|
September 1999 Volume 1.04
The
Right Time for Customer Value
by Ray Kordupleski
Tackling important market and business matters
Businesses are often faced with deciding on when is the right time
to launch a Customer Value initiative. Sometimes they feel they
have such serious market place and business issues to work on that
they don't have time to consider the value they are delivering to
their customers. I can understand this desire to postpone Customer
Value Added (CVA) research and analysis work, while they focus their
energy and tackle these important market and business matters. I
felt the same way when I was a Vice President of Operations for
a major business unit of AT&T that was faced with a similar
situation. In fact so did the other Vice Presidents. Over time we
realised that having the actual marketplace perceptions of our products,
services and prices compared to the competition would have been
a major help in focusing our time and money on the factors and business
process that would have the biggest impact on our competitive position.
Rather than taking time out from the complex issues, we came to
understand that the Customer Value work would have shortened the
decision making and implementation steps, as well as producing a
better business result.
CVA action in one day
The next time I found myself in the same situation, rather than
completely ignoring the powerful CVA techniques for helping a business
unit understand its competitive strengths and weaknesses, we used
a quick yet effective interim alternative approach. We ran a one-day
action planning workshop and created the customer value proposition
from the minds of the best subject matter experts and business leaders
we had. The output we created was the value maps, value trees and
competitive value profiles for the different market segments we
were competing in.
The outcome of the day was a much greater understanding and agreement
on the key product, service and price purchase criteria that influence
customers purchasing and loyalty decisions. And
even more important, we achieved agreement between the key people
and a work plan to move forward and improve. Our people had decided
and accepted where the business unit should focus its scarce time,
money and talents, on items that would have the biggest payback
in the market. It helped us make the critical decisions on what
to continue to do, what to start doing or what to stop doing.
The first step delivers business gains
Since that experience I always recommend to my clients, especially
when the issues are many and serious, to invest one day of their
leadership's time in creating the common view of the value position
in their markets and what the consensus of opinion on the priorities
is. With this approach the first step in a Customer Value initiative
immediately delivers business gains by focussing on business and
market priorities, gaining agreement, then gathering the low hanging
fruit.
Club Croc
One company with very attractive shareholder benefits, in addition
to their dividends, is Club Crocodile based in Brisbane, Australia.
We decided to check up on our investment and take advantage of the
free holiday offer at their Long Island resort in the Whitsunday
Islands. After landing at Hamilton Island we had a quick trip by
water taxi to Long Island. From the time we landed the service was
relaxed and friendly - just what's needed while you are in holiday.
The rooms look out on palm trees, a glistening sandy beach, with
a backdrop of the Whitsunday passage and the other islands.
The rest of Long Island is a national park with walking tracks around
and across the island. So you can stretch your legs on land or sample
the many water sports, before easing into the restaurant for a great
selection of food and wine.
As they say, the friendly resort for all ages,
The Mission for Your Customers
Continues...
7.0 Analyse and Review Results
This article focuses on further aspects of analysing the Customer
Value Added (CVA) information and deciding on the next steps to
take.
When looking at the CVA information it is important to review it
in the context of other performance information such as income and
expenditure reports, economic value added for capital projects.
When determining business priorities, the relative profitability
of different markets or product lines can be considered together
with the CVA data. A low CVA in a market that delivers most of a
business's profit is likely to indicate areas of higher business
priority than a low CVA in a market which delivers only 10% of the
business's profit.
In the same way, often scarce capital resources can be rationed
and allocated according to priorities established by CVA performance.
Consider a situation where two business units both have the same
CVA rating of 98, and each one contributes about the same amount
of profit to the company. Each business unit has developed a plan
to improve CVA, which requires considerable capital expenditure
of similar amounts of corporate funds. The first proposal is designed
to improve CVA to 102, while the second is designed to lift CVA
to 105. Both proposals are likely to achieve similar reductions
in operating expenditure. But the higher CVA level is indicative
of future gains in market share, and share of business from existing
customers. So in this situation the project that delivers the highest
CVA, with greater future market potential would be approved.
So the greater power comes from CVA information when it is coupled
with financial information.
Watch the next CVM Update for further ideas on Implementing
the Customer Value Added Process.
Previous Step
7.0 (Part One)...
Next Step 8.0
Regards,
Rodger Gallagher
|
