Using a Customer’s Bill of Rights to Build a Customer Culture

Posted October 22, 2017 by Customer Value Foundation
Categories: Business & Management

In my last few column articles, we discussed how to measure Customer Value and have examined the softer side of Customer Value Management. Tools of Total Customer Value Management include building a Customer Strategy and the Customer Centric Circles.

In this article, we will discuss the Customer’s Bill of Rights, and why they are important in building a Customer Culture.

Customer’s Bill of Rights

We have all seen Customer’s Bill of Rights. How often are these really honoured? More importantly, how many executives/employees know about the Bill of Rights and how to use them and uphold them?

I bet in most companies the executives and the Customers do not know the Bill of Rights. So in one Tata company, at the Customer centre, the company put the Bill of Rights on the wall behind the executive so that the Customer could see his rights. Very soon they put it on the wall behind where the Customer sits… so that the executive could also see it. And what a difference it made.

There are a number of steps in making a Customer’s Bill of Rights. Some are self-evident, like the right to get a product to work and honour the warranty. Less obvious are the rights to return a product, get it fixed, access to a knowledgeable, friendly, empathetic service person, no price gouging, no bait and sell, time bound repairs and delivery etc.

Second, how do you find out whether a particular right is upholdable? Let’s say the country you sell in insists on a maximum retail price on the package. So you put this in your Bill of Rights. How do you prevent someone from selling at a higher price during shortages?

Third, if there is a problem, how do you uphold the Bill of Rights? Let’s say the Bill of Rights says a product will be repaired in two days. The frontline person may say that to the Customer also, but does he know that this will happen? This requires all the people responsible for this to ensure this happens. This is the Circle of Promises.

This brings in everyone into focusing on the Customers, engenders team work and a Customer focus.

The Circle of Promises

The Circle of Promises is the understanding by people in the company or partners that they are part of a promise to uphold the Customer’s Bill of Rights. They have to be in the loop and understand the meaning of their promise. More importantly, they should form a Customer-Centric Circle to discuss improvements and where promises were not kept and how to solve problems. This will help change mind sets.

Bill of rights

Continuous Customer Improvement Program

A Continuous Customer Improvement Program (CCIP) is necessary to keep ahead of competition. The Customer-Centric Circles and the awareness through the Customer’s Bill of Rights and the Circle of Promises conditions the employees to seek more ways to please Customers. This becomes a Continuous Customer Improvement Program.

As the program takes root, we find that more and more ideas to improve Customer Value through Customer experience or the Customer journey surface. Ideas on Customer intimacy, Customer satisfaction, CRM, Customer delight, Customer customisation, and Customer channels can all be discussed.

Zero Complaints

As we work on the CCIP, we realise that we could actually incorporate systemic changes that could prevent a problem we have noticed from happening with other Customers. Or we could notice that Customers ask the same question…we cannot find your product in the stores. We should then correct this situation, or at least communicate with the Customer where to find the product or offer to deliver it to them.

We have to work towards reducing complaints or getting closer to Zero Complaints. Most people believe this is not possible, but we all agree we can strive towards it.

Discussion

In this article, we have taken Customer-centricity and Customer mind-set to the next level by allowing the Customer Circles to focus on the Customer’s Bill of Rights, understand its importance, and how to ensure that the promises enshrined in the Bill of Rights are upheld.

This is through the Circle of Promises and ensuring that the people involved understand this. And to build their involvement and mind-set, a special Customer Circle including the people in the Circle of Promises is a good idea.

Customer Circles then can embark on a Continuous Customer Improvement Program. This can eventually focus on all aspects of Customer Value such as the Customer Journey, the Customer Experience, CRM, customisation can be worked on.

What items require systemic and procedural changes? How can we get to Zero Complaints?

Total Customer Value Management which includes the Customer Circles and the Customer’s Bill of Rights help all departments and executives to have a Customer focus. It is the foundation of building a Customer culture. Customer strategy and Customer Centric Circles are building blocks of the Customer culture and a Customer mind-set. This gives the company a great competitive advantage.

Do it Yourself

Think of where you could set up front line Customer Centric Circles. Who should be in it? What should be the agenda? What are follow-up steps, and who has responsibility for it? Who will call the next meeting and review what was discussed and the results?

Think if how to set up Customer Circles in various departments like IT and HR. See how they become Customer centric.

What is your Customer Bill of Rights? Can you build one?

Can you embark on a Continuous Customer Improvement Program? How will you ensure ideas are cross fertilised?

How does the CCIP look at the Customer Experience, the Customer Journey, and CRM? How can you reduce the Customer Journey?

When you solve a new problem or a different problem for a Customer, do you think this is possibly important for other Customers or could cause them problems? If so, what can we do to prevent these from happening?

What can we do to move towards Zero Complaints?

 

Gautam Mahajan, 

President, Customer Value Foundation and Inter-Link India

Founder Editor, Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 98100 60368
mahajan@customervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

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How Customer Value Can Improve Your Price

Posted October 14, 2017 by Customer Value Foundation
Categories: Business & Management

If you create the value that the Customer is looking for, and if he perceives that you are creating value, what does he do? Does he choose your product first (show a preference for it) or be prepared to give you a higher price? How does it impact pricing and commoditisation?

His perception that you are creating value means he thinks you are creating a better benefits/cost ratio than competitive offers. That means he is willing to consider your product/service over competitions’. Depending on the Value you are creating, he may be willing to pay a higher price.

Let’s look at what he may be willing to pay.

We start again with the Value Map that was discussed in a previous post. The Value Map plots all competition and our company on a graph of the customer’s perception on the overall cost vs the benefits. We draw a fair value line, and then compare ourselves to competition. Those companies falling below the fair value line are adding value to customers and those above the line are depleting value.

Value Map

Let us assume we are company AA. In this example, the product is a commodity. You can see we are adding value, as we fall below the fair value line. So we can increase price to reduce the value, or reduce the benefits to decrease the value. Let’s decide to increase the price to reduce the value we are giving away.

Value Map2

How do you know how much to add to the price to the product? There are many ways. I will show you a simple way. Let us tabulate the price versus the benefit as shown in the table below (I have taken actual prices):

price vs benefits

You can calculate the fair value price for DD. Notice here we are looking at ratings in the graph. We could have plotted actual price also. (BB is missing in the graph. We did not plot it as we did not have enough data on it.)

You can see we are plotting the price for each of the competitors and their benefit as we found from the CVA study. The average of all the different prices is 27.25, and the average of the benefits is 3.90.

Thus an average product in this category will demand a price of 27.25. Our product gives a benefit of 3.98 and so deserves a price of 3.98 divided by 3.90 and multiplied by 27.25 giving us a price of 27.81, which is an improvement of 3.4% over AA’s current price.

Remember that in this you are in an almost commodity market, and a 3.4% improvement in price could improve your profits depending on your variable and fixed costs to almost 40 to 50%. Not bad! (How did I reach this conclusion?) Typically a 1% increase in price means a profit increase of 10-15%. Did you know this?

Let’s say your sales price is 100, your fixed costs are 25 and your variable cost is 67. Then your profit is 8. Now we increase price by 1% from 100 to 101. Our profit goes up from 8 to 9 or we increase the profit by1/8 or 12.5%)

In the real world, you might wish to increase your price by 1 to 1.5% initially, while working on improving benefits further.

Also look at AA members, with benefits of 4.10. You can figure out a fair price to charge them.In a non-commodity market, you might be able to get higher prices.

We can actually break down benefits into its attributes, and conduct this exercise for each benefit attribute and price that attribute based on the relative importance of the attribute and also the ratings from the Customers.

Pricing based on sub-attributes of Benefits

We can get even more granular. We know that benefits have sub attributes. Let’s assume these are the product, the service, and the image. I am noting down hypothetical importance or weights:

  • Product 20%
  • Service 45%
  • Image 35%

 

Then we can say for the average product in the example given in the previous section, the service has 45% of a bearing on the price. So the average price of 27.25 is made up the importance of the product, the service and the image.

De-commoditisation

You will note that I said the example showed above happened to be in a commodity market — it is actually for a fertiliser. Even though the competitors keep on focusing on the quality of the fertiliser, the farmer knows there is no difference in the product. If this is the case and the fertiliser is a true commodity, farmers would buy on price. However, it turns out that the farmers prefer specific companies and their fertilisers.

It turns out that such companies have a reach out program, membership programs and contact processes that align the customer to the company. Hence, even though there might be a slight price differential, they prefer to buy the company they have an association with and trust. Such a reach out program de-commoditises the fertiliser. You can see the relative importance of the image of the product.

benefits attribute1

And which attributes to work on to increase value and potential price.

benefits attribute2

Discussion

Total Customer Value Management helps all departments and executives to have a Customer focus. It is the foundation of building a Customer culture. Customer strategy and Customer Centric Circles are building blocks of the Customer culture and a Customer mind-set. This gives the company a great competitive advantage. Do you find your executives talking about how to improve Customer Value? Have you attended such meetings?

You can see from this article that price depends on the benefits you create. If you create lower benefits, you will command a lower price and vice versa. Each part of your benefits has a price associated with it based on the relative importance of that benefit. Thus price is dependent on the value you create.

Moreover, you can decommoditise products by adding value such as a brand, image, association of the product with the customer, service etc.

Do it yourself

See if you can create a Value Map for your product, and see where you stand versus competition.

Figure out the price for the benefits you create.

How much does 1% increase of price mean for your company in profit increase?

Think of value creating ideas that can de-commoditise or add more value to your customers. Try to put them into a priority based on the importance the customer gives to these items

 

Gautam Mahajan, 

President, Customer Value Foundation and Inter-Link India

Founder Editor, Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 98100 60368
mahajan@customervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

 

Value Creation: CEOs Must Tip the Balance Towards Retention

Posted October 7, 2017 by Customer Value Foundation
Categories: Business & Management

Curt Fowler wrote in the Moultrie Observer on Driving Growth through Customer Excellence. He quoted HBR in Zero Defections stating that a 5% increase in Customer retention can increase profits up to 75%. In retail, they find a 1% increase in retained customers can increase revenue by 10%. Gartner estimated that 80% of your future revenues will come from just 20% of your existing customers.

Below is a chart showing just this:

gm_profit

Very impressive, won’t you say? And if you were the CEO of or on the Board of companies wouldn’t you want to retain more Customers? Wouldn’t you make it your strategy? Wouldn’t you want to tip the balance in your favour?

So we should be hearing great success stories, great increase in profits. But we don’t hear these stories. Why?

Start by answering these questions:

  1. Are HBR, Customer Value Foundation and Forrester and all the experts wrong? Y/N
  2. Is this data overstated? Y/N
  3. The CEOs and others don’t believe these numbers Y/N
  4. Or they do, but their training of focusing on shareholder returns, cutting costs, increasing efficiency and traditional ways of doing the thing, prevents them from making a big change? Y/N
  5. Or they do not know how to make the change? Y/N
  6. They are happy with the status quo Y/N
  7. They are balancing the focus on various stakeholders in favour of the owners Y/N
  8. Or the change consultants are focusing on efficiency and systems while focusing on the Customer experience etc. and not the mind-set and culture that need to be changed. Or CEOs don’t think culture is their baby? Y/N

I truly would like to understand WHY? I’d like the reader to help. How many Yesses did you click? I bet there are fewer N (nay) answers.

So what really happens? In a given market, companies in the competitive mix are all losing and gaining customers. They report the customers they gain and not the customers they lose. The great balancing act: market share and retention remain static, and yet customers are gained. A wonderful game, as if all competitors are happy no one is tipping the balance.

Examples

As an example, in India prepaid cell phone Customers defect at an alarming rate of 30 to 50%. Yet market shares are static as those customers one company loses are made up as new customers coming in from competitor’s customer losses.

Another example of companies not focusing on retention is Tata AIG. I tried to re-new my home policy, but could not do so on line. I sent them an e-mail as suggested on their website. After 2 days there was a response that someone would get back to me. After another 2 days I got a message to pay within 3 hours on the payment portal they had sent in the mail with a link (this was at 6pm). I paid a week ago, but there is no response from the company. Doesn’t it appear that they are not interested in retention? (I always say retention is like farming, and acquiring new customers is akin to hunting. Hunting is more exciting, farming more boring. Learn to farm to retain customers. Make it interesting for yourself and your customers).

We need disruptors, and great CEOs to tackle this, to not only understand the opportunity but put into action the balance tipping strategies: build a customer strategy, change the mind-set, and out strip competition.

I would choose Amazon, AirBnB, Costco, WholeFoods, Zappos among others. Down the list would be United Air. You can see that some of the leaders are also disruptors and have built their businesses around the customer. United, on the other hand does not seem to want to do so.

Brand Keys’ 2015 Customer Loyalty Engagement Index® (CLEI) Ratings are based on a brand’s ability to meet customers’ ever-growing expectations better than the competition. That means a focus on the Customer by the company and the CEO. Leaders are:

Apple, AT&T, Hyundai, Ford, Avis, Domino’s, Dunkin’, Google, Konica Minolta, Discover and the NFL maintained their #1 category positions. Brands that were rated #1 in their categories for the first time included Air Canada, Facebook, Kellogg’s Nutri-Grain Breakfast Bars, Chipotle, Exxon Mobile, Nationwide, and Travelocity.

CEO Must Lead

What does this tell us? Companies, who are on the top and want to keep retaining customers, work with a strategy and a culture to achieve just this. The CEO is motivated to retain customers. The newer companies on the list were able to reach the number one loyalty slot by focusing on the customer, giving him what he wanted and making him feel cared for.

Other companies improving retention did so by better customer engagement, better communications, and include High Ridge in packaged goods, Hilton, insurance companies such as Aetna, MetLife and Cigna, and brands like Nike. They focus on what customers want, how they want to be communicated with, convenience, personalisation, a comfortable customer journey, and offering choice to customers.

So you can see that the winners learn to focus on the customer, and retain more customers and lose fewer customers. They tipped the balance in their favour.

Can you tip the balance today? Can you be the Value Creator for your Customer, and avoid value destruction. Can you make this a core task?

Come, let us win! Win the Customer and reap the benefits.

Click here to read full article….

 

Gautam Mahajan, 

President, Customer Value Foundation and Inter-Link India

Founder Editor, Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 98100 60368
mahajan@customervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

 

The Sense of Value

Posted August 23, 2017 by Customer Value Foundation
Categories: Business & Management

image002

Developing the sense of value is a two way street. One is your sense of what value is. The next is whether this value is being created for you, or are you creating value for others.

Do you have a sense of value? What is the sense of value? We all have it, but in different degrees. The sense of value includes the feel and intuition and insight of value. We tend to learn what value is (we are taught or told what it is and how to react to it, and this is value-in expertise). We also build a value by feeling. This all happens as we develop our intuition of value. Intuitions depend on expertise, experience and knowledge. Insights help us develop new thinking.

Gut feel is more like intuition.

We also have an instinct of value. This is ingrained in us from our childhood and  depends on our expectations and beliefs (should we be prompt, should we keep our promises). Thus, some of us might want an expensive watch, whereas others are happy with a cheap watch. Some prefer a basic car, and others prefer a better car. This instinct of value changes over time, but the basic instinct of what value is remains.

Instinct is different from intuition. Leaders often use intuition to make decisions. We also use intuition to decide what is value. Part of this comes from data, our feel and our focus.

The way we deliver value is often through people. We train our frontline people, hopefully to deliver value. Often, we put in thoughts like customers like all customers are not honest.

This thought then impacts the intuitive thinking. We want the intuitive thinking to be positive,

Are we willing to put more emphasis on the intuitive thinking than on the generic rules we set up to handle customers? The customer should do this and follow this path to deal with us is one type of thinking.

Let’s examine two types of salesmen selling a B2C item in a shop/store, and a customer walks in

Kind of Value Salesman 1 Salesman 2
Instinctive Hunt/attack Hold back/relaxed
Intuitive Customer will buy

Serve fast

Customer will buy/ let him browse, be available for questions
Insight How to Convert from a walk in to a buyer

So how do we correct this and build the right intuition and curb instincts.  How do we develop insights?

  1. Build self-esteem, awareness, anticipation, ability, agility, attitude and ambidextrousness of the front line people.
  2. Form Customer Centric Circles and use self-development and self-directed learning for the customer, thereby exchanging knowledge and building intuition and insight.

These people will have a sense and a feel for what customers want and value.

 

Gautam Mahajan,
President, Customer Value Foundation and Inter-Link India

Founder editor, Journal of Creating Value jcv.sagepub.com
K-185 Sarai Jullena, New Delhi 110025
+91 98100 60368, 011-26831226

mahajan@customervaluefoundation.com
www.customervaluefoundation.com
www.interlinkindia.net

Twitter @ValueCreationJ

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

5 Steps to Becoming an Outstanding Customer Expert

Posted August 13, 2017 by Customer Value Foundation
Categories: Business & Management

Many of you are good at being Customer focused, and are Customer Experts. How can you become an outstanding Customer expert? You just need to follow a few steps given below.

  1. Understand what Customers Value and related Customer Tools

First, understand what Customers value and why they buy from you and from your competitors. What is important in their buying decision? To do this you have to understand Customer Value, its terminology, its usage, its advantage both for quantitative metrics such as Customer Value Added and mind–set changes and implementation of Customer Value techniques such as Customer Strategy, Customer-Centric Circles, Customer Bill of Rights and the Circle of Promises, Zero complaints etc. You must use Total Customer Value Management (Total CVM) effectively. If you are following some of these, you are already on your way.

In summary, understand Customers and what they value, and have the mind-set to add greater value to them than competition.

So let us look at these items in some detail:

What do Customers Value? Value is what something is worth to a Customer. What is it that he finds in your products and services that is better than competition? Is it the product, or the price or the cost of doing business, your people, or your brand? We soon start to understand where we are better and where we are worse. Obviously we need to communicate where we are better, and work on improving where we are worse.

We also should be able to figure out what is most important to the customer in his buying decision. What are other important factors? Why?

Customer Strategy: Do you have a Customer strategy? Can you develop one at your level? How do we understand the Customer’s expectations? How do we deliver on these? Simplistically, let’s say the Customer expects the service person to come to his home on time. How do we ensure this happens, so that the Customer is not kept waiting or bets anxious? As you look at this case by case, you will develop ways of using your understanding of the Customer to give him a better experience and create better value for him. 

Customer Centric Circles: Just like you yourself are getting deeply involved with the Customer through understanding him and giving him better offerings through this knowledge, you would like your front line people to deliver more. You cannot whip them into a team (like one does with carriage horses) and expect them to perform or move faster. It is better for us to give them a chance to think about the Customer and his needs based on the experience your front line people have gained over the years. On reflection of this knowledge of Customers, they will come up with what to do for the Customer, and make him happier. They will suggest easy wins that makes a Customer feel good. Suddenly you will have a team that thinks about the Customer and is willing to go the extra mile for him.

The Customer’s Bill of Rights: Your Company may or may not have a Customer’s Bill of Rights. You can make one for reference if there isn’t one. You can pretend to be the Customer and ask what my reasonable rights are as a Customer. Then work on delivering these rights yourself and through your team. You can build a Circle of Promises with your team so that there is reasonable assurance that the Customer will get his rights.

Now you have started a Continuous Customer Improvement Program, and if you ensure mistakes are corrected systemically, you will start to reach Zero Complaints thinking.

As you reflect on all this, you will realise that your mind-set has changed and that you are becoming a great Customer expert.

  1. Know more than your Colleagues and be recognised as the Customer Expert

With your understanding, two things will happen. You will have more knowledge than your colleagues. You can start using some of the knowledge proactively. Using more of your knowledge will require you’re educating and helping your colleagues and bosses, and slowly the Total CVM program will take hold. But certainly start where you can with what is within your control. First change yourself and your thinking. Unlearn old ideas. Bring in the new ones.

Remember, to be effective, you must break silos, have team work with all departments in offering the Customer a seamless experience and enhanced value. Some of this you can impact, and some of this will happen because your bosses will believe you, have greater faith in you and give you greater responsibility.

  1. It’s all about Mind-set and Attitude

To be successful, you must have the right mind-set. You know that when you are in your company or your mind is focused on your functional job, you are trained to think like an executive, and not like a Customer. Once in a while, take of your executive hat and wear your Customer hat. See and feel the difference. Inculcate a Customer mind-set. Help your front line people with a Customer attitude and mind-set. Just don’t keep training them on skills. Help them into a self-education and a self-reflection way of learning. Let them tell you what they want to do for the Customer. Help them in this process by incorporating Customer Centric Circles.

A great feeling for the Customer and doing the right thing for him/her will emerge. Combine this thinking with Customer friendly processes.

  1. Go from being a Functional Manager to being a Value Creator

All this learning will move you from being a functional manager to being a Value Creator. Consciously create value and think of ways to do this for yourself and the Customer. You will then create more value for yourself, and create value for others, who in return will create value for you.

Recall that a Customer Expert creates Value for the eco-system: for himself, his colleagues, his employees, his partners, supply chain and delivery chain, society and for the shareholder, and thereby for the Customer.

  1. Join Associations and Learn from Others

You have to be on a continuous learning and awareness program. So much is changing. Processes are changing. AI is coming in. Cost cutting and other corporate moves will force you to think of better ways to achieve your Customer goals. One such way is to learn from others, your competition and peers.

Join associations like Customer Value Creation International, Customer Think, and Linked in sites such as the Journal of Creating Value. Interact with Customer Value Foundation and others. Join LinkedIn groups such as Journal of Creating Value.

Learn from others. Become leaders of next practices. Do not just seek best practices.

 

Gautam Mahajan, 

President, Customer Value Foundation and Inter-Link India

Founder Editor, Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 98100 60368
mahajan@customervaluefoundation.com 
www.customervaluefoundation.com  

Twitter @ValueCreationJ  Blogs: https://customervaluefoundation.wordpress.com/

Author of Value CreationTotal Customer Value ManagementCustomer Value Investment

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

Hotels Follow Airlines

Posted August 7, 2017 by Customer Value Foundation
Categories: Business & Management

My friend Ravishankar wrote to me:

Thought you’d find this interesting from the WSJ (Hoteliers Start to Mimic Airlines—Uh-Oh). Sad that the airlines model of nickel-and-diming the customer is now adopted by major hotel chains. Even worse that industry consultants who should argue for customer experience and value are saying in essence “nickel and dime the traveller to maximize revenue and forget about customer satisfaction”.https://www.wsj.com/articles/hoteliers-start-to-mimic-airlinesuh-oh-1501711763

The article goes on to say: The “big six” hospitality mega-chains—IHG, Hilton, Marriott, Choice, Wyndham and Hyatt—have gobbled up 60% of all U.S. hotel rooms. Now they are adding fees that resemble the baggage and ancillary charges assessed by the “big four” airlines.

All this to increase revenues.

Our studies showed that most high end Customers were happy to pay Rs 9600 with free internet versus Rs 9000 plus an add-on for internet. It is a matter of value (what you get and what you pay) and Customers are happy to pay for higher value they perceive when they get with free internet (it is real need today). Same goes for free breakfast.

On the other hand in budget hotels with stripped down prices, add-ons were considered ok by budget travellers. Thus, one pays Rs 3000 for a room vs. Rs 3500 even though the lower fee has no internet and the higher fee does. This is similar to baggage fees in discount airlines.

This segment of customer buys on the lower price and they perceive they get higher value with the Rs 3000 room even though with no internet.

Revenue increases will follow value. Actually revenue increase will follow differential value. That means if all hotels follow the policy of add ons, then the Customer will have no choice but to seek value on price or other benefits that differentiate one hotel from another.

I think we consumers understand that when we pay a high price, we expect more. And we expect less when we pay less, and are then ok with add-ons.

Who are waiting in the wings? Amazon, Google, Microsoft, Banks, etc. etc. Look at Microsoft. In MS Office365 they give you Outlook, but an annual fee is charged. In MS2016 there is a higher fee with a ‘lifetime’ ownership (whatever lifetime means. What happens when you change to a new computer?) But this gives you no Outlook. You pay extra for Outlook. What choice do you have? Buy one or the other? In India they have found a third way, piracy.

All the biggies have managed to get us into their net, and now they are squeezing the Customer! Vive la Company!

Do you think companies should ask for expected add-ons when you are paying high prices? Share your thoughts and experiences.

 

 

Gautam Mahajan,
President, Customer Value Foundation and Inter-Link India

Founder editor, Journal of Creating Value jcv.sagepub.com
K-185 Sarai Jullena, New Delhi 110025
+91 98100 60368, 011-26831226
mahajan@customervaluefoundation.com
www.customervaluefoundation.com
http://www.interlinkindia.net

Twitter @ValueCreationJ

Customer Value Foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transforms the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

 

Review of Gautam Mahajan’s book “Value Creation – The Definitive Guide for Business Leaders”

Posted July 15, 2017 by Customer Value Foundation
Categories: Business & Management

Gautam Mahajan, Value Creation: The Definitive Guide for Business Leaders, Sage Response. New Delhi, India: SAGE Publications India Pvt Ltd, 2016, 340 pp., ` 450 (ISSN: 978-93-515-0897-7) (Paperback)

Mahajan is a champion in advocating the customer as the fulcrum of business. Through his no nonsense approach, he reasons that creating value to customers is not only beneficial to the shareholders, but also to the entire ecosystem which includes employees, partners, vendors, customers and of course the shareholders.

This book is primarily targeted at chief executive officers (CEOs) (and chief experience officer [CXO]) and provides a detailed roadmap of how CEOs can create a value-creating organization. He has organized the book in 11 chapters and each chapter focuses on an important aspect of value creation. The book is interspersed with widely accepted research articles as well as personal experiences of the author.

Chapter 1 ‘Why Is Value Creation Important for CEOs?’

The author, aptly, begins by building a strong case for the importance of value creation for the company and why the CEO should focus on value creation, rather than on other competing goals such as shareholder wealth creation, profit maximization, etc. He argues that value creation is for all stakeholders, including customers, employees, shareholders, suppliers and society, while shareholder wealth creation is focused only on shareholders, which leads to myopic mindset. To support his point, he cites various research articles which champions value creation as the goal of the organization and highlights the drawbacks of shareholder wealth creation as the sole objective of the organization.

The concept of value creation is explained in detail, where the fulcrum of the business is the customer. All processes and systems are designed to add value to the customer, which leads to value creation for the entire ecosystem (customers, employees, shareholders, partners and society).

The author probes the reasons for the high failure rate of leaders and leadership training. In his view, the failure is mainly because of lack of customer focus. Leaders are profit focused and not customercentric; leaders lack the mindset of value creation as well. He argues that leadership training should focus on changing mindsets, which will make potential leaders more customer-centric, making them aware of value creation for all stakeholders.

Chapter 2 ‘CEOs as Value Creators for Business/Customers’

Having built a strong case for value creation, the author moves on to discuss various ideas for value creation. The first step to building a value-creating, customer-focused organization is to craft a customer strategy and integrate it into the business strategy. The author explains the key features of a customer strategy and explains the key differences between customer strategy and business strategy.

The author gives strong arguments to silence critics of customer value creation, who argue that customer value is focused on the company at the cost of the company. He argues, when a company creates value for the customer, the company also gets value. He further explains that being customer-centric is not in conflict with shareholder wealth creation. To explain his point, he uses customer value added (CVA) as a metric for value creation and demonstrates that increase in CVA is linked to increase in market share, return on investment (ROI) and share of wallet.

He cautions CEOs against being complacent and explains the reasons for companies losing market share. He argues that customers desert a company, if a competitor adds more value than the company. He advises CEOs to innovate and keep on adding more value to customers than competitors, to retain customers.

Chapter 3 ‘How CEOs Can Use Value Creation for Customers’

The author introduces the idea of customer ambassador, how a company can create customer ambassadors by creating more value for them than by competitors, how to leverage the customer ambassador’s personal and social network for acquiring more customers. To illustrate his point, he gives examples of Apple customers who are also their ambassadors.

He moves on to the reasons why senior management does no pay as much importance and heed to customers despite being aware of the benefits of being customer-focused and customer value-centred.

The common refrain of most CEOs that they do not have sufficient time for customers is debunked by the author by conducting a task audit, which reveals that 50–70 per cent of the work done by CEOs is not necessary and relevant to the customer.

Chapter 4 ‘CEOs Can See How Their Values Creates Customer Value’

The author broaches the topics of value creation through values, corporate consciousness and conscious capitalism. He urges corporates to do business with values (integrity, honesty and sustainability).

He argues that such companies are preferred by customers, suppliers, employees and all other stakeholders, which will lead to higher prices, higher market share, higher profits and higher value creation for all.

He also advises CEOs to walk the talk and implement the values of the organization and not confine it to the annual reports and corporate walls.

Chapter 5 ‘Business Transformation Ideas for CEOs to Create Value’

The author talks about how CEOs need to change their mindset and unlearn to make their organizations customer-centric. He also suggests ways for the top management to be customer focused. The author, in fact, gives a checklist of what to unlearn for middle and senior managers. He goes on to ridicule the concept of internal customers, arguing that the concept of internal customers creates silos and departments, which are often isolated, and do not care for the customer, passing the buck to the customer department.

He advises companies to break away from the concept of internal customers by building customer strategy whose leadership is from all departments, ensuring that all departments own the customer.

Chapter 6 ‘How CEOs Can and Why They Should Create Value for Employees’

In author’s view, the three pillars of a company are customers, employees and investor. In this chapter, he discusses the role of employees in creating value for themselves and for the company. In the process, he explains the concepts of employee value added (EVA) and employee journey in the context of value creation for the company. He emphasizes on security and self-esteem of employees because only such employees can be proactive and have a sense of ownership towards customers. To build self-esteem and pro-activeness, he suggests building customer-centric circles in companies on the lines of quality circles, where employees across departments discuss, ideate and initiate value creation initiatives.

Chapter 7 ‘Howand Why CXOs Such as CFO/Marketing/HR Create Value’

The author discusses various strategies of de-commoditizing and differentiation and argues for ‘Adding Customer Value’ as the best way to differentiate. He cites several examples of how adding customer value can de-commoditize businesses.

The author also challenges the traditional roles of chief information officer (CIOs) and advocates the growing importance of information technology (IT) and information technology enabled services (ITES) in businesses. He argues that IT should no longer be a support function, but be a core function with the CIO taking the lead and initiative to design systems which aligns with the customer strategy of the organization and create value for all stakeholders.

Chapter 8 ‘Value Creation and Customer Service/Loyalty Tips for CEOs’

In this chapter, customer service, complaints and loyalty issues are discussed. The author is critical of the role of call centres in resolving customer complaints and advises CXOs to take one call a day from the call centre to understand the customer and redesign the systems and processes to be more customer focused.

The author is also critical of executives who stop thinking and acting like customers. He advises them to think and feel like a customer. His focus should be the customer, not the company. In author’s view, it is the training in business schools which alienates the customer from the executive. The focus in business schools is on company’s needs and not on customer’s. He suggests B Schools to start courses on customer strategy and value creation so that future employees are customer centric and not company centric.

The author also distinguishes between necessary and sufficient condition to buy. He reasons that, while experience and satisfaction are necessary conditions to buy, it is the value which is created for the customer over competition which makes the customer buy. Hence, companies should not overtly focus on experience and satisfaction, but make all efforts to create value for the customer.

Chapter 9 ‘How CEOs Can Use Value Creation to Enhance Pricing’

The author focuses on how value creation can be used not only as a tool to improve customer service but also be leveraged for enhancing price, thereby increasing profits and shareholder wealth creation.

The author moves ahead of the standard pricing theories and recommends a story approach to pricing, wherein a story is weaved around product on what the product does to the customer and how the product enriches the lives of the customers. It is this story approach which results in enhanced pricing power to the company.

Chapter 10 ‘CEOs Learn from Value Creation and Education’

The author discusses the linkage between value creation and education. He advocates teaching of value creation in engineering colleges, business schools and companies. The first step towards value creation is awareness about activities which create or destroy value. He goes on to narrate how Michener Centre, University of Texas, Austin is imparting education in value creation.

Chapter 11 ‘How CEOs Drive Their Companies to Become Leaders through Value Creation and Increase Profits through Customer Value’

In the concluding chapter, the author summarizes all the important ideas of the book beginning from meaning of value creation, importance of value creation, changing the mindset of CXOs from short-term profits to long-term value creation, transforming HR and IT from support function to line function, creating value for all stakeholders through values such as integrity and sustainability, focusing on important customer-related activities, creating and nurturing customer ambassadors, etc.

He also provides a road map for implementation of his ideas to transform the company from ‘Companystan’ to ‘Customerstan’, by starting a customer department, headed by the chief customer officer. The customer department would cut across all functions and focus only on delivering seamless customer experience.

This book, though primarily targeted at CEOs and CXOs, is a must read for all executives across functions, across hierarchy. It will change the mindset of executives and will challenge the accepted paradigm of shareholder wealth maximization as the goal of the firm. Executives will embark on a new journey of unlearning and will get ready for leading value-creating organizations.

 

Surendra Poddar

Assistant Professor

International Management Institute, Kolkata

2/4C, Judges Court Road, Alipore, Kolkata 700027

E-mail: s.poddar@imi-k.edu.in