"Ray, in your years of working with customer value management, what are the questions you're asked most?"

 

Frequently asked questions

Q: What will understanding customer value management do for me?

A: Customer value is both a way of thinking and a set of techniques and methods that anyone in business can use to determine where to focus time, energy and money to create value for customers better than any competitor can. Research and experience have shown that if you do this better than the competition, you'll win business and reap the rewards in the form of profit and shareholder value.



Q: Do the techniques apply only to large companies or can small businesses use them as well?

A: Customer value management requires a good understanding of your customers' needs, how well you're delivering on those needs and your competitors' strengths and weaknesses. The best way to get that information is from properly designed market research surveys. This research is a very worthwhile investment for companies of all sizes, from large companies with a broad customer base in several market segments to smaller companies with a single, targeted market segment.


But if you're a small company and this kind of market research isn't feasible, you can still use the concepts and ideas of customer value, because at heart it's a way of understanding and thinking about customers, competitors, products, services and costs. I've worked, for example, with a hardware store that employed 15 people. They brought their best minds together and used customer value management principles to turn the business around very quickly.


Q: How difficult is it to implement customer value management?

A: One of the problems I encounter is that people think customer value management is hard to implement. The truth of the matter is that they try to make the simple stuff hard, and treat the hard stuff as if it were simple. Let me explain.


Capturing, analyzing and interpreting customer data is actually simpler than most people imagine if you follow the ten step process I've developed and learn in advance how to see and avoid pitfalls. I don't know of any company that has tried it and has not been able to implement it from a technical standpoint - because there's so much room for customizing the approach and tools to the business context of the company. It takes some discipline and commitment, but the techniques are not that hard.


What I find people underestimate is how hard it can be to get people to really understand, accept and use the data - especially in a large organization where you need to get many players on board and aligned around a common purpose.


The fact is that many people seem to have a natural resistance to change, and the data coming in may challenge their current beliefs about what customers actually value. It's important to address this "soft side" of culture change as well as the more technical aspects.



Q: How long does it take to implement?


A: It depends on how large and complex your business is and where you're starting. The small hardware store I mentioned earlier got a much better handle on their customers and their competitive situation very quickly and saw a major turnaround in their business within a year.


For a large business with, say, $2 billion in revenue, five to six major market segments, three to four regions and 10,000 employees, it will take longer. As a rule I generally say that in a large business it will take up to 1.5 years to start seeing substantive results, although if you look for quick wins and "low-hanging fruit" you can make gains faster. Typically within six months a company of this size would have data that would start giving them a better sense of how the market perceives their value. Within another three they could have key players in the company trained on how to understand and use the data to pick priorities and make improvements. In another three to six, they'd typically be starting to see changes in market perception resulting from the action they took.


Of course, the effort is not over then. Customer value management is of most value when it gets engrained into the fiber of how the company does business and sustained over time.



Q: How does customer value management relate to customer loyalty, customer satisfaction, customer relationship management, and similar terms?


A: I believe that in the most successful companies all of these concepts are integrated and together enable the company to deliver value to customers, shareholders and employees. Companies must look at the "big picture" of how all of these things fit together.


One thing I've noticed, though, is that as you're navigating your way through all of these labels and acronyms like CRM or CVM, you can't assume that everyone is using them in the same way. I was reading something on the web the other day by an author who was using the term "customer value management" to mean understanding the lifetime value of your customers and how to capture that lifetime value. He was looking through the lens of the value delivered by the customer to the business.


I look at it the other way around. The way I define customer value management is clearly understanding what creates value for customers in the market (your customers and potential customers) and learning what you have to do with your products, services, relationship, and cost factors to create value for them. I believe that if you start from the assumption that businesses exist to create value for customers, you stand a better chance of learning how to choose, deliver and communicate that value to those customers so that you're perceived to have the best value compared to any competitor. If you do that, you will be rewarded by greater revenues, market share and shareholder value.



Q: Is this just another fad?


A: In 1906, when he was president of Princeton University, former U.S. President Woodrow Wilson made the following comment in a speech to a group of business people: "We are not here merely to earn a living and to create value for our shareholders. We are here to enrich the world and to make it a finer place to live. We will impoverish ourselves if we fail to do so."


I believe what he was saying almost 100 years ago was that businesses exist to create something of value for customers, and I've based my approach to customer value management on that basic business truth. I've been involved in customer value management from the mid-80's, and over the past 20 years I've had the privilege to see it evolve and prove its worth in my work with companies in Asia and the South Pacific, Europe, North America and South America. Over the years new tools and techniques have been developed, more reliable market research methods invented, and new methods of statistical analysis made possible by more sophisticated computers. But the basic concept has been around for a long time and I believe it will last. So, I guess, will the many companies that have been after me for some time to capture our mutual learnings in book form.



Q: Can I implement customer value management myself, or do I need outside help?


A: You can learn a lot about customer value management by reading and learning from other companies that have successfully implemented it. In Mastering Customer Value Management: The Art and Science of Creating Competitive Advantage I've tried to share learnings from my experiences and those of my colleagues that will help companies avoid common errors and fast track the process. Because so much of this is customized, though, to your specific needs and business context, I suggest getting an outside expert to guide you through at least the initial stages of tailoring the template to your needs.



Q: How many people does it take to implement customer value management?


A: It doesn't take a lot of dedicated staff to implement the program, although of course many people will be involved in driving the improvements that will help create customer value once you've picked your priorities. Before the breakup of AT&T, when it was an $80 billion corporation, at the corporate level we had one Director of Customer Value, a statistician/econometrician, a market researcher, and an administrator. We then had one key contact person in each of the business units.


You do need to make sure that you have basic market research and statistics expertise available to the team, either through internal resources or external contracts. Most importantly, you need someone who knows how to be an agent of change, and you need active sponsorship from a business leader champion.



Q: Should customer value management have visibility with top level management?


A: Absolutely. One senior officer once said to me, "Ray, I need you to make me lose sleep over customer data. I know what it's like to lose sleep over financial data - what I should be worrying about or capitalizing on is relationship to customers."


That's what customer value management is all about!

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