Customer Value Management November, 2002 From anywhere… to anyone Janet LeBlanc Director, Canada...

Customer Value Management

November, 2002

From anywhere… to anyone

Janet LeBlancDirector, Canada Post

From anywhere… to anyoneIntroduction 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 anyoneIntroduction to Customer Value ManagementWHY invest in CVM?

Canada Post will be a world leader in

providing innovative physical and

electronic delivery solutions, creating

value for our customers, employees

and all Canadians


What is Customer Value?

Quality Price

VALUE

Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998


Sub-attributes

Sub-attributes

ProductQuality

Custom erService

M arketingSales

Order Fulfillm ent

OverallQuality

Relative PriceCom petitiveness

Overall ValueSatisfaction

Customer Value Defined


QualityAttributes

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


Stage One Stage Two Stage Three Stage FourMinimum

RequirementsCustomer

FocusCustomerAttitudes

Competitive Focus on Targeted Markets

Conformance Quality

• Delivering what we promise

• Meeting standards

Customer SatisfactionCustomer

Satisfaction

• Providing what customers want

• Responding to customer complaints

Customer Loyalty

Customer Loyalty

• Retaining our customers

• Getting them to recommend us

Customer Value

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)


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?Where are leading-edge companies headed?

Satisfaction =

Satisfy Existing Customers Better

Value=

• Improve Your Competitive Position

•Attract and Retain Targeted Customers


Satisfaction

Current Service

The Entire Customer

Relationship

Lag IndicatorLead

Indicator

Company Performance

Company Vs. Competition

Tenuous Link to Business

Performance

Proven Relationship to

Business Performance

Value


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.


Ideal Customer

Value

Ideal Customer

Value

Process Capabilities

Process Capabilities

PerformanceImprovementPerformanceImprovement

CUSTOMER-CENTRICCUSTOMER-CENTRIC


1. Assess Market Opportunity

2. Conduct Analysis

3. Commit to a Value Proposition

4. Measure and Reward Performance



Value Analysis Tools

Value Scorecard

Performance Scores Weights for:

Dimension Attribute Filto

Wal

ter

Env

ir

Bri

te

Cla

rion

Ave

rage

Attrib. Value

Benefits 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 25.0

Service 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 14.0

RelationshipRelationship 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 98.3

Costs Selling priceCapital cost 17 40 30 37 25 30 100.0Other 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 ($)

HighCost

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

Wal

ter

Envi

r

Brite

Clar

ion

Aver

age

Benefits 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 0

Service Reliable supply -19 -19 0 19 19 0Technical 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 0Other 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


Price Performance Profile

Performance Scores Weights for:

Dimension Attribute Filtr

o

Wal

ter

Envir

Brite

Clar

ion

Aver

age

Attrib. Value

Benefits 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 25.0

Service 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 14.0

Relationship 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 98.3

Costs Selling price Capital cost 17 40 30 37 25 30 100.0Other 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


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 ($)

HighCost


Value ScorecardDifferential worth of performance advantages and disadvantages

Dimension Attribute Filtr

o

Wal

ter

Envi

r

Brite

Clar

ion

Aver

age

Benefits 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 0

Service Reliable supply -19 -19 0 19 19 0Technical 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 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


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


IdentifyValue

Drivers

MeasureValue Creation

After Transaction

Business Process

Improvement

ConductBaseline

Study

On-goingTransactional

Surveys

DevelopActionPlans

MeasureMarket

Perception

On-goingMarket

Surveys

feedback


The Value Proposition Deployment Process

Define/Refine Value

Proposition

Define/Refine Value

Proposition

Build Commitment

ToValue

Proposition

Build Commitment

ToValue

Proposition

Process &Organization

Gap Analysis

Process &Organization

Gap Analysis

Changes To Deliver

Value Proposition

Changes To Deliver

Value Proposition

Internal Tracking

&Measurement

Internal Tracking

&Measurement

TrackingMarketImpact

TrackingMarketImpact

Plan/Do/Check/Act

Plan/Do/Check/ActInternal

Management/Staff

InternalManagement/

Staff

Group ofCompaniesGroup of

Companies


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


MODELING EMPLOYEE VALUE

The Right Workforce”

Positive Turnover

AcquisitionRetention

Employee Value

Relative Compensation

Relative Job Quality

Base Salary

Work Life Balance

Brand Equity

ManagerQualityBenefitsBonusPay

Equity


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.


November, 2002

From anywhere… to anyone

November, 2003

Customer Value Management November, 2002 From anywhere… to anyone Janet LeBlanc Director, Canada...

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Transcript of Customer Value Management November, 2002 From anywhere… to anyone Janet LeBlanc Director, Canada...