the momentum effect

The Momentum EffectThe Momentum Effect

J.C. LARRECHE

What is momentum?What is momentum?• An impelling force or strength

How does it help?How does it help?• It helps in putting a serious distance between the

competitors

Pushers, Plodders & PioneersPushers, Plodders & Pioneers• PushersPushers – drive sales through aggressive increases in

marketing spend• PloddersPlodders – firms that remained in the safety zone of

past behaviors• Pioneers Pioneers – firms who boldy moved in opposite

direction of pushers and decreased their relative spending on marketing

Momentum Deficient FirmsMomentum Deficient Firms• Companies invest more in marketing to compensate for

poor product.

• Have to cut down on R & D because of dearth of fund.

• It eats up the resources of firm and destroys the firm inside out.

Momentum Powered FirmsMomentum Powered Firms• Focus on the product

• Create initial impact

• Take growth forward with that momentum

WalmartWalmart• Sam waltons knowledge of retail & customers

• Deliberately opened stores only in small towns

• Improved on customer service front, supply chain & supplier relationships.

• Used economies of scale in purchasing to achieve “Every Day Low Price” (ELDP)

• Strong, hidden, emotional value – appreciated by customer trust

ToyotaToyota• Did not focus on competitor , focused on customers

• Ability to connect with customers – based on aspiration targeted their market– Prius car – low carbon emission car for city dwellers– Lexus car – focus on luxury

• Toyota could deliver consistently reliable and impeccably engineered automobiles.

Source of MomentumSource of Momentum• Gary Kildal VS Bill Gates

• Microsoft’s source of Momentum– Buying MS – DOS– Selling it for as less as $40 for IBM– Capture the Mass Market– Programmes created compatible for MS – DOS– Created windows OS based on the success of Apple– Technology driven and also giving compelling offers– Source of momentum Value creation

Value Creation ProcessValue Creation Process

Drivers of Momentum StrategyDrivers of Momentum Strategy

• Exploring customers space– Nintendo Wii

• Crafting Power Offer– Toyota Scion– Toyota – Whyville partnership

• Mobilization of growth– Create a sense of urgency– Organization focused on satisfying, retaining & engaging customers

• Apple’s Ipod, Itunes & IphonesApple’s Ipod, Itunes & Iphones• Less is more, More for less.

The Road to MomentumThe Road to Momentum• Twin Engines of Momentum

– Momentum Design– Momentum Execution

Compelling value

Compelling

Design

CompellingInsight

Power offer

Design

Vibrant satisfacti

on

Vibrant Engagem

ent

Power offer Execution

Vibrant Retentio

n

Designing MomentumDesigning Momentum

Compelling Insights

• Compelling Organisational Insight– The IBM Story – CEO Lou Gerstner– Virgin Atlantic

• Compelling Customer Insight– 3M Post – Alcoa Packaging : Fridge Pack– Dassault: The Falcon 7X Aircraft

Designing MomentumDesigning MomentumRetail Banking scenarioRetail Banking scenario

Knowing – Doing

Discovery Path•Inconvenient opening hours•Service quality•High charges

Learning

Discovery Path•New Products•Alert System•Offset Mortgage

Listening

Discovery Path •Lack of respect•Value of time•Anxieties

White

Discovery Path•Personalisation•Banking “Stores”•Tele-Banking•Internet Banking•Mobile – Phone Banking

TH

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STHE CUSTOMERS AWARENESS OF

THEIR UNSATISFIED NEEDSKNOWN UNKNOWN

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Compelling Insights

• First stage in momentum• Reveals new and better ways of satisfying customer

needs leading to customer values• Uncovers new customers and new opportunities• Insight discovery matrix helps in systematically achieving

and finding out the strength and weaknesses



Compelling ValueCustomer value Map

Infe

rior

val

ue

Perceived

Customer Benifits

Satis

fact

ory

valu

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Econom

y offer

Mid

-Range o

ffer

Prem

ium

offer

com

pelli

ng

valu

e

High

Low HighPerceived

Customer costs

Compelling Value

• Two types of organisations based on customer value map– Delighting Customers

– Abusing Customers• Giving value to customers, by increasing their perceived benefits and

decreasing their perceived cost

• The golden pathway to Increased customer value– Decrease perceived customer cost

– Increase perceived customer value

– Select customer group



Compelling ValueCustomer Value Wedge

Functional value

Financial value

Intangible value

Emotional value

Compelling Value

• Customer value drives business, not products.

• Customers buy products only to obtain the value they offer

• Products are only transitory, temporary vehicles to carry from a firm to its customers

• Customer decisions involve constant trade off of perceived costs and perceived benefits


Compelling Value• Achieving compelling customer value requires a deep

understanding of the pain and gain as perceived by the customers

• Most powerful drivers are often the deep intangible and emotional determinants of value

• Perceived customer value must be continuously optimised by systematically decreasing customer costs, increasing customer benefits and exploring alternative customer groups


Compelling Equity• Customers are company’s main asset • They are more important to the firm than the factories,

personnel or brand• The source of origin of most of the firms cash flow is

through customers• Maximising the value of customers to the firm


Compelling EquityCustomer Equity Wedge


Functional Equity

Financial Equity

Intangible Equity

Emotional Equity


Compelling EquityCustomer Equity Map

Infe

rior

Equ

ity

Business Benifits Sat

isfa

ctory

Equity

Econom

y

Custom

er

Mid

-Range

Custom

ers

Prem

ium

Custom

ers

com

pelli

ng

Equi

ty

High

Low HighBusiness costs


• The golden pathway to customer equity optimisation– Chase Equity Destroyers– Build up Equity Enhancers– Shift Customer Targeting

Compelling Equity

• Customer’s are firms most important asset • Shift customer equity focus from the most vocal or visible

customers to those who are important to the firm• Average customers life time is first estimate of

customers equity• Acting on customer equity requires a deep

understanding of the total business cost and benefits related to serving customers


Power Offer Design

• First Direct – A bank that doesn’t like Banking• Power offer thro’

– Compelling value path• Customer value enhancers• Customer value destroyers• Customer value proposition• Compelling targets

– Compelling Equity path• Customer equity enhancers• Customer equity destroyers• Compelling targets• Compelling proposition


Power Offer Design• Pillars of power offer

– Compelling propositon• Swatch

• Wal - Mart

– Compelling target• Dell

• First Direct

– Power crafting – provide highest value to customer while extracting highest equity for the firm.


Power Offer Design• Power offers resonate targeted customers need so

vigorously that they “sell themselves” nd offer superior profitability for the firm

• Explores the customer value & equity to determine the single compelling proposition and compelling equity

• Maximum Momentum is achieved when a power offer is perfectly aligned with the three pillars.


Power Offer Execution• Walkman!!!• Execution of power offer

– Product focus to Value focus• SWATCH (fashion)

• Business Value of Momentum– Not only power with customer but also power to generate

growth– iPods & Wii V/S Competitor

• Chain reaction– Deliver high revenue– Reduce or redirect costs with performance– Deliver more value to customers and stockholders

Executing MomentumExecuting Momentum

– Vibrant Satisfaction– Vibrant Retention– Vibrant Engagement

• To sustain the chain reaction– Iron out problems in execution

• Discover the sources of friction

– Constantly learn from customers and use them as insights

Vibrant Satisfaction• Moments of truth

– Jan carlzon – Scandinavian Airlines – Fifty million battles– A.G. Lafely – P&G – Election

• Either win or loose• Family accepts it or doesn’t

• Why Vibrant Satisfaction– Customer satisfaction evolves based on initial

experience– Sustenance is required for momentum of firm– Only vibrant satisfaction evokes intense feelings and

emotions

Executing MomentumExecuting Momentum

Executing MomentumExecuting MomentumVibrant Satisfaction

How to sustain? (MDC)

• Mobilise for Vibrant Satisfaction

• Detect Source of Dissatisfaction– Tetra Pack

• Convert Unsatisfied Customers– Pizza– Virgin Atlantic– JetBlue – David Neeleman

Executing MomentumExecuting MomentumVibrant Retention

• Types of Retention– Passive retention– Forced retention– Vibrant retention

• cadbury’s

• Vibrant Retention How?– Mobilise for vibrant retention– Detect source of defection– Convert Defecting Customers

Executing MomentumExecuting MomentumVibrant Engagement

• Harry Potter• Business value of engagement

– First engaged customers - Power offer– Second engaged customer – valuable by buying more– Engaged customer – new customers

• Accelerators to engagement– Boosted compelling value

• Listen to your lead customers – BMW

– Boosted Compelling equity• First Direct – cross selling

– Boosted customer acquisition

Executing MomentumExecuting MomentumVibrant Engagement

• Vibrant Engagement how?• Mobilising for vibrant engagement

Insurance firm Inspirational leaders

Detecting the source of engagement United colours of Beneton

Converting for vibrant engagement Ferrari Second Life

Total MomentumTotal Momentum• What is Total Momentum

– Dependent on• Internal Momentum• Leadership Momentum

• Internal Momentum– Wal-Mart Squiggly– Employee mobilisation for sustenance

• Building internal Momentum– Compelling Employee insight

• IKEA

– Compelling Employee Value• ISS Cleaning – Service

– Compelling Employee Equity• First Direct - background

Total MomentumTotal Momentum

• Employee Power Offer• Provide substantial value to employees• Receiving substantial value from them

– First direct – Fringe benefits VS Facility– Vibrant Employee Satisfaction– Vibrant Employee Retention

• Johnson & Johnson – Weldons (Retain)

– Vibrant Employee Engagement• Daniel Vasella’s – Gleevec • Richard Branson- Employees potential ideas

Total MomentumTotal Momentum

• Internal Momentum in Crisis– Wal-Mart fiasco– Johnson & Johnson- Tylenol

Total MomentumTotal Momentum• Momentum Leadership

– Leaders obtain momentum from stake holders, suppliers, media, government, local communities, financial analyst

• Tips for building Momentum Leadership– Commit to building momentum through value origination– Practice momentum principles with your contacts– Have respect for people– Spend quality time with customers, employees and other

stake holders– Be momentum consistent over time and through your

action

the momentum effect

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