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April 2002 Volume 2.10
The Benefits of CVA (Part Five)
by Rodger Gallagher
Deciding What to do
 Our
performance relative to the competition along with the purchase
impact weight for a given driver, are key indicators for why customers
buy from us and why customers don't buy from us. The previous article
covered interpreting this type of Customer Value Added (CVA) information
to reveal:
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Why customers buy from you.
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Why customers don't buy from you.
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Why customers buy from the competition instead of from you.
Once you know this then you are well placed to make decisions,
then take the actions needed to retain customers and attract new
ones. Some market research companies report customer opinion results
showing the attributes that are 'important'. The use of this term
and the way it is used often suggest that these are the attributes
that are important and must therefore be worked on. But these are
the attributes that are important to the customer. While we are
interested in this, we are more interested in what impacts customer
loyalty and buying decisions. We are even more interested in what
is important for a business to work on to improve customer loyalty
and market share. Any customer research study can only provide part
of the information needed to determine this.
Selecting the customer value drivers to work on
When determining the drivers to work on, the following areas should
be considered:
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1. Drivers with a high customer impact
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2. Large scope for performance improvement
( Performance under 7.0/10)
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3. Competitive ratio at parity or below
( Relative under 102)
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4. High position on waterfall process
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5. High customer frequency
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6. Low implementation cost
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7. Relatively quick to implement
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8. Competitor vulnerabilities
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9. Your Targeted Value Map position
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All of these areas should be considered together. Note that only
the first three areas are provided by the CVA survey information.
The remaining information, in the green box, comes from market intelligence,
business process maps and financial information.
1. Drivers with a high customer impact
The impact weight drivers tell us what is currently driving purchasing.
If we believe that the market we are operating in will be fairly
stable in the next period without major changes, then we can select
the highest impact weight drivers right through to Overall Value
as the ones where we will get the biggest gain from the improvements
we are planning.
In highly competitive markets, major changes in purchasing behaviour
often result when products are first introduced and heavily promoted.
e.g. Long distance calls of up to 4 hours at a flat price. The degree
of movement in the purchase impact weights is a measure of the effectiveness
of the campaign. This change is, of course, the marketer's aim and
must be considered when working out action areas.
2. Large scope for performance improvement
From our experience working with clients in all types of market,
we have learnt that the higher a current performance level is, the
harder it is to move it up some more. Conversely if performance
is down around the 5/10 level, then it is much easier to improve
performance. The rule of thumb is that when performance is less
than 7/10 then the driver should be considered as one where it will
be possible to implement an improvement fairly readily.
3. Competitive performance at parity or below
In this situation where the relative result is below 102 we need
to decide if the particular driver is one where we want to be ahead
of the competition. Does this fit with what our products & services
are all about? Do we have the capability to improve, given the current
score out of ten and our service delivery processes? If the purchase
impact weight is very high, it is likely that we will then need
to improve the driver.
4. High position on the waterfall process
The way a customer experiences a company's products and services
follows a distinct sequence from purchase through to using the product,
then possibly making a complaint about it. If a sales representative
oversells a product, it may not live up to the expectation set at
the selling stage when the person comes to use it. This may then
cause a complaint. So we have a waterfall effect where an action
at the selling stage cascades down causing a problem at the bottom
of the waterfall. So delivery processes higher up the waterfall
deserve greater attention than indicated by their impact weights.
5. High customer frequency
A person using an Internet service provider every day experiences
dial up, Web access and mail downloads every time they log in. But
they only usually pay the company once a month. So if an Internet
company improves a login service, the customer will experience it
365 days a year. On the other hand, if a company improves its payment
process, the customer will experience the improvement only 12 times
a year. This different level of customer frequency drives the rate
that customer perceptions change. More frequent customer interactions
change perceptions faster than once a month or once a year activities.
So if we have two otherwise equal improvement opportunities we should
select the one with the higher frequency to work on.
To be continued in the next issue...
Looking at Orcas
 Its
been a while since we last published a CVM Update, and people have
phoned or emailed asking where we've got to. Well where we've got
to is Raglan. It's a small town on the west coast of New Zealand.
CVM was established as an Internet based knowledge business and
with most of our business done over the Internet, there just didn't
seem to be a need to live or work in a city anymore.
Our office is located at 4A Wallis Street, above the Raglan Tourist
Information Centre near the edge of the Whaingaroa Harbour. (New
contact details below.) From the office we can see parts of the
harbour with the dramatic pancake rock formations just across from
us.
From time to time a pod of Orcas visits the harbour pursuing squid,
and their path takes them past our office. Quite a surprise to be
catching up on some CVM work, then to look out the window and see
an Orca jump out of the water. And some of these whales were huge,
quite different in size from the ones kept in marine parks.
As well as looking at Orcas, moving home and office, the last nine
months have been an extremely busy period for CVM work. In addition
to our ongoing work with New Zealand clients, we are working from
our Raglan base with clients in Australia, the Pacific Islands,
Asia and the United Kingdom. This year looks as if it will be even
busier with customers already booking work for the second half of
the year.
Regards,
Rodger Gallagher
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