Success Stories With Customer Value Management
Examples of successful customer value management abound. The techniques of CVM can be applied in any industry where there is competition. The cases outlined below illustrate the variety of environments where Customer Value Management has been applied. *
- Box Plant Turnaround: Growth and profitability rebound in the middle of an industry depression
- Electronic Controls Find a New Market: The voice of the customers' customers provides the key
- Tech Services Find Room For Improvement: Customer value analysis flags some pervasive problems
A prolonged cyclical downturn was squeezing manufacturers of corrugated boxes in the Midwest. One key competitor of our client, a leading paper company, had just folded. Using the value map and other tools, it became clear that, based on Plant A’s customer-perceived positioning, there was a good chance that Plant A would be next.
The same data that showed Plant A’s relatively poor customer-perceived value also showed the way for Plant A to recover. For Plant A to improve customers’ value for money, it needed to correct its poor ratings on delivery, and on a few other attributes. In plant A’s case the solution was to focus on customers who were willing to schedule deliveries on a predictable basis, and not try to serve those customers who needed high flexibility. By changing its value proposition to focus on its strengths and on customers that valued those strengths, Plant A greatly strengthened its customer-perceived value. Customers loved the value they were getting, profitability skyrocketed, and sales, bucking continued downward industry trends, grew rapidly.
The CEO of a major industrial equipment company was dissatisfied with the company’s slow growth, and launched a major growth initiative. Everyone in the company was on the hot seat to identify where incremental growth could come from. The Controls Division had an idea involving components for a commodity piece of equipment. To the old hands at the company, the idea had all of the hallmarks of a disaster. The company prided itself on its technology; the new market was low tech. The company had a strong brand name; the opportunity was to manufacture a component inside of a commodity product where the company’s brand name would not be visible. But it was a new market, and that could mean growth.
While the old hands at first dismissed the idea, they started to warm to it as they explored the possibilities. They went to their customers’ customers and profiled their needs. Then they went to their engineers and prodded them to find ways to apply their advanced technology to the end user’s problems. At the end, they came up with a component family that could vastly improve their immediate customer’s products. They used value mapping and other customer-value displays to show how, despite higher prices, products featuring their new components actually gave customers better value. Their customers bought their concept, giving the company credit for actually measuring the end customers’ perceptions better than they did. They made the sale, and launched the product successfully.
Large companies are plagued with inertia; successful companies are plagued with complacency. So, large successful companies often find it difficult to react quickly to inroads by hungrier, smaller, and nimbler competitors. “Big Tech”, by all measures the model of a successful company, found that smaller competitors were taking bites of market share out of some markets that that they had considered “locked up.” However, their customer metrics showed that their perceived quality was unrivaled, so the causes of the erosion were not apparent.
Using Customer-Value concepts, Big Tech added perceived price metrics to its analyses. The metrics showed that, although Big Tech had great products, the value that customers were getting was not necessarily good. The products were not quite good enough to justify the price premiums. Looking at the performance data, however, suggested a number of areas where Big Tech was not leveraging its scale and technology advantages as fully as it could. The way to better value was better service, not lower prices. Several Director-level participants in a customer value workshop stepped forward as champions for major initiatives to secure a leadership role for Big Tech in two areas where its scores were lagging its potential.
* For additional case examples, see Managing Customer Value by Bradley T. Gale. (Perdue Farms, Chapter 2; Milliken & Co., Chapter 3; AT&T, Chapter 4; Parke-Davis, Chapter 5, AT&T Universal Card and United Van Lines, Chapter 5; Gillette, Chapter 7; Johnson & Johnson, Chapter 8; and Lexus, Chapter 9.)