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June 2001 Volume 2.08
The Benefits of CVA (Part Three)
by Rodger Gallagher
Understanding what drives customer purchasing
decisions
 One
of the major strengths of the CVA approach is its ability to distinguish
between the factors that customers say are important and the ones
that actually drive buying decisions. While businesses should listen
to what customers say is important, there may well be factors that
customers say are important that aren't so important after all.
Take the battle between the Beta and VHS formats for VCRs in the
1980s for example. Sony listened to customers when they said it
was important for a VCR cassette to load quickly and be the same
size as a paperback book. The competing manufacturers who developed
the VHS format realised that while these two things were important,
what customers would really buy on was the size of VCR and the maximum
amount of programme that could be recorded on a cassette. It didn't
matter if the VCR cassette was a little bigger or if it took a little
longer to load, the customers would buy it anyway so long as the
critical purchase drivers were met.
So even if some important factors are only partially met customers
will still buy a product. On the other hand there are some important
factors where there will be a direct relationship with purchasing.
As the extent that the customer need is met rises so will the customer's
likelihood of buying the product. So there are different degrees
to which the factors that are important to customers actually drive
purchasing decisions.
The Must Bes
There are other factors that while they are important to customers
do not drive purchasing decisions at all. These factors must be
met. They are the Must Bes. If you asked a prospective airline passenger
if safety was important, they would most likely say, yes. In the
year 2000 in Australia if you asked a passenger if safety was a
deciding factor in choosing between Ansett Australia, Impulse, Qantas
or Virgin Blue they would most likely have said that it wasn't.
All four airlines would have been seen as meeting the safety requirement.
Passengers would have given them 10 out of 10 on safety. Airline
safety would not drive customer purchasing decisions. So there are
some factors that are important but do not have any impact on purchasing.
If we move forward in time from 2000 to early 2001 when Australia's
civil aviation body grounded a number of aircraft when cracks in
engine mounts were discovered, what customers weigh up when making
a purchase decision would probably have changed dramatically. Airline
safety would have moved from having no impact to having a significant
impact. Instead of being a Must Be, airline safety becomes an attractor.
An airline that prospective passengers see as having a few safety
issues might get a 6 out of 10 on safety, while another with almost
no safety issues might get a 9 out of 10 on safety. So for the factors
that are important to customers, the ones that impact on customer
purchasing can and do change over time.
While there are many factors that are important to customers when
they weigh up what to buy, some important factors will have no impact,
other factors will impact to varying degrees and the impacts will
change over time depending on market conditions. The CVA approach
can identify the different types of importance factors and quantify
their current impact on purchasing.
The CVA approach uses qualitative market research techniques at
the Business Processes/ Customer Needs step to first determine which
factors are important to customers. These are then included in the
questionnaire. The data from the customer ratings in response to
the questions in the survey is then modelled to determine the elasticities
at the Modelling & Interpretation step.
The elasticities quantify the relationship between the various
factors that are important to customers. e.g. A movement from 7.5
to 8.2 (gain of 0.7) in the excellence rating for the Knowledge
of customer services representatives with an elasticity of 0.3 to
Customer Services Representatives Overall would result in an 0.7
x 0.3 = 0.21 gain for the overall result. When the elasticity is
zero we have identified a Must Be, which is currently having no
impact on purchasing. Once the elasticities are known, the purchase
impact weights can be calculated. These quantify the different degrees
to which the factors that are important to customers actually drive
purchasing decisions.
How do we know that econometric modelling does actually reveal
what drives purchasing? The confirmation for this comes from experience
in countries around the world with actual business situations covering
everything from mobile phone services through to sheep dip. Companies
that use these techniques win in their markets.
MELBOURNE
 It
was great to be in Melbourne again. Its mix of interesting people,
buildings, trams and cafes makes it one of my favourite cities.
A while ago I stumbled across the Café d'Orsay in Collins
St. As the Café is only four metres wide it is easy to miss.
But once you go inside you enter another, albeit slightly claustrophobic,
world. Somehow, the owner Kenneth Meere has managed to squeeze 29
seats into the available space to create a unique restaurant. The
staff are friendly and efficient - its just as well because they
are very close to you. Although my visits are usually many months
apart the staff appear to remember me from my previous sporadic
visits.
Before looking at the menu your attention first turns to the ceiling,
which is totally covered with a painting in a virtuoso trompe l'oeil
design with the mirror above the kitchen at the end of the café
adding to the deception. Three seats at the front window provide
an alternative to the interior view. The bi-fold windows open wide,
creating a small window table that looks out on Collins Street with
people going home after a day at work or getting ready for a night
out, the trams rumble up and down to the backdrop of the Regent
theatre just across the road.
You are first served with water and some thick slices of bread.
With this overall ambience it is easy to forget the need to select
what to eat. The walls of the Café are lined with the comprehensive
cellar and the waiter suggests a glass of McLaren Vale Shiraz. I
finally decide on the Seafood Linguini from the selection of mainly
Italian dishes. As always the food is great and the prices are reasonable.
The selection of desserts is tempting but so far I have been able
to resist them, just finishing off the meal with a cappuccino.
While the Café can usually find a stool for one person at
the bar or the window, there are only a few tables for two people
and only one for four people so it is wise to book by phoning Kenneth
on +61 (3) 9654 6498, before you visit Café d'Orsay at 184 Collins
Street, Melbourne, Australia.
And the Café gets a 10/10 for Overall Value.
Regards,
Rodger Gallagher
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