Customer- Value Creators and Destroyers

Dears,


For companies owned by stockholders, value is represented by share value. For companies owned by employees (cooperatives), value is usually represented by bonuses paid on earnings. For publicly owned organizations, a mixture of cost of provision and quality of service usually represents value. For charities, a similar mixture represents value, with the services received by beneficiaries of charities being important. Recent business news challenges whether some quoted companies, through management compensation and option schemes, are being run for their executives' personal benefit!

Behind some of these forms of value lies value to customers. Value to customers is usually measured in terms of the appropriateness of what they receive (benefits) relative to what they have to pay, either directly or indirectly (for example, Service costs, taxation). In most cases, stakeholder value and customer value are closely related, though the relationship between the two can diverge in the short run for all sorts of reasons: for example, government intervention, lack of competition and customer inertia. However, in the long run the two rarely go in different directions. Enhancing customer value is not done solely by CRM but also by producing excellent products and at low cost is another feasible route.

Before analyzing how good CRM practices improve customer value, let us examine the value to the different groups of people in the value chain:

• Value for customers is implicit; it is the fundamental driver of shareholder value. Customer value is created through the development and effective delivery of the right proposition to the right customers.

• Value for employees and partners, and how to create it, is an important focus that people and Partner organization are the most important contributors to business performance.

• Value for shareholders is based not just on profit but is determined by the stock market, based on a number of factors. If a company is perceived to be managing customers and opportunity well, the share price may go up. CRM is now one of the main foci of large companies' presentations to analysts. In one case, a company made such a presentation, claiming that it managed its customers well. When the analysts challenged it and asked how it knew this, the company turned out to have a top- performance, overall and for its sector, so the company was right but there was no value to Customer evaluation criteria set or measured in this case. Share value can also be influenced by the way decisions on improvements to customer value management capabilities are announced and subsequently managed.

Value Creator and Value Destroyers

How value to customers can be created or destroyed. Value can be created, destroyed or ignored at any customer management stage, but most value is created by organizations that compound value creation at each CRM stage by using and building on the gains created in other stages


Analysis and planning: creating value through insight, knowledge and effective planning


Value is initially created by:

• understanding which customers you want to manage;

• understanding how much you can afford to spend in acquiring and retaining them;

• putting the appropriate plans in place to acquire the customers that will add value over time;

• retaining those who are worth retaining;

• Developing those with potential, efficiently.

Planning is also used to match resources to gross value, so that time spent on attracting, retaining or trying to develop customers is relative to likely value.

Value is often destroyed through

• a lack of customer knowledge and insight;

• absent (or poor) data quality and/or data analysis;

• a mismatch of costs to revenues;

• Missing or ineffective planning.

Proposition: creating value through a proposition that helps you find, keep and develop those customers you want to manage

Value is created:

• when you are in a position to develop a proposition to attract similar customers, retain them and develop their value;

• when your proposition development involves all your supply chain providers (to ensure that your proposition can actually be delivered);

• when you communicate your proposition to staff who actually manage customers and to their immediate managers, so that they manage customers in a way that is consistent with the proposition;

• when you support the delivery of the proposition with incentives, rewards, competency development, process standards, measures, IT content and accessibility.

Value is often destroyed through:

• poor targeting or disparate incentive measures that encourage poor quality lead generation;

• propositions that are poorly defined or articulated or go no further than a set of brand values;

• propositions aimed at low value customer groups (a problem compounded from poor analysis and planning);

• poor communication of the proposition to the people delivering the proposition (employees and partners) and the people experiencing it (customers).


People and organization: creating value through effective people and partners

Value is created when:

• you have clear visible leadership for CRM;

• internal communication works smoothly, especially between customer-facing staff and between them and the rest of the organization;

• you have slick decision-making structures and the right competencies;

• motivation and supplier management are employed as key enablers of good customer management;

• Ability to execute is made practical through an appropriate strategy and governance system for business transformation.

Value is destroyed:

• when there is no clear board level leadership and commitment to CRM;

• when the organization stifles quick decision making relating to CRM;

• where objectives are misaligned with the goals of the organization;

• when incompetent people or ineffective systems influence the customer experience;

• when employees are not motivated and rewarded or when suppliers are badly managed;

• when ability to execute is undermined by inappropriate culture or poor governance of business transformation programmes.

We can go on for further exploration at all levels. It can be seen how value is influenced at each stage of the model. Maximum value occurs when all elements of the model are managed together rather than independent parts: joined-up management creates maximum value. Thus, knowing which customers to manage enables you to develop a more appropriate proposition. A good proposition will help you to shape your organization and align your people, processes and IT infrastructure. Good Luck..Value Creators

Your P&C


DC*