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August 1999 Volume 1.03
The
Customer Value Escalator
by Rodger Gallagher
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Keeping ahead of the escalator
Working to provide superior value for customers is a bit like trying
to walk up a down escalator. As fast as you meet or exceed the needs
of your customers, it always seems to be getting a little harder.
The type of meal that an international airline provided to its business
class passengers ten years ago is now the meal they provide to their
economy passengers. Expectations have increased. What causes customer
expectations to increase?
Customer expectations are raised and set by:
# Changes across all similar products and services.
For example, a phone company introducing a vastly improved bill
with an easy to understand layout with more information would raise
customer expectations for bills from electricity companies, insurance
companies, and statements from banks and credit card companies.
# Changes across the same products and services.
In the airline meal example above, when one airline started serving
hot meals to customers on early morning flights they set a benchmark
that set an expectation for all customers. As long as the hot meals
met an unfulfilled customer need then this would set customer expectations
at a new level.
# Promises made to customers by their suppliers
Sometimes companies plan marketing campaigns that announce new services,
or promise certain levels of service. When this happens customers
naturally enough expect that what had been promised will occur.
Their expectations have been set at a higher level. An airline announced
in an extensive advertising campaign that it had ‘empowered’ its
ground service representatives. Customers flying on this airline
could observe no change in the behaviour of these representatives.
But as their expectations were higher the customers were now dissatisfied
with the service they received even though it was no worse than
it has been previously.
Keeping promises.
When we undertake Customer Value Added research for clients we always
include questions on whether the company has kept promises that
have been made to the customers. Over and over again Keeping Promises
comes up as one of the strongest drivers of customer value. Of the
three ways that customers’ expectations are raised and set, this
is the one the supplier has most control over. Why is it then that
some companies seem to want to speed up the down escalator by making
promises they then do not keep? Many years ago I took out a life
insurance policy. Over the years this policy has been passed around
six life insurance companies as a result of mergers, acquisitions,
and takeovers. Every time a change has occurred the new company
has written to tell me that my policy is with the new company. Good.
In the same letter they have also promised me how much better the
service will be with them running it. This would be have been good
if the service had improved, but it didn’t. Instead the service
always continues as before. i.e. every three months the company
sucks some money out of my bank account. Each time I receive one
of these letters with a promise of better service, my expectations
are raised and when nothing happens I become just a little bit more
dissatisfied.
Once, about three life companies ago I received a letter saying
that Ms X was my personal advisor and she would contact me soon
to ensure that my expectations were being exceeded. Ms X never contacted
me. When making promises to customers it is important to remember
that Communicating Value is the final step when aiming to raise
the customer view of the Value they receive from you. First you
have to determine what customers value, then decide which of those
needs to focus on. Next you have to deliver those needs better than
your competitors. Only when you have done that, and customers confirm
you are delivering superior value should you start to communicate
your value proposition. Then you will get ahead of the escalator.
From one Cambridge to another
Just south of Hamilton is the town of Cambridge, New Zealand. Approaching
from the north you fairly soon come across St. Andrews Church –
a small wooden building like so many New Zealand colonial churches.
Inside the rimu timber of the pews, walls, arches, and ceiling has
a beautiful mellow glow. This setting is ideal for choral music
given the visual ambience and acoustic qualities.
Every few years the Chapel Choir of Christ’s College, Cambridge,
United Kingdom visits Cambridge, New Zealand to perform a few concerts.
And of course they sing in St. Andrews Church. As we sat listening
to their selection of English sacred music from the 16th to the
20th century I couldn’t help thinking about the contrast between
this cosy little rimu church and their home Chapel with its soaring
stone arches.
The 8 sopranos, 4 altos, 4 tenors and 6 basses, with two organ scholars
under the direction of Dr. David Rowland gave us a rich well balanced
musical evening demonstrating their unquestioned talent.
If you are not in one Cambridge or the other, then you can find
the Chapel Choir at www.christs.cam.ac.uk/choir
The Mission for Your Customers
Continues...
7.0 Analyse and Review Results
This article focuses on analysing the Customer Value Added (CVA)
information and deciding on the next steps to take.
Achieving gains in business performance with CVA information starts
with people throughout an organisation understanding the information,
then believing that it accurately portrays the customer needs and
the market view. This requires winning the hearts and minds of all
employees in the company. Achieving this is more an ‘art’ than a
‘science’. The usefulness and usability of the CVA information depends
to a large extent on how it is communicated, along with people acquiring
the necessary skills on how to use the information.
The executive sponsoring the project must take the first step by
holding a planning workshop with the managers and subject matter
experts responsible for the business processes and products covered
by the CVA information. The purpose of the workshop is to establish
targets along with the tactics that will allow them to be achieved.
This step has the dual function of educating the mangers about how
to use the CVA information. An expert in applying and using the
CVA techniques should facilitate the workshop. Once the strategies
and tactics have been decided on then owners must be assigned to
them.
The managers who own the tactics can then hold implementation workshops
with their people. This cascades the CVA information and the tools
to use it, down and across an organisation. Another important way
of using the information is to ensure that it is reviewed at normal
operational meetings along with the financial and operational information.
The frequency of presenting the information at these meetings depends
on the frequency of the research. It is good to aim to supply the
information at the end of each quarter at the same time as the financial
reports.
Whenever the CVA information gets used by mangers this will get
noticed. A strong signal is sent to everybody in an organisation
on the importance of providing superior value to customers.
Watch the next CVM Update for further ideas on Implementing
the Customer Value Added Process.
Previous Step
6.0
Next Step -
Step 7.0
Regards,
Rodger Gallagher
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