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February 2000 Volume 1.08
Management Fad Or Business
Benefit?
by Rodger Gallagher
Satisfaction and Value Surveys
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Some business managers are keen to implement the latest management
fad whether organisational structures based on the social order
of wolves, or Customer Value surveys. It is often difficult for
managers to evaluate the business benefits of new techniques and
to decide whether a given approach is worth pursuing, or if it just
another management fad.
It is pleasing for me as a consultant to have worked on Customer
Value projects with clients over the last few years and seen them
enjoy gains in market share accelerated by the projects. But this
work is of course confidential and is not available in the public
domain. Companies are naturally unwilling to allow publication of
critical business data that gives them a competitive edge. They
are quite happy for their competitors to use traditional customer
satisfaction techniques where there is no linkage between the data
and financial performance. So the successful application of Customer
Value techniques tends to limit the availability of the very information
that validates its effectiveness. Occasionally companies allow publication
of the information they have collected. Towards the end of 1999
I spoke with James DiCostanzo, a senior vice president with the
PNC Bank in Pittsburgh, Pennsylvania. In 1996 he undertook customer
satisfaction and buying behaviour research that found clear evidence
that companies reap financial benefits when they have highly satisfied
customers.
Highly satisfied customers have higher account balances
The PNC Bank research was based on study of 1,500 customers. Account
balance information was attached to the sampling database so that
the findings from the customer research could be analysed in relation
to the account balance information. When DiConstanzo analysed account
balances of satisfied customers he found that there was no difference
between the account levels of satisfied customers and those of less
than satisfied customers. It was only when he separated out the
highly satisfied customers who thought the bank’s service was
excellent that he found a difference. When he did this he found
that customers who regarded the bank’s service as excellent
had account balances that were nearly 20% higher than those of the
customers who thought it was only good and were just satisfied.
So we have a clear relationship established between providing excellent
service and the funds that customers deposit with a bank. In banking
markets where the deposit rates are highly competitive it is normal
for the deposit rates to be identical for the same level of risk.
In this type of market, buying behaviour is driven almost entirely
by brand image together with product and service quality. James
DiCostanzo’s work at PNC Bank confirms the findings from earlier
published work in the telecommunications industry. Good Isn’t
Good Enough! Customers only reward excellent service with additional
business.
MOONLIGHT BAY
 In January 2000, The New Zealand
Herald discovered Raglan. We thought we had better check out the
developments. And what better place to spend a few nights than the
Waters Edge in Moonlight Bay two minutes east of Raglan. Edi and
Therese have three self-contained retreats and also provide a home
stay. We are booked into the Studio which looks out through a few
mature Kanuka and Ponga trees onto Whaingaroa Harbour and across
to the Harbour’s northern shore. This is one of those places
that
has unique New Zealand natural beauty.
The day at Waters Edge starts with Therese delivering breakfast
featuring home made fruit yoghurt and conserves. An ideal way to
start the day. After breakfast we make our way down to the beach,
then head off exploring around the rocks. Kayaks and dinghies are
available to explore the sheltered inner harbour but we decide that
rest and relaxation is more what we need.
Well, what with admiring the natural beauty of Moonlight Bay, strolling
along the beach and enjoying Edi and Therese’s hospitality
we didn’t get to see many of Raglan’s developments, but
I am sure they are very nice. You can contact Edi and Therese at
+64 (7) 825 0587 or watersedge.raglan@clear.net.nz, and glimpse
some of the scenery at www.raglan.net.nz/watersedge/
The Mission for
Your Customers Continues...
11.0 Establish and manage Key Performance
Indicator and Key Results Area Linkages.
This article looks at the need to translate company wide Customer
Value Added (CVA) into goals and measures that can be deployed throughout
an organisation.
Internal Service Metrics
It is only possible to measure CVA with market research periodically.
But to build rapid gains in CVA, the right actions must be taken
every day. The way to ensure this can happen is to deploy internal
service metrics in key customer-facing processes that bring the
voice of the customer into the company. Metrics must be selected
that measure performance from a customer perspective rather than
a company perspective. It has been found that to establish the right
type of internal measure two questions must be asked.?
* When does the process begin for the customer?
* When does the process end for the customer?
The answers to these questions provide reference points that ensure
the right measures are developed that reflect what is really important
for customers. Business and Personal Performance Plans
Customer Value works best when it becomes part of the fabric of
a company. One way of doing this is to incorporate Customer Value
goals, targets and tactics into the business plans for strategy,
customer relationship management systems, capital investment, operations,
marketing, and personal performance. When this is done, CVA becomes
part of the way the company is managed and how it operates, standing
alongside the financial performance measurements. By using the normal
business planning process the CVA measures and their day-today proxies
become embedded in the way a company operates. Once this is done
the business plan tactics and targets can be built into Key Results
Areas in the individual performance plans for every person in a
company. When this level of CVA implementation is achieved a company
is well placed to make rapid gains in providing superior value to
customers.
This is the final article in this series, which has been based
on actual project plans and lessons learned when implementing the
Customer Value Added Process for our clients.
Regards,
Rodger Gallagher
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