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May 1997 Volume 1.9
Valued Product or Commodity?
Marketers often say that products they are promoting
have become commodities. What do they mean by this? When the impact
weights for "Overall Product & Service" and "Overall
Price & Cost" are determined in relation to Customer Value
Added (CVA), we can accurately determine the degree to which a product
is valued by customers for product and service features, or is just
a commodity and priced solely on quantity.
Consider our fictitious Internet companies. Last month
we looked at the Value tree diagram for Company W. By undertaking
statistical analysis of data collected from Customer Value surveys
we are able to determine the impact weights for the various factors
that drive purchasing behavior. With Company W providing a comparatively
poorer product and service, the results would be something like
40% Quality, and 60% Cost.
Customers will tend to look for lower cost when buying
this company's products. By improving factors that determine perception
of costs they can improve their market share.
The situation for Company X is quite different, with
their middle of the road position, causing customers to buy on both
Service and Cost. With impact weights added to the Value tree diagram,
we can see that this Company will need to improve the factors that
drive both Service and Cost if it is to increase market share.
Whether products and services are perceived as commodities
is determined by the position that companies decide to take in a
market. This is not something that is forced on a company. Many
companies do not consciously decide how to position their products.
Customer Value frameworks provide a tool that allows companies to
either improve their present position or move to an entirely new
position in the market.
Lunch at the Yacht Club
With the imminent return of Hong Kong to China, many
newspapers are carrying articles about Hong Kong, so it is fitting
that CVM News does the same. Garth Christensen has just finished
a project in Hong Kong for Serco Guardian on their Hong Kong Telecom
property services contract. Garth, while Director of Customer Services
for Telecom New Zealand, achieved world class performance with high
service levels achieved at extremely low cost. He is a leader at
using customer satisfaction information to drive business success.
To celebrate Garth's achievements in Hong Kong, Martin
asked him to lunch at the Royal Hong Kong Yacht Club. And what better
topic to discuss over lunch than customer service. Garth tells the
story:
"Many expatriates in Hong Kong claim they survive
by virtue of their club. It provides a temporary escape from the
stress of business in this capitalistic Super City. Martin is an
old China hand, and Garth was delighted to receive an invitation
to lunch in the Royal Hong Kong Yacht Club. The Club is located
on a large, prime waterfront site. We made our way to an outdoor
table to enjoy the beautiful day. Making conversation, the waiter
mentioned that it might rain and we would be forced indoors. Martin
ordered a pint of the club drink, a Gunners, being half ginger beer,
half ginger ale, a few drops of Angostura bitters, completed with
a slice of lemon. Garth ordered a pint of the local San Miguel beer.
Wednesday is Curry Buffet day. The selection of food
was magnificent, and included New Zealand mussels. The views over
Victoria Harbour are superb. The ideal place to talk about service
quality issues. Our conversation turns to why so few contractors
differentiate themselves by going that extra distance to provide
truly excellent service. From our respective experience in the building
services industry we are aware that many companies want quality
service and are prepared to pay for it. Why then are not more suppliers
prepared to shift their focus to provide better service and earn
a higher profit margin?
We then talked at length about Customer Satisfaction.
Not enough is told about the achievements of Telsats - the programme
to improve customer value and satisfaction at Telecom New Zealand,
how my region achieved 60% excellence for maintenance. Incredible
when you look back. Simple measures like, 'Keeping the customer
informed', 'Follow up', and 'Appearance of the technician' allowed
us to track and improve performance. Troughton, the Chief Executive,
made his reputation on Telsats. Great concept to promote. We determined
that time to repair was a key driver, this led us to target reducing
carried over faults. A daily contest between regions was won by
the region with the least carried over faults. By 1993 we had discovered
that long weekends were the enemy. If there was a holiday on Thursday,
staff would take the Friday as a holiday. That meant a fault reported
late Wednesday most probably would not be repaired until next week.
The bow wave of faults from Thursday through to Sunday meant the
fault repair time in the following week was poor. Major achievements
in service levels were achieved by using 'carried over faults' as
the key performance measure, then restricting the number of people
taking one-day holidays. We also employed more people over the weekend
period.
If you are going to be a long time resident of Hong
Kong it is normal to join a club. Membership fees are substantial,
with a required minimum monthly bar tab. They are all very British
in that they work on a tab system, with members paying their account
once a month.
Tradition is tradition, and a club member would never
allow his guest to pay, in any case cash is not accepted in Hong
Kong clubs. The leisurely lunch finished with Martin signing his
tab. I enjoyed my lunch with Martin at the Yacht Club."
Regards,
Rodger Gallagher
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