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Customer Value Management


Janet
LeBlanc
November,
2002

Director, Canada Post

Introduction to Customer Value Management

Presentation Objectives
Define customer value management
(CVM),
Understand the difference between
customer value and customer
satisfaction,
describe key CVM concepts and tools,
and
communicate the importance of
measuring quality in the eyes of your
clients.

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WHY invest in CVM?

Introduction to Customer Value Management

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Canada Post will be a world leader in


providing innovative physical and
electronic delivery solutions, creating
value for our customers, employees
and all Canadians

Introduction to Customer Value Management

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What is Customer Value?

VALUE

Quality

Price

Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998

Introduction to Customer Value Management

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Customer Value Defined


O v e ra ll V a lu e
S a tis fa c tio n

O v e r a ll
Q u a lity

P ro d u c t
Q u a lity

S u b -a ttr ib u te s
S u b -a ttr ib u te s

C u s to m e r
S e rv ic e

R e la tiv e P r ic e
C o m p e t it i v e n e s s

M a r k e tin g
S a le s

O r d e r F u lfillm e n t

Introduction to Customer Value Management

Quality
Attributes

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Performance Rating
Importance
Weight

ABC

XYZ

Product Information

50

Advertising and Promotion

20

Customer & Consultation

20

Customized Solutions

10

100

Introduction to Customer Value Management

Stage One
Minimum
Requirements

Conformance Quality
Delivering what we
promise
Meeting standards

Stage Two
Customer
Focus

Customer
Satisfaction
Providing what
customers want
Responding to
customer complaints

Stage Three
Customer
Attitudes

Customer
Loyalty
Retaining our
customers
Getting them to
recommend us

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Stage Four

Competitive Focus on
Targeted Markets
Customer
Value
Meeting critical
needs of targeted
customers
Outperforming
competitors
Creating new,
unique benefits

21st Century
Growth
Company

Source: Adapted from Managing Customer Value by Bradley T. Gale, (New York, The Free Press, 1994)

Introduction to Customer Value Management

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I cant get no (customer) satisfaction


Satisfaction in itself does not lead to customer loyalty
Positive empirical relationship between value focus and
link to market share
Satisfaction
=
Satisfy Existing
Customers Better

Value
=
Improve Your
Competitive Position
Attract and Retain
Targeted Customers

Where are leading-edge companies headed?

Introduction to Customer Value Management

Satisfaction

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Value

Current
Service

The Entire
Customer
Relationship

Lag Indicator

Lead
Indicator

Company
Performance

Company Vs.
Competition

Tenuous Link
to Business
Performance

Proven
Relationship to
Business
Performance

Introduction to Customer Value Management

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DEFINITION
Customer Value Management is a process designed to develop and execute
value-based strategies which impact marketing, strategic planning, competitive
positioning, branding, pricing, and selling.
GOAL
To establish CVM as a core competence for the
Canada Post Group of Companies.
INPUTS
OUTPUTS
Customer Value Management Council

Customer Value Tools and Data

External/Internal Data Sources

Competitive Value Proposition


Customer Loyalty and Market Share
Analysis

KEY MEASUREMENTS
Customer Loyalty

Market Share

Profitability

Customer Retention

Introduction to Customer Value Management

CUSTOMER-CENTRIC

Ideal
Customer
Value
Process
Capabilities
Performance
Improvement

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Introduction to Customer Value Management


1.

Assess Market
Opportunity

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2. Conduct
Analysis

Customer Value Management


4. Measure and
Reward
Performance

3. Commit to a
Value Proposition

Introduction to Customer Value Management

Value Analysis Tools

Value Map

Price Performance Profile


Product

A ve rag e

C la rio n

B rite

Walter

200

High
Cost

Attrib. Value

Chloroform Removal
Lead Removal
Taste
Clogging
Service
Reliable supply
Technical spport
RelationshipRelationship
Weighted benefit scores

10.0
10.0
8.0
8.0
5.0
2.0
7.0
7.0

10.0
10.0
10.0
2.0
5.0
1.0
9.0
5.8

2.0
10.0
8.0
10.0
7.0
3.0
5.0
6.7

10.0
8.0
6.0
4.0
9.0
1.0
5.0
5.8

2.0
10.0
6.0
8.0
9.0
7.0
9.0
7.5

6.8
9.6
7.6
6.4
7.0
2.8
7.0
6.6

12.0
10.0
9.0
25.0
16.0
14.0
14.0

Costs

17
120
137

40
160
200

30
54
84

37
85
122

25
130
155

30
110
140

100.0
100.0

Selling priceCapital cost


Other costs Disposibles cost
Weighted cost scores

220

180

160

Price 140
($)
98.3

Clarion

Filto
Brite

120

100

-1.7

Envir

80

60

Filto Value Relative to Average

5.6

6.0

6.4

6.8

7.2

7.6

Performance
Chloroform Removal
Lead Removal

Attribute

B rite

C la rio n

Benefits

Dimension

E n vir

Reliable supply

W a lte r

Clogging

Product

Chloroform Removal
Lead Removal
Taste
Clogging
Reliable supply
Technical spport
Relationship

22
2
2
23
-19
-7
0
25

22
2
13
-64
-19
-15
16
-44

-34
2
2
53
0
2
-16
9

22
-9
-8
-35
19
-15
-16
-43

-34
2
-8
23
19
34
16
53

0
0
0
0
0
0
0
0

Capital cost
Disposibles cost

13
-10
3

-10
-50
-60

0
56
56

-7
25
18

5
-20
-15

0
0
0

Technical spport
Relationship

Service

Capital cost

Relationship
(a) Total differential worth of benefits

Disposibles cost
-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Relative value impacts - Filto vs. Average

Head-to-Head Comparisons

Costs

A ve ra g e

Differential worth of performance advantages and disadvantages

Taste

F ilto

Benefits

Value Map for Commercial Filtration -- Base

Weights for:

E n v ir

Dimension Attribute

W alte r

F ilto

Performance Scores

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Selling price
Other costs
(b) Total cost advantage

Value Scorecard

Introduction to Customer Value Management

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Price Performance Profile

Benefits

Product

Average

C larion

B rite

Weights for:

E nvir

Attribute

W alter

Dimension

Filtro

Performance Scores

Attrib.

Chloroform Removal
Lead Removal
Taste
Clogging
Service
Reliable supply
Technical support
Relationship Relationship
Weighted benefit scores

10.0
10.0
8.0
8.0
5.0
2.0
7.0
7.0

10.0
10.0
10.0
2.0
5.0
1.0
9.0
5.8

2.0
10.0
8.0
10.0
7.0
3.0
5.0
6.7

10.0
8.0
6.0
4.0
9.0
1.0
5.0
5.8

2.0
10.0
6.0
8.0
9.0
7.0
9.0
7.5

6.8
9.6
7.6
6.4
7.0
2.8
7.0
6.6

12.0
10.0
9.0
25.0
16.0
14.0
14.0

Costs

17
120
137

40
160
200

30
54
84

37
85
122

25
130
155

30
110
140

100.0
100.0

Selling price Capital cost


Other costs Disposibles cost
Weighted cost scores
Slope of fair value line

Value

98.3

-1.7
58.5032

Introduction to Customer Value Management

Value Map

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Value Map for Commercial Filtration -- Base


220

High
Cost

Walter

200

180

160

Price 140
($)

Filtro

Clarion

Brite

120

100

Envir

80

60
5.6

6.0

6.4

6.8

Performance

7.2

7.6

Introduction to Customer Value Management

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Value Scorecard

Attribute

Walter

Envir

Brite

Clarion

Average

Benefits

Dimension

Filtro

Differential worth of performance advantages and disadvantages

Product

Chloroform Removal
Lead Removal
Taste
Clogging
Reliable supply
Technical support
Relationship

22
2
2
23
-19
-7
0
25

22
2
13
-64
-19
-15
16
-44

-34
2
2
53
0
2
-16
9

22
-9
-8
-35
19
-15
-16
-43

-34
2
-8
23
19
34
16
53

0
0
0
0
0
0
0
0

Capital cost
Disposibles cost

13
-10
3

-10
-50
-60

0
56
56

-7
25
18

5
-20
-15

0
0
0

28

-104

64

-25

38

137
165
28

200
96
-104

84
148
64

122
97
-25

155
193
38

140
140
0

Service
Relationship
(a) Total differential worth of benefits
Costs

Selling price
Other costs
(b) Total cost advantage
(c) Total value advantage = (a)+(b)

(d) Actual price (or cost)


(e) Fair Value Price = (a) + (average price, 140 )
(f) Total value advantage = (e)-(d)

Introduction to Customer Value Management

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Head-to-Head Comparisons (Average)


Filtro Value Relative to Average
Chloroform Removal
Lead Removal
Taste
Clogging
Reliable supply
Technical support
Relationship
Capital cost
Disposibles cost
-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

Relative value impacts - Filto vs. Average

20.0

25.0

30.0

Introduction to Customer Value Management

Identify
Value
Drivers

Develop
Action
Plans

Measure
Value Creation
After
Transaction

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Measure
Market
Perception

feedback

Conduct
Baseline
Study

Business
Process
Improvement

On-going
Transactional
Surveys

On-going
Market
Surveys

Introduction to Customer Value Management

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Plan/Do/Check/Act

Define/
Refine
Value
Proposition

Build
Process &
Commitment
Organization
To
Gap
Value
Analysis
Proposition

Internal
Management/
Staf

Internal
Changes
Tracking
To Deliver
&
Value
Proposition Measurement

Plan/Do/Check/Act
Group of
Companies

The Value Proposition


Deployment Process

Tracking
Market
Impact

Introduction to Customer Value Management

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Customer Value Yields Big Dividends


Heavy Equipment
Dealership

Underground Mining
Equipment
Manufacturer /
Distributor

International Health
and Leisure Firm

50% reduction in
customer churn

Doubled sales revenue


from $250M to $500M+

Improved equipment
delivery time from 10
days to 2 days

Tripled market share in a


strategically important
market: 4% - 12%

Reclaimed more than


$8mm in lost sales
30% improvement in
on-time deliveries
Improved margins on
equipment repairs
from 11% to 28%

Doubled profits in a
single year
Moved from being a
market nicher to the
market leader

Wireless Telecom
Company

Total estimated bottom Increased employees from


line contribution = $4.5M 600 to 1000+
Achieved record
profitability last year

Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998

Introduction to Customer Value Management

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The Right
Workforce

MODELING
EMPLOYEE VALUE

Acquisition

Retention

Positive
Turnover

Employee
Value
Relative Job
Quality

Relative
Compensation

Base
Salary

Pay
Equity

Bonus

Benefits

Manager
Quality

Brand
Equity

Work
Life Balance

Introduction to Customer Value Management

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The Value of Customer Value


Strengthen value propositions value is
the basis for customer decisions
Identify responses with the greatest
impact on customers future purchase
behaviour
Hone in on winning client strategies
Discipline and focusacross all functions
Dramatic impacts and performance gains

The key to attracting,


satisfying, and retaining
customers.

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Customer Value Management


November,
2002 2003
November,