Customer Expectation Management
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Transcript of Customer Expectation Management
www.tschurter.com
© 2009 All Rights Reserved
CUSTOMER EXPECTATIOM MANAGEMENT
Simply working harder at existing approaches - even
excellent ones - may not be enough to retain demanding
customers. As price differentials narrow and product
features are quickly copied, business survival requires an
unrelenting focus upon identifying and delivering
additional and differentiating value for customers. Terry
Schurter provides a manifesto for all those who are
seeking to inspire a greater focus upon the experience of
customers.
-- Colin Coulson, Thomas, Professor of Direction and
Leadership, University of Lincoln. Author, Winning
Companies, Winning People
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OUR GOAL – THE TRIPLE CROWN
REDUCEDCOST
INCREASEDREVENUE
ENHANCEDSERVICE
Triple Crown
One Action that results in:
1) Reduced Cost
2) Increased Revenue
3) Enhanced Customer Service
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We’ve been taught that MARGIN is the game. Most of us THINK about business the way it is presented in Michael Porter’s Value Chain.
• This is a COST based approach to Business Success based on Margin
• the strategic assumption being that MARGIN is the #1 controllable variable in the organization that produces PROFIT
• hence, Business Success is a MARGIN-based measure…
WHAT WE THOUGHT WE KNEW…
Porter’s
Value
Chain
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…IS WRONG!
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Business Success is affected by margin, but it is driven by the Customer!
IN FACT, the CUSTOMER holds the KEY to Business Success!
BECAUSE IT IS MISSING THE CUSTOMER!
Can we doubt this?
Isn’t it obvious that CUSTOMERS are the KEY
to our SUCCESS?
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Margin has become a ZERO SUM
game, due to Price and
Cost Contraction…
…with each cost/price iteration, returning
ever smaller business
value
VALUE CHAIN REALITIES
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CUSTOMERS determine the POTENTIAL of the Business by…
…determining the size of the pipeline - how many NEW customers seek to engage with the business
…and by the CUSTOMER LIFECYCLE – i.e. how LONG the customer stays in the customer-business relationship.
VALUE CHAIN REALITIES
Business Growth =
New Customers x Customer Lifecycle…
…where real revenue
occurs AFTER Profit per Customer
EXCEEDS Acquisition
Cost (Loss to Profit
Transition)
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With the insight that the Success Domain of the business occurs when we:- manage Customer Expectations (Customer Value) and
- meet those Expectations Without Exception (Customer Experience)
THE 21st CENTURY VALUE CHAIN
The 21st Century Value chain is:
Expectations (Customer Value)…
…delivered without Exception (Customer Experience)…
…maximized through Margin Optimization. Which is then MAXIMIZED (Profit) through Margin Optimization
(Porter)
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US CELLULAR SERVICE
Market Expectations:1) Service will be ok most of the time.
2) The quality of service is generally the same no matter who I have service with
3) If I want competitive rates, I must purchase cellular service under a contract
4) I will need to wait in line and I should expect that getting my service setup will take an hour or more.
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Established competitors use classical marketing techniques to push contract sales…
…while their processes – the ones that touch the customer – remain stagnant.
US CELLULAR SERVICE
Examples:
1 - Reps get higher comps for New Customers…
…often leaving existing customers in long wait lines.
2 – Until mid-2008, average in-store time to open an account was 40 minutes
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US CELLULAR SERVICE
Market opportunity rests with customers, not with technology or marketing…
…so by focusing on the processes that touch the customer we can drive a new – market leading – value proposition.
Sir Richard Branson is adept at finding market
opportunities in margin-
centric industries.
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How does Virgin Mobile employ the dynamics of the 21st Century Value chain to produce Business Success through Process Innovation?
1) No contracts (value proposition)
2) Delivery of value proposition without exception
3) Success Without Exception (all customer interactions)
Purchase of service from Sprint PCS (buy infrastructure and primary margin-driver activities/resources)
VIRGIN MOBILE USA VALUE CHAIN EXAMPLE
Virgin Mobile USA
Flipping the “tables” with a core Value Proposition
focused solely on…
Customer Expectations
and Customer
Experience
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The results of the strategy are compelling:
• Launched in 2002
• By November 2003 Virgin Mobile USA touted 1 million customers
• By March 2004, growth had exploded to 1.75 million customers (just 4 months after reaching the 1 million customer mark)
• By February 2005 Virgin Mobile USA’s customer base had grown to 3 million customers.
• January 2007 – Virgin rings in at more than 4.6 million customers
VIRGIN MOBILE USA RESULTS
5 million customers in 5 years
Doesn’t own a single Cell Tower
More profitable than entrenched players (including Sprint!)
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ZARA – THE WORLD’S #1 FASHION RETAILER
Inditex (Zara) opened 448 stores and franchises last year…
everywhere from Shanghai to Serbia…
and said it planned to open a further 410 to 490 outlets in 2007-2008.
Zara to keep up expansionNow the worlds largest and Europe's fastest-growing fashion retailer have reported strong profit growth and outlined further expansion plans. Spain's Inditex, owner of the Zara chain, has posted a 26% rise in annual net profits to 803m euros ($964m; £555m) for the year to 31 January.
Zara started as a local Spanish Fashion Retailer…
and has grown to be the undisputed leader in High Street Fashion GLOBALLY!
How did they accomplish this?
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ZARA – Changing Customer Expectations
1 – In Store and On Street Sales Trends are fed through handheld devices directly to HQ.
2 – HQ Designers and Product Managers receive trend info directly and make product decisions
3 – Designers send new styles/patterns directly to local Zara factories for immediate production
4 – Clothes move thru Zara distribution and reach stores within 48 hours.Traditional
Fashion Retailer:
12 – 18 month new product to store
Zara:
Trend Spot to Store in days (as little as 10)
Customer:
Gets Hottest Trends Now!
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Customer Expectation Management:
1) People on the “front line” capture trends in real time
2) Real time connection from front line to design
3) Simplistic Supply Chain executes in days
4) 48 Hour Logistics turn
Porter’s Value Chain:
5) Much higher product costs than industry average
6) ERP is home-grown
Technology
7) PDA’s, Cellular, Chats, et al create “front line family”
8) Point of Sale (POS) system running on DOS 3.01
9) Homegrown ERP – Support system don’t grow it
THE ZARA DIFFERENCE
The Zara Difference
Product to Store in days…
Customers get what they want…
Higher supply chain cost…
Easily offset by premium pricing and sales volume!
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Customer Expectation Management:
1) Market Leaders make their customers’ lives Simpler, Easier and More Successful
2) They Align everything they do to the Customer and eradicate the things that don’t
3) They use Porter’s Value Chain (Margin) to maximize profit, not as a business strategy
4) They apply technology where technology adds CUSTOMER value!
Common Characteristics include:
5) Reduction in complexity – people’s work, processes and technology
6) Organizational alignment and empowerment
7) A behavior of challenge and continual refinement
LESSONS LEARNED
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TO LEARN MORE…
http://www.amazon.com/Insiders-Guide-BPM-Process-Mastery/dp/0929652096
Would you like to learn more about Mastering BPM?
http://acuitystudio.com/human-centric-process-analysis-and-improvement/
http://www.amazon.com/Customer-Expectation-Management-Success-Exception/dp/092965207X