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Using What Customers Value to Guide Your Business

  • ID: 42691
  • Report
  • October 2000
  • 110 pages
  • American Productivity & Quality Center, APQC
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The five best-practice organizations in this benchmarking study represent very different industries in terms of their customers and the products and services they offer. Yet each partner managed to avoid the ill-fated “strategic principals” mentioned above and instead focused on providing superior customer value. They have all found ways to effectively use the simple, yet powerful tools and concepts of customer value analysis (CVA) and have made customer value a key factor for decision making throughout their organizations. “Superior customer value is the best leading indicator of market share and competitiveness. And market share and competitiveness, in turn, drive the achievement of long-term financial goals such as profitability, growth, and shareholder value,” said Gale.

In studying these successful companies through site visits and a detailed
questionnaire, findings have been identified that will help other companies achieve similar positive results when using what customers value to guide their business. The findings are listed in this summary and will be described in detail in the findings section.

STUDY SCOPE

Drawing upon input from the subject matter expert team of Joe Murdock,
Dr. Bradley Gale, and Dr. Reginald Goeke as well as secondary research literature, the study team identified six scope areas for research. These areas guided the design of the data collection instruments and were critical in guiding the progress of the study. The six scope areas are:

1. Background and conducting customer value analysis
2. Using what customers value to direct organizational change
3. Using what customers value to drive strategy development or deployment
4. Using what customers value to drive financial processes
5. Using what customers value to guide management decisions
6. Linking what customers value to business results

This best-practice report was preceded by and builds on a 1999 consortium
benchmarking study devoted to uncovering processes, tools, and techniques used in measuring customer analysis. This study was called Customer Value Measurement: Gaining Strategic Advantage, and Gale served as the subject matter expert.

STUDY FINDINGS

1. A key to successful, rapid implementation of a companywide CVA system is strong support from the CEO. With support from the CEO and other high-level
managers, customer value management can rapidly become part of the corporate
culture rather than just an isolated event.

2. CVM provides best-practice organizations with an overarching strategic framework that combines customer satisfaction and transactional studies to become supporting studies for a customer value framework.

3. Best-practice organizations, with central CVM support staffs, made a significant commitment of money and resources over time in order to achieve success with CVM.

4. Within best-practice organizations, CVA is more than just a methodology for
formatting customer and market research. CVA is seen as a key model and is used
widely as a tool in decision making, strategic thinking, and planning.

5. Best-practice organizations encourage widespread employee involvement in CVA
and disseminate CVA results and information throughout the organization.

6. All best-practice organizations strongly emphasize the development of a common CVA language and methodology.

7. Best-practice organizations use CVM to identify and establish business priorities. CVM is used as a priority-setting tool in critical business planning to determine what processes to improve or not improve and what markets to serve or not serve. Best-practice organizations also have strong and explicit links between their customer value programs and their quality improvement programs.

8. Best-practice organizations have developed techniques to understand what their large key account customers value. Using client participation in one-on-one surveys, they develop customized action plans to deliver accelerating revenue growth from key accounts.

9. Best-practice organizations take different approaches with mixed degrees of
sophistication to measure the business results (e.g., ROI) they achieve with CVA.

10. CVM plays a major role in measuring performance and determining business
results.

11. CVM is used by some best-practice organizations to shift away from productfocused thinking to solutions-focused thinking.

BENCHMARKING METHODOLOGY

This consortium benchmarking methodology was developed in 1993 and serves as one of the premier methods in the world for successful benchmarking. It is an extremely powerful tool for identifying best and innovative practices and for facilitating the actual transfer of those practices. The methodology is described below.

Phase 1: Plan

During the planning phase of the study in the winter of 1999, the subject matter experts and the study team (using secondary research) identified a number of organizations that had successfully used customer value initiatives. Each of the identified companies was invited to participate in a screening process. Based on the results of the screening process, as well as company capacity or willingness to participate in the study, the final list of five partners was developed. A kickoff meeting was held in February 2000, during which the sponsors solidified the study scope and gave input on the data collection tools. Finalizing the data collection tools and piloting them within the sponsor group concluded the planning phase.

Phase 2: Collect

Two tools were used to collect information for this study.

1. Detailed questionnaire—quantitative questions designed to collect objective
data across all participating organizations

2. Site visit guide—qualitative questions that parallel the areas of inquiry in the detailed questionnaire; serves to structure the discussion at all site visits All partners and sponsors completed the detailed questionnaire, and four of the five partner organizations hosted half-day site visits attended by sponsors, partners, and members of the study team. Additionally, an extended telephone interview using the site visit guide was conducted with WesTrac Equipment. The APQC study team prepared written reports of each site visit and submitted them to the partner organizations for approval and/or clarification. The reports were then distributed to all sponsor organizations at the conclusion of the study.

Phase 3: Analyze

The subject matter experts and APQC analyzed both the quantitative and
qualitative information gained from the data collection tools. They examined the challenges organizations face in using customer value information. An analysis of the data, as well as case examples taken from the site visits, is contained in this report.

Phase 4: Adapt

Key lessons identified in the consortium study are adapted for improvements at
sponsor organizations. APQC staff members are available to help sponsors create
action plans appropriate for the organization based on the findings of this study.
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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 the following sections.

- Findings

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

- Partner Organization Case Studies

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