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June 1998 Volume 2.09
London Customer Value Conference
In April I attended the conference on Measuring & Maximising
Customer Value in Telecoms held in London, United Kingdom. Leading
British and International speakers presented papers to delegates
from a range of countries from Botswana to Poland. Although the
conference had a telecommunications theme, most of the topics covered
were applicable to any service industry. Papers presented by companies
such as British Airways provided ideas and experiences from other
industries. The first two days of the conference focussed on the
economic value of customers to service providers, while the final
two days looked at the customer value that customers receive from
their service providers.
Determining the value provided to companies by groups of customers
and then relating this to the cost of providing service, using techniques
such as activity based costing has always seemed very worthwhile
to me. Although many people write about this topic in general terms
it is extremely difficult to undertake in practice. It was refreshing
then to find that, yes, there are people who know how to do this.
One such person is Michael Boon, Director of Strategic Consultancy
for the Cogent Group. Michael has a suite of techniques available
that examine the cost and revenue information that is required to
determine customer value. These cover a balanced score card approach
drawn from activity based costing, absorption, incremental, direct
costing, and full costing. Selection of the techniques depends on
the situation being studied. One of the areas he specialises in
is allocating the fixed costs to customer groups over their lifetime.
Michael has used these techniques in many telecommunication markets
around the world, and is now spending most of his time in China.
In New Zealand he has assisted the long distance Company, Clear
Communications Ltd.
Where a few years ago it was adequate for software suppliers to
simply promote 'Data Warehouses' and loosely talk about data mining
tools, the emphasis is now very much on applying the various data
mining tools to assist with the design and implementation of customer
retention, and win-back tactics. These tools range from tools with
a single application, through neural technology tools, to enterprise
tools such as The SAS System, which claims to encompass just about
anything you'd ever need at the click of a mouse button. A person
from the SAS Institute told me that it does help if you know what
you are doing when you do the clicking. I agree, in everything I've
come across in life it always seems to help if you know what you
are doing.
On the third day of the conference one of the highlights was a
paper by Nic Budden, Head of Strategy for Cable & Wireless Cayman
Islands. With a vision of, 'Leading the World In Integrated Communications'
they have set a high target. This company is the leader in the Cable
& Wireless group, although it only has about 15,000 customers.
The speed of change achieved demonstrates what a small company with
a focussed management team can accomplish. They identified nine
key drivers of customer needs covering Service Response, Customer
Care, and Competitive Pricing. Five key internal service metrics
were tracked against targets defined by their customer satisfaction
research. Using a set of integrated programmes based around process
improvement, systems development, competitive pricing, and employee
reward and recognition they succeeded in moving their Customer Value
indicator by 27% in one year. Great work Cable & Wireless Cayman
Islands.
Madeleine Anderson, Marketing Manager for British Airways' frequent
flyer programme, presented another interesting paper on the use
of loyalty programmes to enhance customer satisfaction and reduce
churn. There are many poorly designed loyalty programmes that only
focus on some sort of reward to retain customers. The British Airways
programme is an example of a well thought out loyalty programme
where the aim is to create advocates for British Airways. Put simply
British Airways' Executive Club aims to be regarded by a customer
as, 'The part of British Airways that knows who I am, ... acts on
it and cares.'
Madeleine gave examples of past good ideas that actually lowered
customer satisfaction, such as the one where the senior duty manager
personally greeted gold level members at check-in. The manager would
ask the people if there was anything they could do for the gold
level member. The member would usually ask for a free upgrade to
First Class, which the Manager would then decline. The result was
an upset customer and a frustrated staff member. British Airways
has learnt from its experiences. A well-designed loyalty programme
is based on the true customer needs that build customer value, and
that a company can afford to deliver on.
Lunch at Eastbourne
I am heading down to Eastbourne from London by train to have lunch
with Frank. While most rail services in the United Kingdom seem
to have improved with the advent of privatisation this is certainly
not the case with the Connect South Central Company. Their trains
are dirty and while other Companies post statistics listing their
on time performance, these details are missing at stations where
Connect South Central operates. But they do have signs up bearing
a slogan telling us they are customer service focussed. Frank has
been playing golf in the morning at the Royal Eastbourne Golf Club
in a competition with a visiting club from another part of Sussex.
He has arranged for me to join him at the golf club for lunch. We
have a drink before lunch as the golfers discuss the competition.
A tie appears from behind the bar for me to wear to lunch. At the
appropriate time the local Club Captain and the visiting Club Captain
lead the way to the top floor function room which provides beautiful
views of the course.
And in such a setting, over a very tasty meal accompanied by the
Club Red Wine, what could be more appropriate than discussing ways
of providing value to customers.
Over the last few years many new golf courses have opened in Sussex,
without a corresponding increase in the total number of people playing
golf. This has seen the clubs looking at ways of providing better
value to attract new members.
Royal Eastbourne designed an introductory package branded as, 'The
Academy' as a way. Payment of a fee based lower than the normal
annual membership allowed new players to try the game, receive free
lessons, and a discount off full membership. This customer value
based approach has been extremely successful at increasing the club's
membership.
Regards,
Rodger Gallagher
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