’ decision criteria

Top 10 Rules of CVM, continued Gather and trust the data Benchmark the data against the competitors’ and identify the competitive strengths and weaknesses Develop cross-functional action plans that enhance strengths and correct weaknesses Measure performance continually and spread the data throughout the firm Be committed to getting better and better and better

Gather and trust the data

Benchmark the data against the competitors’ and identify the competitive strengths and weaknesses

Develop cross-functional action plans that enhance strengths and correct weaknesses

Measure performance continually and spread the data throughout the firm

Be committed to getting better and better and better

CVM Measurements Management is not: Just some more data A survey A fad or “program of the month” Marketing’s responsibility

Just some more data

A survey

A fad or “program of the month”

Marketing’s responsibility

Value Add Cubed VA 3

Value Add People - PVA Clients - CVA Economic - EVA

People - PVA

Clients - CVA

Economic - EVA

People Value Add - PVA Activity High involvement Work Teams Participatory Work Environment Organizational Communication Training and Development Outcome Measures Employee Satisfaction Creativity and Innovation Decreased Turn-Over Decreased Absenteeism People Value Added

Client Value Add - CVA Activity Client Driven Reengineering Client Driven Core Competencies Client Driven Organizational Learning Product/Service Innovation and Improvement Outcome Measures Client Satisfaction with Product and Service Quality Increased Corporate Image Increased Market Share Client Value Added

Economic Value Add - EVA Activity Improve Operating Efficiency with NO Capital outlay Invest Capital in Attractive, New Products Reduce Capital in Unprofitable Operations Outcome Measures Increase operating profits and margins Increase Rate of return Compared to marginal weighted average cost of capital Economic Value Added

Value Added Cubed Model Outcome Measures People Value Added Client Value Added Economic Value Added Creating Company Value and Wealth for Shareholders

Becoming Client Centered 1 on 1 Relationships Attitude Listening Empowerment/Leadership Involve Everyone Walk the Walk A TRUE PASSION FOR CLIENTS Client Driven Value Chain Commitment Communications Organizational Learning Process Innovation ORGANIZING AROUND CLIENTS Think Like the Client Decision Making Knowledge Information A DEEP UNDERSTANDING OF CLIENTS

1 on 1

Relationships

Attitude

Listening

Empowerment/Leadership

Involve Everyone

Walk the Walk

A TRUE PASSION FOR CLIENTS

Client Driven Value Chain

Commitment

Communications

Organizational Learning

Process Innovation

ORGANIZING AROUND CLIENTS

Think Like the Client

Decision Making

Knowledge

Information

A DEEP UNDERSTANDING

OF CLIENTS

Fitting the Pieces Together to Build Strong Client Relationships Understanding Client Opportunities Understanding Competitive and Market Opportunities Understanding Client Opportunities Targeting Clients Tracking and Performance Measurement Needs and Attitudes Market Research CVM Behavior and Value Database Marketing Products Service Positioning Economics Competitive and business Strategy Product&Services Pricing Features Brand Image Market Rsh. Distribution Channels Design Staff and Cost Client Care Staff Systems Direct Marketing Inbound Outbound Database Mktg. Product Level Marketing Analysis Advertising Market Research Marketing Database IT Systems Market Tests Client Satisfaction CVM Service Recovery Brand Awareness Market Research Feedback Loop

Needs and

Attitudes

Market Research

CVM

Behavior and

Value

Database

Marketing

Products

Service

Positioning

Economics

Competitive and

business Strategy

Product&Services

Pricing

Features

Brand Image

Market Rsh.

Distribution

Channels

Design

Staff and Cost

Client Care

Staff

Systems

Direct Marketing

Inbound

Outbound

Database Mktg.

Product Level

Marketing

Analysis

Advertising

Market Research

Client Satisfaction

CVM

Service Recovery

Brand Awareness

Market Research