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April 2001 Volume 2.06
The Benefits of CVA
by Rodger Gallagher
The Customer Value Added (CVA) Approach
 Often
when one company or division in a corporation begins using the Customer
Value Added approach, it isn't too long before word of mouth results
in other divisions initiating their own CVA studies. In this article
we will begin looking at the benefits of CVA which drive this positive
word of mouth. Whether a business is encountering an amazing period
of growth, or if it is under severe cost pressures, one thing that
always seems to be true is that there is a need to focus scarce
resources. The resources might be capital for new projects, manufacturing
capacity, service delivery process capability, or the intellectual
resource of the people in a company. Businesses never have an unlimited
supply of these resources so it is critical to focus resources on
what matters most to a business, whether it is cost minimisation,
sales revenue maximisation, market share gains, or increased customer
loyalty. Many people advocate that businesses should use a balanced
scorecard of performance indicators. But businesses are more complicated
than that. It is not enough for performance indicators to be balanced,
they must be integrated as well and link together. A workable system
that provides information to focus resources, must indicate where
focus is needed. This is achieved by providing information that
can be acted on by a business, and then the resulting change must
be measurable and profitable for the business.
A tailored approach
While a CVA project follows a standard set of steps, every project
is tailored to the business needs, customer needs, product attributes,
service delivery processes, and customer purchase criteria for the
unique situation in any specific market. So the output information
is tailored to the needs of the business and the business conditions
in the market. This is quite different to applying a standard cookbook
set of questions that cannot be acted on by the business. The following
chart shows the major steps in implementing a CVA project. The first
two steps are critical in providing information that can be used
in the final step.
It is important to define what the business wants to achieve. Is
it to boost market share or increase loyalty and profitability of
existing customers, or perhaps achieve both of these simultaneously?
These are three separate options and the CVA research needs to be
developed differently for each option. Alternatively a company may
plan to increase loyalty through an emphasis on emotional rather
than cognitive loyalty. If this is the case, then we would want
to devote more of the questionnaire to customer needs for emotional
loyalty. Whatever our business goals, the final information available
for use must relate to those goals.
Business Processes and Customer Needs
Another key differentiator of the CVA approach is the use of a questionnaire
structure based around the major business processes used to deliver
products and services to customers. Many customer satisfaction surveys
only consider what the customer wants. While the customer's needs
are important, it is equally as important to consider how a business
and its competitors deliver products and services to customers.
To do this we need to break the service delivery processes down
into the major steps where businesses interact with customers -
the moments of truth as Jan Carlzon would put it. (Moments Of Truth,
Harper Collins Reprint edition, February 1989). These steps may
be the customer consuming a physical product such as a cola drink,
purchasing it from a vending machine or a café, experiencing the
advertising for the product, or making a complaint to the companies
800 line about the product. Once we have identified these steps,
the next stage is to arrange them into the order that the customer
experiences them. We call this the waterfall process of customer
needs and wants as the customer experience ripples down the waterfall.
Sometimes promises made higher up the waterfall cause major problems
as they progressively build up as they ripple down the waterfall.
One of the reasons for organising the customer experiences in this
way is that during the survey we want to rebuild the overall experience
with the moments of truth in the customer's mind.
As well as this, by organising the customer experience around the
actual major processes used by the business to deliver products
and services, if the survey follows the same pattern then the customer
opinion ratings obtained will mirror the business processes. This
means that the results are directly actionable by the owners of
each business process. Compare this with a customer satisfaction
survey where people rate a company's people and then its entire
customer service. While this is useful information there is no manager
in a business accountable for these attributes, so it is more difficult
to use the information.
So the information provided by a Customer Value Added study can
be more readily used as it is specifically tailored and tuned to
the business itself.
THE ANATOMY OF BUZZ
"I find it hard to believe that market share can be linked with
what people feel about the Products & Services being delivered
to them." This was the comment made by the Marketing Director of
a large Australian company when I had been explaining to him how
we could predict swings in market share with the customer information
gathered in a Customer Value Added survey. It seems counter intuitive,
doesn't it. If you spend millions of dollars advertising a product
you would expect and hope that the advertising would have a major
impact on what customers purchase. Why would what customers believe
about a company's products and services have a direct relationship
to market share?
There are two main reasons. The first is that what customers believe
about products and services is shaped by advertising, so yes, advertising
does have a big impact. The second is that what people tell each
other about their personal experiences with products and services
by word of mouth, has a much greater impact on customer beliefs
than had previously been expected. The most common research quoted
on this subject, is the work done by the TARP organisation on how
many people are told about good and bad service experiences. A new
study by Emanuel Rosen, Vice President of Marketing for Niles Software,
shows just how important word of mouth or Buzz is when customers
choose from competing products. For movie-goers, 53 percent follow
the recommendations of friends, while 58 percent of car buyers rely
to some extent on the advice of others. For products such as Palm
organisers or mobile phones, the enthusiasm of the others counts
for 65 percent of purchasers. The reasons for the importance of
Buzz are that customers can hardly hear advertising messages due
to the overall volume of advertising 'noise', customers are sceptical
of what companies tell them, and customers are connected through
networks of friends, associates, relatives, and other contacts.
Rosen's book,
The Anatomy of Buzz (Doubleday, 2000) reveals the full findings
of the study, or check his Web site
http://www.emanuel-rosen.com/ for more information.
Regards,
Rodger Gallagher
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