1

EIGHT FACETS OF THE VALUE THEORY

CULTURECULTURE

OrganizationalCulture

OrganizationalCulture

EmployeeValues

EmployeeValues

SUPPLIERVALUES

SUPPLIERVALUES

3RD PARTYVALUES

3RD PARTYVALUES

CUSTOMERVALUES

CUSTOMERVALUES

CompetitorValues

CompetitorValues

Owner’sValues

Owner’sValues

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Prescription for Customer Accelerated Change

Tools to Leverage the Customer’s Voice

• WHAT IS OUR VISION?

• WHAT IS OUR CURRENT REALITY ?

• WHERE ARE OUR LEVERAGE POINTS ?

• HOW DO WE OPERATIONALIZE ?

• HOW DO WE SUSTAIN THE CHANGE ?

3

VISION LONG-TERM SOMETHING TO BE PURSUED A MOTIVATING STATEMENT PROVIDES GUIDANCE/INSPIRATION

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7 TOOLS OF CUSTOMER VALUE ANALYSIS

1. Quality Profile

2. Price Profile

3. Value Map

4. Won-Lost

5. Head-to-Head

6. Key Events

7. What/Who

CUSTOMER VALUE MAP: LUXURY CARS

Higher

Relative

Price

Lower

Relative Performance: overall score

1.25

1.25

.75

60 80 100

Inferior CustomerValue

Superior CustomerValue

BMW5-Series

LexusLS 400

*

*

LincolnContinental

*

AcuraLegend

*

6

Customer Customer characteristicscharacteristics

CUSTOMER PERCEIVED VALUECUSTOMER PERCEIVED VALUE

PricePrice Product Product qualityquality

qualityquality ServiceService InnovationInnovation Image Image

LOYALTYLOYALTY

Market share and profitabilityMarket share and profitability

Shareholder ValueShareholder Value

Business Business environmentenvironment

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THE VALUE MATRIX

Process

Pu

rpose

High

Low

Low High

Well-Intentioned

Adversarial

Value-Creating

Bureaucratic

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VALUE ENABLERSVALUE ENABLERS

PEOPLE

INFORMATION

TECHNOLOGY

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THE FOUR STAGES OF QUALITY

Con

form

ance

Q

ual

ity

C

ust

omer

S

atis

fact

ion

Mar

ket

Per

ceiv

ed

Qu

alit

y vs

C

omp

eito

r

Cu

stom

er V

alu

e M

anag

men

t

Focus InternalOperations Customers

Target Market & Performance vsCompetitors

Quality/Value inOverall StrategicFramework

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WHAT IS QUALITY• Conformance to Requirements/Zero Defects (Crosby)• Continuous Improvement/Reducing Variation

(Deming)• Fitness for Use (Juran)• Perceived vs Actual Service Delivery• Product Performance, Reliability, Durability,

Serviceability, etc.• Ease of Use, Low Maintenance Costs, • WHAT THE CUSTOMER SAYS IT IS

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WHY TOTAL QUALITY IN MARKETING

• SLOW OR NO GROWTH MARKETS

• MORE DEMANDING CUSTOMERS

• MORE INTENSIVE GLOBAL COMPETITORS

• QUALITY PAYS!!!– (lower product/service failure rates, higher quality

leads to higher ROI; higher quality means higher customer retention)

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WHY TOTAL QUALITY EFFORTS OFTEN FAIL

• LACK OF TOP MANAGEMENT SUPPORT • TOTAL QUALITY PROGRAMS ARE OFTEN

MOUNTED AS STAND-ALONE PROGRAMS – (involves a cultural transformation of the entire

organization; quality is everyone’s responsibility, not just a quality department))

– LACK CUSTOMER FOCUS - RUN AS INTERNAL PROGRAMS

• FAILURE TO ADAPT ORGANIZATIONAL STRUCTURE TO ACCOMMODATE TOTAL QUALITY INITIATIVES

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(CONT.)• TOO AMBITIOUS - TRY TO DO TOO MUCH,

TOO QUICKLY• NOT A “PROGRAM-of-the-MONTH” ,

RATHER A BUSINESS-LEVEL STRATEGY • REQUIRES “BUY-IN” ON THE PART OF

EMPLOYEES• NEEDS TO BE PROPERLY SOLD

INTERNALLY (excuse for “downsizing?”)

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The House of Quality

Mgt. System

Social System Technical System

TQM

Cu

stomer

Satisfaction

Con

tinu

ous

Imp

rovemen

t

Sp

eakin

g

with

Facts

Resp

ect for Peop

le

Strategy Management Process Management Project Management

Individual Task Mgt.

Strategic Planning

Operations Planning

Project Planning

Quality Planning

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THE FOUR

PRODUCT LEVELS

CORE BENEFIT

EXPECTED PRODUCT

AUGMENTED PRODUCT

POTENTIAL PRODUCT

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Determinants of Service Quality

ReliabilityResponsivenessCompetenceAssuranceCourtesyCommunicationCredibilityEmpathyKnow the customerTangibles

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• Define the Problem

• Understand the Process

• Measure the Process

• Simplify or Improve the Process

• Evaluate and Monitor Process Improvement ?

STEPS IN PROCESS IMPROVEMENT

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KEYS TO EFFECTIVE IMPLEMENTATION OF TOTAL QUALITY

IN MARKETING

• MEASURE!!! (benchmarking gives you a point of departure)

• TRAIN EMPLOYEES ON USE OF TQ TOOLS

• SHARE INFORMATION

• LOOK AT CUSTOMER AND PROCESS TOGETHER

• TIE REWARDS TO QUALITY GOALS

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RELATIVE TOTAL QUALITY

Price as a Percent of the Average

A B C D AVERel. $

1.05 0.89 1.00 1.05 .95Performance as a Percent of Average

NeedsImp.Wt. A B C D AVE

accur 14 1.29 0.77 0.90 1.03 7.75serv. 10 1.64 0.91 0.91 0.55 5.50

Rel.TQ 1.23 0.91 0.94 0.93

Contrasting customer satisfaction and customer valueCustomer Satisfaction Customer Value

1. Who we ask Our own customers, endusers

Our customers and competitors’customers, end users, anddecision makers

2. What we ask Rate our performance Rate us and our key competitors

3. Respondent perspective Experiential, am Isatisfied, backward-looking

Perception of differences, whichsupplier will I choose, currentand forward-looking

4. Who takes action Customer service Competitive marketing strategy

5. Type of Action TacticalContinuously improve,customer service,correct defects anderrors

StrategicClarify and evolve our CVproposition, create a differentialsuperior offering

6. Data changes Static, reflects mainlyour initiatives

Dynamic, reflects all competitiveinitiatives

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QUADRANT ANALYSIS

Perception of Performance

Cri

tica

lN

ot

Imp

orta

nt

Very Poor Excellent

Weaknesses

Monitor Importance

Strengths

Over-Emphasized Issues

*Customer Service*Product Quality

*Billing Accuracy

*Comm. Skills

*Ease of Doing Business

A Satisfied Customer is Loyal

1 2 3 4 5extremely satisfied

somewhat dissatisfied

slightly dissatisfied

satisfied very satisfied

Satisfaction Measure

apostle

Zone of Affection

Zone of Indifference

Zone of Defection

100%

80

60

40

20

terrorist

Loyalt

y

(Rete

nt

ion

)

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CUSTOMER SATISFACTION MEASUREMENT

Traditional Customer Satisfaction Measurement (CSM) tends to be misleading - according to Bain Research, 65-85 percent of customers who abandon a business report they were either “satisfied” or “very satisfied”

Measuring “customer value” serves as a better indicator of long-term customer commitment and loyalty

Measure not just the “foundational” (hygiene factors) but the “leverageable” aspects of the product/service (ie., satisfiers)

CSM needs to capture two important items of information: (1) how important each product/service attribute is; (2) how well a company performs on each product/service attribute (use “Quadrant Analysis”)

Customer Satisfaction/Revenue Enhancement Model

Internal Customer Satisfaction

External Customer Satisfaction

Reduced Turnover

Increased Productivity

Increased Loyalty

Positive W.O.M.

Customer Retention

Revenue Enhancement

Improved Profitability

WHAT IS RELATIONSHIP MARKETING?

The creation and retention of profitable customers through ongoing collaborative business and partnering activities between a supplier and a customer on a one-to-one basis for the purpose of creating superior customer value

Question: What 3 Factors Lead to Overall Customer Satisfaction in Industrial Buyer-Seller Relationships?

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Practicing Relationship Marketing Share Information with Customer Look for opportunities to “Add Value” Respond Quickly to Customer Needs Apply “Mass Customization” Involve Customer in

product/Service/Process Design Organize Processes Around Customer Track Each Relationship - Est. L.T.V. Deliver Differentiated Messages Based on

Customer Characteristics/Preferences

Reasons for Relationships

Efficiency

Needs and Wants

Customer Retention

Relationship Variables

Trust

Cooperation

Commitment

Dependence

Information Exchange

Continuum of Relationships

Industry Relationship Bandwidth

Pu

re

Tra

nsa

ctio

nal

Exc

han

ge

Pu

reC

olla

bor

ativ

e E

xch

ange

Flaring - OutUnbundlingStrategy

Added AugmentationStrategy

Core Product

Augmented Product

Stages of Customer Needs

Core Products and Services That Work

Basic Reliable Services Associated with the Core Products/Sercvices

Customer/Supplier Interaction of theVarious Core Products/Services

Supplier-Developed Innovations

Partnerships with Suppliers

Transactions vs. Relationships

• SHORT TERM• LIMITED INTERNAL

MARKETING• MARKETING MIX

EMPHASIZED• BUYER PRICE SENITIVE• TECHNICAL QUALITY• FOCUS ON MARKET SHARE• RESEARCH IS AD-HOC

• LIMITED INTERACTION AMONG FUNCTIONAL AREAS

• LONG TERM

• SUBSTANTIAL INTERNAL MARKETING

• INTERACTIVE MARKETING EMPHASIS

• BUYER LESS PRICE SENSITIVE

• FUNCTIONAL QUALITY

• FOCUS ON “SHARE OF CUSTOMER”

• RESEARCH IS REAL-TIME

• SUBTANTIAL INTERACTION AMONG FUNCTIONAL

• AREAS

Key Factors of SuccessfulCustomer-Supplier Relationships

1) Business Expertise (29 %)

2) Dedication to Customer (25 %)

3) Account Sensitivity and Guidance (23 %)

4) Product Performance & Quality (10 %)

5) Service Dept. Excellence (9 %)

6) Confirmation of Capabilities (4%)