Customer Value Management

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Customer Value Management November, 2002 Janet LeBlanc

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.
WHY invest in CVM?
Canada Post will be a world leader in providing innovative physical and electronic delivery solutions, creating value for our customers, employees and all Canadians
What is Customer Value?
VALUE
Quality
Price
Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998

Customer Value Defined
Overall Value Satisfaction
Overall Quality
Relative Price Competitiveness
Product Quality
Customer Service
Marketing Sales
Order Fulfillment
Sub-attributes
Sub-attributes
Quality Attributes
Product Information Advertising and Promotion Customer & Consultation Customized Solutions
Performance Rating
Importance Weight
ABC
XYZ
50
20
20 10
6
9 8
7
6 7
100
Stage One
Minimum Requirements
Stage Two
Customer Focus
Stage Three
Customer Attitudes
Competitive Focus on Targeted Markets Customer Value
Stage Four
Conformance Quality Delivering what we promise Meeting standards
Customer Satisfaction Providing what customers want Responding to customer complaints
Customer Loyalty Retaining our customers Getting them to recommend us
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)
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?
Satisfaction
Current Service
Value
The Entire Customer Relationship Lead Indicator Company Vs. Competition
Proven Relationship to Business Performance
Lag Indicator
Company Performance Tenuous Link to Business Performance

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
Customer Value Management Council External/Internal Data Sources
OUTPUTS
Customer Value Tools and Data Competitive Value Proposition Customer Loyalty and Market Share Analysis
KEY MEASUREMENTS
Customer Loyalty Market Share Profitability Customer Retention
CUSTOMER-CENTRIC
Ideal Customer Value Process Capabilities Performance Improvement

1. Assess Market Opportunity
2. Conduct Analysis
Customer Value Management

4. Measure and Reward Performance 3. Commit to a Value Proposition
Value Analysis Tools

Price Performance Profile
220
Value Map
Value Map for Commercial Filtration -- Base
Average
Performance Scores
Weights for:
200
Clarion
Walter
Envir
Brite
Filto
Dimension Attribute Benefits Chloroform Removal Lead Removal Taste Clogging Service Reliable supply Technical spport RelationshipRelationship Weighted benefit scores Costs Selling priceCapital cost Other costs Disposibles cost Weighted cost scores Product
Attrib. Value 12.0 10.0 9.0 25.0 16.0 14.0 14.0 98.3 100.0 100.0 -1.7
10.0 10.0 8.0 8.0 5.0 2.0 7.0 7.0 17 120 137
10.0 10.0 10.0 2.0 5.0 1.0 9.0 5.8 40 160 200
2.0 10.0 8.0 10.0 7.0 3.0 5.0 6.7 30 54 84
10.0 8.0 6.0 4.0 9.0 1.0 5.0 5.8 37 85 122
2.0 10.0 6.0 8.0 9.0 7.0 9.0 7.5 25 130 155
6.8 9.6 7.6 6.4 7.0 2.8 7.0 6.6 30 110 140
High Cost
Walter
180
160
Price 140 ($)

120
Filto Brite
Clarion
100
80
Envir
60
Filto Value Relative to Average
5.6
6.0
6.4
6.8
7.2
7.6
Performance
Chloroform Removal Lead Removal Taste Clogging Reliable supply Technical spport Relationship Capital cost Disposibles cost
Costs
-25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0
Differential worth of performance advantages and disadvantages Dimension Benefits Product Attribute Chloroform Removal Lead Removal Taste Clogging Reliable supply Technical spport Relationship
Service Relationship (a) Total differential worth of benefits Selling price Other costs (b) Total cost advantage
22 2 2 23 -19 -7 0 25 13 -10 3
22 2 13 -64 -19 -15 16 -44 -10 -50 -60
-34 2 2 53 0 2 -16 9 0 56 56
22 -9 -8 -35 19 -15 -16 -43 -7 25 18
-34 2 -8 23 19 34 16 53 5 -20 -15
Capital cost Disposibles cost
Relative value impacts - Filto vs. Average
Head-to-Head Comparisons
Value Scorecard
Average
0 0 0 0 0 0 0 0 0 0 0
Clarion
Walter
Envir
Brite
Filto
Price Performance Profile

Performance Scores Dimension Benefits Product Attribute
Average Clarion Walter Envir Filtro Brite
Weights for: Attrib. 12.0 10.0 9.0 25.0 16.0 14.0 14.0 98.3 100.0 100.0 -1.7 58.5032 Value
Chloroform Removal Lead Removal Taste Clogging Service Reliable supply Technical support Relationship Relationship Weighted benefit scores Costs Selling price Capital cost Other costs Disposibles cost Weighted cost scores Slope of fair value line
10.0 10.0 8.0 8.0 5.0 2.0 7.0 7.0 17 120 137
10.0 10.0 10.0 2.0 5.0 1.0 9.0 5.8 40 160 200
2.0 10.0 8.0 10.0 7.0 3.0 5.0 6.7 30 54 84
10.0 8.0 6.0 4.0 9.0 1.0 5.0 5.8 37 85 122
2.0 10.0 6.0 8.0 9.0 7.0 9.0 7.5 25 130 155
6.8 9.6 7.6 6.4 7.0 2.8 7.0 6.6 30 110 140
Value Map
220
Value Map for Commercial Filtration -- Base
200
High Cost
Walter
180
160
Price 140 ($)

120
Filtro Brite
Clarion
100
80
Envir
60 5.6 6.0 6.4 6.8 7.2 7.6
Performance
Value Scorecard
Differential worth of performance advantages and disadvantages Dimension Benefits Product Attribute Chloroform Removal Lead Removal Taste Clogging Reliable supply Technical support Relationship
Service Relationship (a) Total differential worth of benefits Costs Selling price Other costs (b) Total cost advantage (c) Total value advantage = (a)+(b)
22 2 2 23 -19 -7 0 25 13 -10 3 28 137 165 28
22 2 13 -64 -19 -15 16 -44 -10 -50 -60 -104 200 96 -104
-34 2 2 53 0 2 -16 9 0 56 56 64 84 148 64
22 -9 -8 -35 19 -15 -16 -43 -7 25 18 -25 122 97 -25
-34 2 -8 23 19 34 16 53 5 -20 -15 38 155 193 38
Capital cost Disposibles cost
(d) Actual price (or cost) (e) Fair Value Price = (a) + (average price, 140 ) (f) Total value advantage = (e)-(d)
140 140 0
Average
0 0 0 0 0 0 0 0 0 0 0 0
Clarion
Walter
Filtro
Envir
Brite
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 20.0 25.0 30.0
Relative value impacts - Filto vs. Average
Identify Value Drivers
Develop Action Plans
Measure Value Creation After Transaction
Measure Market Perception
feedback
Conduct Baseline Study
Business Process Improvement
On-going Transactional Surveys
On-going Market Surveys
Plan/Do/Check/Act
Define/ Refine Value Proposition
Build Commitment To Value Proposition
Process & Organization Gap Analysis
Changes To Deliver Value Proposition
Internal Tracking & Measurement
Tracking Market Impact
Internal Management/ Staff
Plan/Do/Check/Act
Group of Companies
The Value Proposition Deployment Process
Customer Value Yields Big Dividends

Wireless Telecom Company Heavy Equipment Dealership 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
50% reduction in customer churn Improved equipment delivery time from 10 days to 2 days
Doubled sales revenue from $250M to $500M+ Tripled market share in a strategically important market: 4% - 12%
Doubled profits in a single year Moved from being a market nicher to the market leader
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

MODELING EMPLOYEE VALUE
The Right Workforce
Retention
Acquisition Employee Value
Positive Turnover
Relative Compensation
Relative Job Quality
Base Salary
Pay Equity
Bonus
Benefits
Manager Quality
Brand Equity
Work Life Balance
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.
Customer Value Management November, 2002 2003 November,

Customer Value Management

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