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April 1998 Volume 2.07
In Balance Again
The weighing action of the scales automatically restored
market forces into balance when Company Z went out of business,
by moving Company X into the Low Value zone, and Company Y into
the High Value zone as shown on the following Value Map:
The management of Company X is faced with a problem.
Through no action on their part they have been moved into a noncompetitive
situation and their loss of market share will accelerate. Too often
managers are focussed on their own company rather than on what is
happening in the market place.
Fortunately Company X has planned for this type of
possibility and announces a new product - a flat rate for access
and usage rate that will move X back into the middle of the Value
Map targeted at the mass market it aims to win. While its offering
is nowhere near as attractive as Company Y's flat rate plan, it
is good enough for X to be competitive again.
The old 'Pay As You Go' product from X remains uncompetitive.
While the legacy customers with this old product continue to pay
the higher rates until they transfer to the new product, or to another
company, then X's sales revenue will remain at past levels. In time
as more and more customers take up the new product, X's sales revenues
per customer will progressively decline. Hopefully cost scale efficiencies
will kick in allowing X to continue to cover all of its costs. Such
is life when managers are forced to compete on price. Unless there
is an underlying low cost base then price-cutting is unsustainable
in the long run.
It is far better to develop strengths over the competitors
in areas that are important to customers, then make those areas
even more important to customers through word-of-mouth, marketing,
and communication. Then it is possible to charge a little more than
the competition and still provide superb customer value.
The CVM Web Site
Garth has asked me to write about the Customer Value
Management web site, and the emails I receive from people about
the site.
When they write about things to do with the Internet,
most commentators state that businesses have web sites for 'strategic'
reasons and are not yet making money from them. Well, the CVM web
site is different. The consulting work it attracts more than covers
the cost of providing and updating the site, and as well as that
it is fun. The aim is worthwhile content that loads quickly. Graphics
and audio are only used where they are worth the wait.
People who contact me after visiting the site fall
into 3 categories: university students, other consultants and academics,
and clients. An example from the student category is Mamta from
Raleigh University. She was doing a project on business-to-business
research and wanted to know how customer value techniques would
be used in that field. I responded with my ideas on that topic.
Maria from the University of Rome was doing an article on CVM in
telecommunications. Would I help? Of course I would. Indra from
Jakarta was doing a comparison of the Servqual approach and CVM.
What would be a good textbook to read? When he bought the book I
suggested he then asked for help on interpreting some parts of it.
Consultants seem either to want to collaborate in some way or to
swap ideas. Randy from Atlanta wanted to discuss the relationships
between customer satisfaction, customer value added, and customer
value management. Vince from Minnesota wanted to form a joint consulting
venture.
As well as the emails from students and other consultants,
both current and potential clients visit the web site. Existing
clients find it a useful resource. From time-to-time potential clients
find the site from a web search engine, then send me emails that
later become consulting assignments.
Regards,
Rodger Gallagher
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