MANAGING CUSTOMER VALUE

09 11 1 Ramesh Venkateswaran
  What is Value ?

 Quality Service and Profitability

 Creating a Value Map

 Cases / Applications of the Value Model

09 11 2 Ramesh Venkateswaran
 SUCCESS CUSTOMER VALUE

WHAT IS VALUE ?

QUALITY - AS DEFINED BY THE CUSTOMER

- OFFERED AT THE RIGHT PRICE

09 11 3 Ramesh Venkateswaran
 HOW DO CUSTOMERS SELECT AMONGST COMPETING SUPPLIERS ?

CUSTOMERS BUY ON VALUE

VALUE QUALITY RELATIVE TO PRICE

PRODUCT
QUALITY - NON PRICE ATTRIBUTES

SERVICE

09 11 4 Ramesh Venkateswaran
 IMPORTANCE OF CUSTOMER SERVICE

35
30
25
Percentage
of 20
businesses
15
10
5
0
20 40 60 80 100

Importance of service v/s product

attributes in purchase decisions
Managing Customer Value : Bradley T Gale
09 11 5 Ramesh Venkateswaran
 PROFITS ARE HIGH WHERE CUSTOMER SERVICE IS IMPORTANT

30

25

20
Profitability
15 ROS
(%)
ROI
10

0
Low Medium High

Importance of customer service in purchase

decision
Managing Customer Value : Bradley T Gale
09 11 6 Ramesh Venkateswaran
 SUPERIOR CUSTOMER SERVICE PAYS

30

25

20
ROI % 15
ROI
10

0
Worse Same Better

Relative customer service quality

Managing Customer Value : Bradley T Gale

09 11 7 Ramesh Venkateswaran
 IMPROVING QUALITY BOOSTS MARKET SHARE

% change in 2
market share
1 % change in
per year share
0

-1

-2
Down Steady Up

Change in MPQ score

Managing Customer Value : Bradley T Gale

09 11 8 Ramesh Venkateswaran
 STEPS TO ANALYSE CUSTOMER VALUE

CREATE CUSTOMER VALUE PROFILE

Market Perceived Quality Profile Market Perceived Price Profile

09 11 9 Ramesh Venkateswaran
 MARKET PERCEIVED QUALITY PROFILE

 What is quality really to the market ?

 How are competitors performing on each quality attribute ?

 What is overall quality performance ?

09 11 10 Ramesh Venkateswaran
 PREPARING A MARKET PERCEIVED QUALITY PROFILE

 Factors important in the purchase decision

 Weightage given to each factor

 Rate each business on each factor

 Get relative ratings - ratios

 Weightage of performance ratings

 Overall performance rating

09 11 11 Ramesh Venkateswaran
 EXAMPLE - MARKET PERCEIVED QUALITY PROFILE

Quality Weight Company 1 Company 2 Ratio Score

Attribute
1 2 3 4 5 = 3/4 6 = 2x5

Equipment 30 9 9 1.0 0.3

Sales 10 8 6 1.3 0.13

Installation 20 6 4 1.5 0.3

Service 30 8 9 0.9 0.27

Billing 10 7 6 1.2 0.12

100 1.12

Customer Satisfaction 7.8 7.4 Market Perceived Quality

Ratio

09 11 12 Ramesh Venkateswaran
 EXAMPLE - MARKET PERCEIVED PRICE PROFILE

Price Weight Company 1 Company 2 Ratio

Attributes
1 2 3 4 5 = 4/3x2

Purchase Price 30 7 7 0.30

Operating Cost 30 6 6 0.30

Cost of Spares 20 6 8 0.26

Salvage Value 20 7 7 0.20

100

Market Perceived Price Ratio 1.06

09 11 13 Ramesh Venkateswaran
 FAIR VALUE LINE

 Fair value line - where quality is balanced against price

 Line of points where competitor neither gains nor loses

market share

 Approximate - weight on quality versus weight on price

 Draw line with slope = weight on quality / weight on price

09 11 14 Ramesh Venkateswaran
 DRAWING THE VALUE MAP

Higher
Fair -value line

Q > P P=Q
*
Relative Price 1.
0

P> Q

Lower

Inferior 1.0 Superior

Market perceived quality ratio

09 11 15 Ramesh Venkateswaran