Value creation is perhaps the single most important aspect of any executive’s job. As such, crystal clarity on what it is and how it’s done should certainly be top of mind. Shareholder value is fueled by customer value; shareholders leave when customers leave, not the other way around. Customer value is an ambiguous term, as it can be used either from the company’s or the customer’s perspective. Few companies know the lifetime value of their customers, or collective customer equity, and more importantly, fewer still know how much customers value their brand, and why.
Why care about how much customers value your brand? Because the customer view of the company’s value is a predictor of market share and shareholder value. Vodafone’s Graham Maher, Managing Director, says “The Customer Value Management (CVM) score is a leading indicator of Vodafone’s market share. We were able to predict market share a quarter out using CVM data, to within 1% accuracy! In fact, the Finance Director said the CVM score is more robust than any of our financial scores.” Customer Value Management (CVM) is a best practice for predicting customer behavior and business results, proven by 3M, AT&T, BP, BT, Chase, Disney, GE, HP, J&J, Kraft, Lucent, Nokia, Philips, Roche, Sonoco, S&P, Tata, TI, Vodafone, Whirlpool, Wisconsin Energies, and many other companies. “If you can create value, you can increase your prices. In point of fact, no one talks much about value anymore”, explains Gautam Mahajan, president of Customer Value Foundation. “They worry about competitors dropping price and whether they should match it, or advertising special discounts. You don’t have to lose money to create customer value; you simply need to know how much customers value the array of customer experience components, and act accordingly. The moment you start to think about pricing driving your product, then you’ve got a commodity product, and it’s a toss of the dice for customers to choose your brand. The only way to stay out of commodity hell is to properly manage customer value.”
Clarity on Customer Value
Untapped value for all parties is common due to the absence of clarity on customer perceptions of value, which is a composite of his or her functional and emotional judgments of your product, service, brand, culture, processes, policies, and business model — all relative to what the customer is striving to do. A keen understanding of customers’ subconscious value equations and perceptions is essential to zeroing-in on management efforts yielding highest return on investment (ROI). Yet most customer research focuses on brand recommendation and sentiment or new product development. Customer value is typically implied, or awkwardly derived from questions about price expectations, or simply assumed. However, Customer Value Management supplies tried-and-true methodologies for discovering how customers think about specific value relative to your competitors and to their expectations.
Customer Value Chain
Another reason for untapped value is weak management of the interdependencies among entities in the value creation and delivery chain. Traditional thinking charges R&D with value creation, but in reality, the customer experience is impacted even by your support functions’ internal and external policies. In fact, everyone in the company, including suppliers and alliance and channel partners, plays a role in the snowball effect of decisions and hand-offs that eventually shape the entire customer experience. The CEO is the chief value creator, balancing the common interests of all stakeholders.
Customer Value Techniques
Gautam Mahajan and Lynn Hunsaker, president of ClearAction customer experience optimization consulting, are showing companies pragmatic principles and techniques during a week-long Customer Value Management seminar series in San Francisco and San Jose, California. The series includes these topics:
- Total Customer Value Management, September 19
- Customer Value Creation, September 20
- Customer Value Measurement, September 22
- Pricing & Customer Value, September 23
- Customer Value CXO Breakfast, September 23
For example, in the CXO breakfast seminar, the following questions will be discussed: Should Customer-Value-Added (CVA) be included in your financial statements? What are the customer-focus and value creation roles of your CFO, Head of HR, and other top execs? How can you recognize gaps in customer-centricity that invite competitive footholds? Mahajan and Hunsaker have implemented Customer Value Management as practitioners, and they have authored five books among them. Their collective experience will be on tap in this unique seminar series that does more than alter perspective by simplifying advanced topics; each seminar engages executives in methods for applying ready-to-use tools for improving customers’ perceived value and increasing profit. For more information about the Customer Value Management seminar series, see www.ClearAction.biz/value.
By seeing value the way customers see it leaders gain the context for collaborative value generation that offers sustainable differentiation and is rewarded by the market place.