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Customer value management

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  • 1. Customer Value ManagementNovember, 2002From anywhere… to anyoneCustomer Value Management
  • 2. From anywhere… to anyoneIntroduction to Customer Value ManagementPresentation Objectives•Define customer value management(CVM),•Understand the difference betweencustomer value and customersatisfaction,•describe key CVM concepts and tools,and•communicate the importance ofmeasuring quality in the eyes of yourclients.
  • 3. From anywhere… to anyoneIntroduction to Customer Value ManagementWHY invest in CVM?To become a world leader in providinginnovative delivery solutions, creatingvalue for our customers, employeesand all customers
  • 4. From anywhere… to anyoneIntroduction to Customer Value ManagementWhat is Customer Value?Quality PriceVALUESource: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998
  • 5. From anywhere… to anyoneIntroduction to Customer Value ManagementSub-attributesSub-attributesProductQualityCustomerServiceMarketingSalesOrder FulfillmentOverallQualityRelative PriceCompetitivenessOverall ValueSatisfactionCustomer Value Defined
  • 6. From anywhere… to anyoneIntroduction to Customer Value ManagementQualityAttributesPerformance RatingImportanceWeightABC XYZProduct Information 50 6 8Advertising and Promotion 20 6 7Customer & Consultation 20 9 6Customized Solutions 10 8 7100
  • 7. From anywhere… to anyoneIntroduction to Customer Value ManagementStage One Stage Two Stage Three Stage FourMinimumRequirementsCustomerFocusCustomerAttitudesCompetitive Focus onTargeted MarketsConformance Quality• Delivering what wepromise• Meeting standardsCustomerSatisfaction• Providing whatcustomers want• Responding tocustomer complaintsCustomerLoyalty• Retaining ourcustomers• Getting them torecommend usCustomerValue• Meeting criticalneeds of targetedcustomers• Outperformingcompetitors• Creating new, uniquebenefits21st CenturyGrowthCompanySource: Adapted from Managing Customer Value by Bradley T. Gale, (New York, The Free Press, 1994)
  • 8. From anywhere… to anyoneIntroduction to Customer Value ManagementI can’t get no (customer) satisfaction…•Satisfaction in itself does not lead to customer loyalty•Positive empirical relationship between value focus andlink to market shareWhere are leading-edge companies headed?Satisfaction=Satisfy ExistingCustomers BetterValue=•Improve YourCompetitive Position•Attract and RetainTargeted Customers
  • 9. From anywhere… to anyoneIntroduction to Customer Value ManagementSatisfactionCurrentServiceThe EntireCustomerRelationshipLag IndicatorLeadIndicatorCompanyPerformanceCompany Vs.CompetitionTenuous Linkto BusinessPerformanceProvenRelationship toBusinessPerformanceValue
  • 10. From anywhere… to anyoneIntroduction to Customer Value ManagementINPUTS•Customer Value Management Council•External/Internal Data SourcesOUTPUTS• Customer Value Tools and Data• Competitive Value Proposition• Customer Loyalty and Market ShareAnalysisGOALTo establish CVM as a core competence for theCanada Post Group of Companies.KEY MEASUREMENTSCustomer Loyalty Market Share Profitability Customer RetentionDEFINITIONCustomer Value Management is a process designed to develop and executevalue-based strategies which impact marketing, strategic planning, competitivepositioning, branding, pricing, and selling.
  • 11. From anywhere… to anyoneIntroduction to Customer Value ManagementIdealCustomerValueProcessCapabilitiesPerformanceImprovementCUSTOMER-CENTRIC
  • 12. From anywhere… to anyoneIntroduction to Customer Value Management1. Assess MarketOpportunity2. ConductAnalysis3. Commit to aValue Proposition4. Measure andRewardPerformanceCustomer Value Management
  • 13. From anywhere… to anyoneIntroduction to Customer Value ManagementValue Analysis ToolsValue ScorecardPerformance Scores Weights for:Dimension AttributeFiltoWalterEnvirBriteClarionAverageAttrib. ValueBenefits Product Chloroform Removal 10.0 10.0 2.0 10.0 2.0 6.8 12.0Lead Removal 10.0 10.0 10.0 8.0 10.0 9.6 10.0Taste 8.0 10.0 8.0 6.0 6.0 7.6 9.0Clogging 8.0 2.0 10.0 4.0 8.0 6.4 25.0Service Reliable supply 5.0 5.0 7.0 9.0 9.0 7.0 16.0Technical spport 2.0 1.0 3.0 1.0 7.0 2.8 14.0RelationshipRelationship 7.0 9.0 5.0 5.0 9.0 7.0 14.0Weighted benefit scores 7.0 5.8 6.7 5.8 7.5 6.6 98.3Costs Selling priceCapital cost 17 40 30 37 25 30 100.0Other costs Disposibles cost 120 160 54 85 130 110 100.0Weighted cost scores 137 200 84 122 155 140 -1.7Value Map for Commercial Filtration -- BaseEnvirWalterFiltoBriteClarion60801001201401601802002205.6 6.0 6.4 6.8 7.2 7.6PerformancePrice($)HighCostFilto Value Relative to Average-25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0Chloroform RemovalLead RemovalTasteCloggingReliable supplyTechnical spportRelationshipCapital costDisposibles costRelative value impacts - Filto vs. AverageDifferential worth of performance advantages and disadvantagesDimension AttributeFiltoWalterEnvirBriteClarionAverageBenefits Product Chloroform Removal 22 22 -34 22 -34 0Lead Removal 2 2 2 -9 2 0Taste 2 13 2 -8 -8 0Clogging 23 -64 53 -35 23 0Service Reliable supply -19 -19 0 19 19 0Technical spport -7 -15 2 -15 34 0Relationship Relationship 0 16 -16 -16 16 0(a) Total differential worth of benefits 25 -44 9 -43 53 0Costs Selling price Capital cost 13 -10 0 -7 5 0Other costs Disposibles cost -10 -50 56 25 -20 0(b) Total cost advantage 3 -60 56 18 -15 0Price Performance ProfileValue MapHead-to-Head Comparisons
  • 14. From anywhere… to anyoneIntroduction to Customer Value ManagementPrice Performance ProfilePerformance Scores Weights for:Dimension AttributeFiltroWalterEnvirBriteClarionAverageAttrib. ValueBenefits Product Chloroform Removal 10.0 10.0 2.0 10.0 2.0 6.8 12.0Lead Removal 10.0 10.0 10.0 8.0 10.0 9.6 10.0Taste 8.0 10.0 8.0 6.0 6.0 7.6 9.0Clogging 8.0 2.0 10.0 4.0 8.0 6.4 25.0Service Reliable supply 5.0 5.0 7.0 9.0 9.0 7.0 16.0Technical support 2.0 1.0 3.0 1.0 7.0 2.8 14.0Relationship Relationship 7.0 9.0 5.0 5.0 9.0 7.0 14.0Weighted benefit scores 7.0 5.8 6.7 5.8 7.5 6.6 98.3Costs Selling price Capital cost 17 40 30 37 25 30 100.0Other costs Disposibles cost 120 160 54 85 130 110 100.0Weighted cost scores 137 200 84 122 155 140 -1.7Slope of fair value line 58.5032
  • 15. From anywhere… to anyoneIntroduction to Customer Value ManagementValue Map Value Map for Commercial Filtration -- BaseEnvirWalterFiltroBriteClarion60801001201401601802002205.6 6.0 6.4 6.8 7.2 7.6PerformancePrice($)HighCost
  • 16. From anywhere… to anyoneIntroduction to Customer Value ManagementValue ScorecardDifferential worth of performance advantages and disadvantagesDimension AttributeFiltroWalterEnvirBriteClarionAverageBenefits Product Chloroform Removal 22 22 -34 22 -34 0Lead Removal 2 2 2 -9 2 0Taste 2 13 2 -8 -8 0Clogging 23 -64 53 -35 23 0Service Reliable supply -19 -19 0 19 19 0Technical support -7 -15 2 -15 34 0Relationship Relationship 0 16 -16 -16 16 0(a) Total differential worth of benefits 25 -44 9 -43 53 0Costs Selling price Capital cost 13 -10 0 -7 5 0Other 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 anyoneIntroduction to Customer Value ManagementHead-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 30.0Chloroform RemovalLead RemovalTasteCloggingReliable supplyTechnical supportRelationshipCapital costDisposibles costRelative value impacts - Filto vs. Average
  • 18. From anywhere… to anyoneIntroduction to Customer Value ManagementIdentifyValueDriversMeasureValue CreationAfterTransactionBusinessProcessImprovementConductBaselineStudyOn-goingTransactionalSurveysDevelopActionPlansMeasureMarketPerceptionOn-goingMarketSurveysfeedback
  • 19. From anywhere… to anyoneIntroduction to Customer Value ManagementThe Value PropositionDeployment ProcessDefine/RefineValuePropositionBuildCommitmentToValuePropositionProcess &OrganizationGapAnalysisChangesTo DeliverValuePropositionInternalTracking&MeasurementTrackingMarketImpactPlan/Do/Check/ActPlan/Do/Check/ActInternalManagement/StaffGroup ofCompanies
  • 20. From anywhere… to anyoneIntroduction to Customer Value ManagementCustomer Value Yields Big Dividends• Doubled profits in asingle year• Moved from being amarket “nicher” to themarket leaderWireless TelecomCompanyHeavy EquipmentDealershipUnderground MiningEquipmentManufacturer /DistributorInternational Healthand Leisure Firm• 50% reduction incustomer churn• Improved equipmentdelivery time from 10days to 2 days• Total estimated bottomline contribution = $4.5M• Doubled sales revenue –from $250M to $500M+• Tripled market share in astrategically importantmarket: 4% - 12%• Increased employees from600 to 1000+• Achieved recordprofitability last year• Reclaimed morethan $8mm in lostsales• 30% improvementin on-timedeliveries• Improved marginson equipmentrepairs from 11%to 28%Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998
  • 21. From anywhere… to anyoneIntroduction to Customer Value ManagementMODELINGEMPLOYEE VALUEThe RightWorkforce”PositiveTurnoverAcquisitionRetentionEmployeeValueRelativeCompensationRelative JobQualityBaseSalaryWorkLife BalanceBrandEquityManagerQualityBenefitsBonusPayEquity
  • 22. From anywhere… to anyoneIntroduction to Customer Value ManagementThe “Value” of Customer Value• Strengthen value propositions – value isthe basis for customer decisions• Identify responses with the greatestimpact on customers’ future purchasebehaviour• Hone in on winning client strategies• Discipline and focus—across all functions• Dramatic impacts and performance gainsThe key to attracting,satisfying, and retainingcustomers.
  • 23. Customer Value ManagementNovember, 2002From anywhere… to anyone

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