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Customer Value Measurement: Gaining Strategic Advantage

  • ID: 42571
  • Report
  • September 1999
  • 132 pages
  • American Productivity & Quality Center, APQC
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Thirty organizations participated in this benchmarking study by attending planning sessions, completing data-gathering surveys, and/or attending or hosting on-site interviews and telephone interviews. Of those 30 organizations, 22 sponsored, or funded, the study (“sponsor organizations”). Nine organizations, including one of the sponsors, were identified as having strong customer value measurement programs in place and were invited to participate in the study as benchmarking partners (“partner organizations”). The total number of respondents to the quantitative portion of the study is 17 sponsors and nine partners. Five sponsor companies did not participate in the quantitative portion because company representatives believed their customer value systems were still in the embryonic stages, making it difficult for them to complete a quantitative survey.

STUDY FOCUS

Drawing input from subject matter expert (SME) Dr. Bradley Gale and secondary research literature, the APQC study team identified four key areas for research. These areas guided the design of the data collection instruments and were the basis for the development of findings. The four areas and the questions at the heart of them are as follows.

Developing and Implementing a Customer Value Measurement System

- How do you determine which customers and non-customers to include in your customer value analysis (CVA)?
- What are the best methods to identify the key buying factors for customers when they choose between your business and your toughest competitors?
- What are the most effective methods to measure the relative importance customers place on each component of customer value?
- What analytical tools and methodologies are most effective in gathering and
analyzing customer value data? Operationalizing Customer Value Analysis
- How is CVA used to conduct segmentation analysis?
- How have “war room walls” been used most effectively to drive CVA?
- How do divisions act on their CVA results? How is customer value information
integrated into operational business plans?
- How are CVA results translated into operational measures to drive improvements with line personnel?
Integrating Customer Value Analysis into a Strategic Navigation System
- What process is used to integrate customer value results into classic management systems (strategic planning, budgeting and control, capital investment, competitive analysis, performance measurement)?
- How can CVA be used to conduct modeling and sensitivity analysis linked to
market performance? Measuring the Impact of Customer Value
- By what process can you establish the impact of CVA?
- What methods are used to link customer value to business results (profitability, shareholder value, and market share)?

KEY FINDINGS

The partner and sponsor organizations participating in this study exhibited many significant differences in the maturity and sophistication of their customer value measurement systems. The results of the data analysis clearly proved that the partner companies have more fully developed their CVM practices and approaches. Fifteen “key findings” emerged from this study, highlighting vital aspects of a successful CVM system. These findings have been grouped into four sections, consistent with the four areas of the study focus. Section 1: Developing and Implementing a Customer Value Measurement System

1. Leading companies are taking a new approach to customer strategies and metrics by measuring and managing relative perceived customer value.

2. Although customer satisfaction is still measured and used in decision making, the majority of partner organizations have shifted their focus from customer satisfaction to customer value.

3. To create a customer-focused culture, best-practice organizations are placing their customer value groups in strategic locations within the organization. Customer value is migrating from the quality function to the marketing department.

4. To achieve organizationwide buy-in for CVM, most best-practice organizations have found it essential to link customer value and compensation at a senior management level and provide the proper amount of education to all levels of the organization.

5. Best-practice organizations partner with third parties for key activities such as survey design and data collection.

6. In addition to the usual quality and customer service attributes of a customer satisfaction study, best-practice organizations find that brand, relationship, and total cost attributes are critical pieces of a customer value analysis system.

7. Understanding and defining the competition is a key driver in determining from whom to collect customer value data.

Section 2: Operationalizing Customer Value Analysis
8. The majority of best-practice organizations analyze and report customer value on a quarterly basis, although data collection is almost continuous.

9. Customer value profiling sessions, workshops, and conferences bring the research findings to life and lead to action steps.

Section 3: Integrating Customer Value Analysis into a Strategic Navigation System

10. Companies are beginning to segment their customers based on their lifetime value.

11. Best-practice organizations are finding ways to integrate insights from various customer listening posts successfully.

12. Customer value, a primary building block for strategic planning, is tied to
performance measurements and operational plans.

13. Customer value is a powerful technique to improve new product development
and commercialization.

Section 4: Measuring the Impact of Customer Value

14. Partner organizations find that CVM drives improvements in internal product
and service delivery measures and that improvements in these processes change
customer value measures.

15. Best-practice organizations have linked their customer value metrics to employee satisfaction, market share, revenue growth, and profits. The following report sections will cover each of these key findings in detail.

This consortium benchmarking methodology was developed in 1993 and serves as one of the premier methods for successful benchmarking in the world. It is a powerful tool for identifying innovative practices and for facilitating the actual transfer of these practices.

The data collection tools used to gather information include the following:
- Screening Questionnaire: quantitative and qualitative questions, designed to
identify best practices through objective assessments and telephone interviews;
- Detailed Questionnaire: quantitative questions, designed to collect objective, quantitative data; and
- Site Visit Guide: qualitative questions, designed to collect qualitative information about targeted aspects of customer value measurement systems.
Recommendations from the subject matter expert, as well as primary and secondary research conducted by APQC, were used to help select innovative companies for the study’s research.

All best-practice partner organizations responded to the Screening Questionnaire, and partners and sponsors responded to the Detailed Questionnaire. Five of the nine partner organizations hosted half-day site
visits, allowing sponsors to meet with key personnel and share their customer satisfaction strategies and practices. A group of consortium members attended each site visit to participate in the discussions and to experience the various programs firsthand. The five companies that were visited were asked to respond to the Site Visit Discussion Guide during the on-site interviews. Three of the remaining four partner organizations participated in follow-up telephone interviews using selected questions from the Site Visit Guide.

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- Sponsor and Partner Organizations

A listing of the sponsor organizations in this study, as well as the best-practice (“partner”) organizations that were benchmarked for their innovation and advancement in customer value measurement.

- Executive Summary

A bird’s-eye view of the study, presenting the key findings discovered and the methodology used throughout the course of the study. The findings are explored in detail in following sections.

- Key Findings

An in-depth look at the 15 key findings of this study. The findings are supported by quantitative data and qualitative examples of practices employed by the partner organizations.

- Partner Organization Profiles

Background information on the partner organizations, as well as their innovative customer value measurement practices.

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