Why Philip Kotler Recommended Gautam Mahajan’s New Book

Posted November 18, 2017 by Customer Value Foundation
Categories: Business & Management

Philip Kotler wrote on Gautam Mahajan’s new book, How Creating Customer Value Makes You a Great Executive:

“Gautam Mahajan is clearly a top expert on Creating Customer Value. The key to winning the customer war is to know how to create superior customer value. Mahajan shows you how to do this.” Philip Kotler, Kellogg School of Management, Northwestern University  

Read how to become a great expert and a success on being a Customer Leader!

 This is what others as saying:

“All too often we read that a such and such a book is timely and important for a given domain and indeed this has become a rather clichéd expression. However, in the case of How Creating Customer Value Makes You a Great Executive such statements are completely merited and valid. The author Gautam Mahajan, Founder Editor of the Journal of Creating Value and President of Customer Value Foundation, has produced a book which offers a potent mixture of manual and thought-provoking philosophical call-to-arms on the critical issue of creating value. The book’s arguments and presentations are filled with excellent examples and diagrams which provide executives and managers with maps to understand and explore value creation. This is a vital text for the twenty first century.” Professor Peter Stokes, Leicester Castle Business School, De Montfort University (UK)

“Value, the personal and individual perception of what a product or service is worth (rationally and emotionally) to a customer, relative to alternatives available in the marketplace, is perhaps the most challenging concept for enterprises and leaders to define and execute. In this comprehensive book, Gautam Mahajan, a world expert in customer-perceived value, the understanding of real benefit is taken well beyond merely understanding the customer experience journey and the effect of pricing. Value is built on experience memory, and the tangible and functional components of vendor-provided products and services; and the book examines the enterprise culture, processes, feedback channels, messaging and positioning which impact customer decision-making. The book offers actionable tools for calculating and strategically sustaining perceived value and customer loyalty. Finally, the author provides two important foundations for organizations to follow. The first is a Customer Bill of Rights, with examples, stating the parameters of what the vendor will provide and what the customer should expect. The second, especially important (and something very few books cover), addresses drivers of employee commitment and contribution to added value for customers. All in all, the book provides needed insights and methods for every organization and manager.” – Michael Lowenstein, PhD, CMC, Thought Leadership Principal, Beyond Philosophy (www.beyondphilosophy.com), author of Employee AmbassadorshipCustomers Inside, Customers Outside, and The Customer Advocate and The Customer Saboteur. 

“Only about 10% of firms are highly effective at creating value for, and from, customers. In this book, Gautam Mahajan pulls back the curtain to reveal why value creation is a critical discipline for every CEO and then backs it up with practice advice on how to make value creation a way of life.

With disruptive innovators attacking every industry, I can think of no greater priority.” Bob Thompson, CEO, CustomerThink Corp., Author Hooked On Customers: The Five Habits of Legendary Customer-Centric Companies

“Reading How Creating Customer Value Makes You a Great Executive showed me how someone with Gautam’s experience could write a comprehensive book on an important topic and provide a perfect level of detail in relatively few pages. Included in each chapter is not only the “technical” information but also a set of exercises to help the reader apply the reading to her own situation. The authors description of the Value Waterfalls and quantifying Value Added should provide the reader with enough motivation to take her business into the world of Value Creation leaders, with the attendant shareholder benefits.”—Sam Klaidman, Middlesex Consulting and President Customer Value Creation International

Find the book at http://www.businessexpertpress.com/books/how-creating-customer-value-makes-you-a-great-executive/

  

Narender Kumar, 

Customer Value Foundation and Inter-Link India

Journal of Creating Value jcv.sagepub.com

New Delhi 110065 +91 9971288580
narender.customervalue@customervaluefoundation.com
www.customervaluefoundation.com  

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

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.

Advertisements

Attractology and Business

Posted November 4, 2017 by Customer Value Foundation
Categories: Business & Management

“The law of attraction is: You don’t attract what you want, you attract what you are”, according to American philosopher and author Dr Wayne Dyer.

Attractology isn’t just the science of looking good, but having personality traits that make you magnetic.

Apart from attracting people of the opposite sex, attractology for businesses means attracting Customers.

Businesses have to understand how the law of attraction applies to them;

You don’t attract Customers by telling them what you are or what you are providing.

You attract Customers by how you are perceived. You, of course,include you, your products and your services.

That brings us to Reality vs. Perception. Rory Sutherland suggests that we fail to realise the difference between what something is, what it means and how it is perceived.

“The same product can mean different things to different people, and there is no such thing as objective product value, at least when it comes to actually selling products (there are objective costs associated with making the product, of course).

Therefore, we have this huge opportunity to influence how people feel – how they perceive our product’s value – as well as the opportunity to optimize the customer”

This is based on the Ladder theory in our brain. I describe this based on the with a real life experience of being cut off by another car when you are driving https://ed.ted.com/lessons/rethinking-thinking-trevor-maber. I have added a buying example for a new male shaving solution showing a half dressed attractive woman on the cover. This is from Rethinking thinking – Trevor Maber.

The ladder Car example Business Example
1st rung: raw data and experience: note the experience of being cut off by the other driver Wonderful new male shaving item with a women’s picture on it
2nd rung: Filter specific details based on our preferences and tendencies, and ignore all other details: filter in how you feel, tightened grip on the wheel, the screeching of brakes, the blood pressure rises, and you notice the expression on the face of the driver Why use women’s picture, you react
3rd rung: Find meaning based on what we are and have learnt filters: I live by rules, I wait in line, first come first served, and the other driver has broken all these rules Shaver for males should not have a women on it
4th rung: Assumptions based on what we created previously and this blurs facts and fiction: the stupid jerk, breaking rules, why does he think he is They want me to buy and present it to him. Why should I
5th rung: develop conclusions based on our assumptions and create emotional reaction: vindictive, heartless, inconsiderate, we feel angry I am not going to be used; I get upset they use women in the picture. That is his job to buy
6th  rung: Adjust our beliefs on what is around us: Last time I will give in I am not going to be used. I will not buy this product
7thrung: we take action based on adjusted beliefs: Back up, roll up, yell Ignore it
  If then the man comes out followed by his pregnant wife, and he apologises that she has to go for a delivery, you calm down If later you find this was invented by a woman, you may calm down and buy

You notice how our beliefs and perceptions can change based on other facts.

So attractology is important, but the perception process made up of 7 ladders is useful in our finding something attractive. This process can change, and if we want to be smart, we should run through the 7 rungs of the ladder one by one, and our perception will be more realistic, and attractology will work better.

Marketers have to make attractology work at first glance and on reflection, and so they have to re-see their products/services.

  1. Get out of your company’s comfort zone of I have a great product…Don’t become comfortable
  2. Do something to get attention (in a date this is the ice-breaker time), increase awareness
  3. Understand their (the customer’s) reality
  4. What prevents them from seeing you the way you are?
  5. What is holding them back from seeing you as you are
  6. How can they be changed to perceive you the way you are

Or how do we change to be perceived in a way they will find us attractive?

Now you can answer these questions for the new men’s shaving solution. Attractology, perception and rethinking!

 

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 Future of UnEmployment and UnEducation

Posted November 4, 2017 by Customer Value Foundation
Categories: Business & Management

Think of the future

There was a time there were humans, and then humans and machines; and humans-data informed; and humans and machine assisted; and then maybe in the future only machines. One robot called Sophie has been given Saudi Arabia citizenship! This could be a frightening scenario but also an opportunistic one.

I come away from my travels overseas wondering why we in India are thinking of what we should have done 10 years ago, whereas the Americans are thinking of what to do 30 years from now.

If we can factor some of the long term trends into our short term thinking we will become a smarter and will truly become a super power.

By just focusing on now, we will not improve our competitive power, and may even increase poverty.

Kaizen thinking of doing many small steps to improve productivity is now being modified with ideas from the Ambidextrous Organisation by Charles A. O’Reilly III, Michael L. Tushman where they talk about companies exploiting the present and exploring the future. This is creating value from now and from the future.

India needs to do just this. Our pre-occupation with catching up in education, skilling, energy, employment, education and food has to be modified with positioning ourselves for the future.

Energy: Chances are that renewable energy and better energy efficiency will result in substantially free energy

Skilling and employment: Thirty years from now, unemployment will increase as most routine jobs will be lost to robots and AI. By 2040, computers the size of a cricket ball will be smarter than human beings. And because they’re computers, they never get tired, they’re never ill-tempered, they never make mistakes, and they have instant access to all of human knowledge. In fact, Osborne in the Future of Employment feels that 47% of US jobs will be at high risk in 20 years.Fukoku Mutual Life Insurance in Japanis laying off 30 employees replacing them with an artificial intelligence system that can calculate payouts to policyholders. Productivity will improve by 30% and the investment will be paid off in two years, after which costs will reduce further. Most automobile plants have robot systems and Tesla is almost all robotics.

But what is more worrisome, that robots are not potential buyers, and so sales will go down. This with other disruptive forces could be the end of business as usual that we know!

Large scale thinking and modification of our education system to tackle the future is necessary.I will discuss this later.

Food: Chances are that better nutrients and food supply systems will change, and food requirements may also change.

Re-design of the nutrition system may not require the human digestive tract, as auto-nutrition through special clothing, and nanobots going in and out of the skin giving nutrition and removing waste. Nanobots could supply oxygen to cells, making the blood system obsolete, and no heart or lung will be required. What will be left will be the skeletal system and parts of the nervous system! Sound far-fetched?

So this brings us into education and re-employment 30 years from now. But first, let us understand the background:

Technology

Stephen Hawking said the rise of powerful AI will be either the best, or the worst thing, ever to happen to humanity. And I add that once this happens AI growth might be exponential.Stephen Hawking a few days ago stated that AI could replace human beings. He said the result will be a ‘new form’ of life. And if the goals of AI are not aligned to ours, we will be in trouble.

Robot nannies, robot pets, robot spiritual gurus are now available.

Already, AI is playing a bigger role in visual perception, speech recognition, decision-making and language translation.

It also might be this new intelligence will find unheard of solutions. After all the Wright aircraft did not emulate a flapping wing bird, and Google’s driverless car does not use brain sensing and thinking.

Narrative science will replace journalists producing news stories, headlines, information reports without humans.

Education

Eric Cooke, University of Southampton feels universities as we know them now have no future. In 15 years, we will have no students to teach (I think the time might stretch). Students want a good, professional job and degrees are evaluated against employability. But the professional jobs for which we currently prepare students will be done by intelligent machines, and no longer available to humans.

So why would students take on the debts involved in undertaking a degree course as it is conceived today, he asks.

This is not necessarily about technology but about humanity and learning. There is a school of thought that says that if you can be replaced by a robot then you probably ought to be!

Haptic screens (based on touch and vibrations), deep learning, deep qualia (of deep learning and blockchain) machines, sense-making networks, convolutional neural networks, smart network convergence, cognitive systems and cognitive computing to the future of teaching, uncollege and experience university, brain-computer interfaces, nanodegrees, micro-careers, are all reasons why our education system must change.

Experience universities, experience degrees, more hands on learning, applied sciences, intuitive way of knowing, and answering the question, and knowing what are all in the offing.Digitisation and virtualisation of education by following music, news, brain computer interface to learn or teach; Centre for the Unknown; Human centred design, community as curriculum.

Since we do not know the job market in 30 years, what are we to teach? 60% of the best jobs in 20 years have not been invented yet! Learning and working will give way to lifelong learning or learning and re-learning. More complex workplace and portfolio of micro careers will happen

Some of the new jobs created will be:

Productivity counselors, personal digital organiser, organisational disorganizer, personal life loggers, hackschool conunselors (hack rather than go to school), medical nanotechnoligists, digital history analysts, cyber securityprofessionals, medical naontechnolgists, work transformers, social media managers, sustainabilty officers, unemployment service managers, keeping unemployed people occupied managers, retirement service managers, classroom avataar managers, deep learning specialists using computers to figure out what something is, recognise how a brain recognises and machine human interaction specialists,  big data and information speciaists, cognitive using knowledge specialists, bio-ai interface/nanobot interface specialists.

Corporate CEOs should worry, too. For a while, everything will seem great for them: falling labour costs will produce heftier profits and bigger bonuses. But then it will all come crashing down… After all, robots might be able to produce goods and services, but they can’t consume them.

And eventually computers will become pretty good CEOs as well.

The lesson for India is that while focussing on here and now, start a parallel program for new universities based on technology and artificial intelligence, focusing on jobs of the future, and re-employment. We also need an university for the unknown, to bring about experts in handling and managing the unknown (the future), and making unemployables employable!

 

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.

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.

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.