1. Why are organizations shifting from a customer satisfaction focus to a customer value focus?
Many organizations across a wide number of industries have experienced an inability to link their customer satisfaction numbers to business performance measures such as market share. What we know about customer value is that it is a strong predictor of market share. Those organizations that have been able to create and maintain a differential value advantage are typically those organizations that are the market leaders. If customer value analysis is done correctly, the analysis will direct strategic initiatives designed to enhance the organization’s competitive value proposition and market share (Click here for a case study).
2. How do you typically go about developing Customer Value Analysis(CVA) for a client?
We use a basic 4 step process. We typically begin by analyzing an organization’s current customer information system in order to keep that which is applicable. The next step is something that we do that many other firms do not. We realize that an organization generally has many products and serves more than one market segment. By identifying the products and markets that have the greatest growth opportunities for the organization we can prioritize where the organization should deploy its customer value investment. We want the CVA to provide the organization with the greatest payoff and this comes by getting this kind of focus. Once product lines and market segments have been identified we conduct focus groups to understand how these customers that use these products define value. This provides input into a questionnaire. When the information is collected we analyze it using our set of proprietary CVA techniques. This produces a model of value, a Competitive Value Matrix that details the organization’s competitive value proposition, a Relationship Planner that assess the loyalty of the organization’s customer base, and an Acquisition Planner that identifies your competitors’ vulnerabilities.
3. How do we use this information to improve your profitability?
This is another key differentiator of Market Value Solutions (MVS). Most research firms simply provide the client with a report but do not provide help in using the information to improve business performance. MVS does. We go a lot further and show the client how to use the information to actually improve their competitive value proposition, increase their market share and improve their profitability. We have developed a framework that drives the customer value information into an organization’s competitive planning systems and then directs the information to those key value delivery processes that have the greatest impact on the organization’s competitive value proposition. We have been very successful with this approach and have documented cases where clients have improved both market share and profitability. Here are some typical results:
Wireless telecom company
- 50% reduction in consumer churn
- Improved equipment delivery time from 10 days to 2 days
- Total estimated bottom line contribution = $4.5M
Heavy equipment company
- Doubled sales revenue – from $250M to $500M+
- Tripled market share in a strategically important market: 4% – 12%
- Increased employees from 600 to 1000+
- Achieved record profitability last year
Underground mining equipment manufacturer / distributor
- Reclaimed more than $8mm in lost sales
- 30% improvement in on-time deliveries
- Improved margins on equipment repairs from 11% to 28%
International health and leisure firm
- Doubled profits in a single year
- Moved from being a market nicher to the market leader
Manufacturer of plastic manufacturing equipment
- Significantly increased market share within one year
- Increased profits to record levels
4. Can customer value analysis work in my industry?
We have successfully deployed customer value analysis in a large number of industries. This includes heavy equipment, telecom, financial services, consumer package goods, utilities (electric and gas), healthcare, as well as many others. Customer value analysis, of course, must be tailored to the specific value dynamics of the industry. In other words, what works in one industry will not work in another industry.
5. How often should an organization conduct a customer value analysis?
That, of course, depends. In more mature industries where there is not a lot of change, probably about every two years. In more volatile industries, particularly industries such as wireless telecom or electronics or, those industries that are rapidly consolidating, CVA needs to be conducted about once a year. Value definitions change and the organization must stay on top of these changing definitions.
6. How long does the deployment of CVA usually take?
This, of course, will depend on the number of market segments/product lines that are analyzed. Ordinarily, the whole process outlined above will take only about 6 to 8 weeks. The implementation of the findings will take longer, again according to the scope of the implementation.