As businesses face an economic downturn, increased competition, and higher expectations from customers, some managers are taking a new approach to finding success. They are using a means of gathering and understanding the “voice of the customer” called Customer Value Analysis, the CVA. It is a strategic decision-making tool that uses statistical analysis to understand the “how” and “why” of customer choice. For many years, business managers have used marketing databases and customer satisfaction surveys, but these tools often fail to sustain or grow customer loyalty because they neglect one crucial factor – the competition. Today, business leaders are starting to take note.
This emerging methodology for gathering the “voice of the customer” places competition at its core focus. The CVA centers on the idea that customers make economic choices based on perceived value. It shows why a “satisfied” customer will go elsewhere if they find a greater value. Research has shown that value, as perceived by the customer, is the most important single long-run determinant of market share and profitability.
Is a Company Losing or Gaining Market Share?
When a customer purchases a product or engages in a service they make a judgment. It may be a feeling or a thought, but it is a judgment – and that judgment is one of value. The CVA uses a system that turns that judgment into a graphic display of where a company stands on the competitive map. Not only does it compare company against company, it also shows the customer’s perceived value of each area or attribute within the company such as: product reliability, speed of response, product specifications, communication with customers, reducing red-tape, doing the basics, understanding customer business and more.
The overall difference between a CVA and other analytical tools is that the CVA shows the psychology that drives customer choice and preference. Customer satisfaction surveys often fail to predict the success of a company because they focus on the company’s own service, rather than the entire market. They do not obtain data from non-customers. Although customer complaints and feedback can show a business how to make their own product or service better, they do not show management how to make it better than their competition. Perhaps, most startling, the CVA shows that customer choice is not, and will never be, a function of just how satisfied customers have been in the past.
The CVA is not a customer satisfaction survey. It is not a marketing study. It is not a promotion or marketing plan. It is a tool that assists management in making sound strategic decisions by understanding customer choice. From the results of a CVA, management can identify and prioritize the aspects of their organizational design that must be addressed in order to keep their customers engaged and motivated to return.
What Really Matters
The CVA uses a “multiple regression analysis” to rank the attributes of company in terms of customer priority. This process is unique because not only does it reveal the attributes a customer experience as most important, but it factors in the element of competition. Since competition drives customer choice, this priority ranking of attributes shows what really matters. With this understanding of priorities, a business can improve the areas that give it the best return for the smallest investment of resources. For example, if say, the attribute of “Product Reliability” is ranked twice as high as “Speed of Response,” management will know that the financial and human resources invested into “Product Reliability” will reap almost twice the return of “Speed of Response” in terms of customer loyalty. Of course all companies strive to rate as high as possible in all areas, but with priority ranked attributes, management can focus on the exact areas that create the greatest customer satisfaction.
The CVA helps management to:
- design customer service programs
- design product improvements
- increase customer loyalty
- shape marketing programs
- enhance the most important attributes the customer values
- reduce operating costs
- attract and keep the best customers at the lowest investment
- avoid projects that do not work
- get the highest rate of return on decisions
- understand why customers prefer one company over another
As business managers make decisions involving millions of dollars, the CVA can increase confidence, improve accuracy and reduce the risk of those decisions.
The “To Do” List
The CVA process begins by identifying attributes of a company, such as “Product Reliability,” “Speed of Response,” “Reduce Red Tape,” and many more. An attribute must be a quality or aspect of the product or service that the customer can identify and must be something in which management can take action to change. In many organizations, a generic list of industry attributes is available to help management understand the consumer from a marketing point of view. In the CVA, this list of attributes is created for a specific company. It works on the premise that each market has a different character.
Three of the most important insights taken from a CVA are: Customer Value Attributes, Strategic Gap Analysis, and Customer Value Map.
Customer Value Attributes – Feedback on Current Performance
This is a comprehensive list of service and product attributes that are most important to customers. These attributes are weighted so that management can understand the relative importance of each. For example, in a gaming casino facility, if “Atmosphere” is weighted at 21% and “Food Quality” is weighted at 11%, at a glance, management can gleam that “Atmosphere” is twice as important as “food quality” in terms of customer value. This analysis helps management better understand the basic level of service required in order to maintain market share.
Strategic Gap Analysis – Prioritization of Improvement Efforts
A “Strategic Gap Analysis” compares a facility against the competition on its key attributes and also shows a prioritized list of the improvements necessary to improve their competitive position. In this process, each attribute of a company is rated on a scale between 1 and 10 and each attribute of its competition is also rated using the same scale. The difference between the two is the gap. The gap is important to know because this gap is what drives customer choice. Management may be surprised to learn that in some areas where their surveys show customers are satisfied may actually be the areas that need improvement. Management can see what attributes and areas need attention and how much attention is needed in order to retain or grow customer loyalty.
Customer Value Map - Competitive Analysis
A “Customer Value Map” reflects how customers place a facility or location relative to its competitors in terms of the most important attributes. It provides a look at the “big picture.” The Customer Value Map analyzes data from all a company’s competitors, takes the highest priority attributes of the customer and of places the results on a graph. For example, in a gaming casino, if “Fun and Positive” and “Food and Luck” rate highest in terms of producing customer loyalty, this graph will plot these two attributes of each casino in a location and show the relationship among all the competition. Those facilites ranked high will gain a market share as those ranked low will lose it. From this map, business leadership will know the urgency of taking action to remain competitive.
Winning Hearts and Minds
Perhaps the two most important insights taken from a CVA package are “Implications for Strategy” and “Action Planning.” These two reports take all the information gathered and synthesizes it into a guidance tool and action steps.
Management can use an “Implications for Strategy” report for goal setting, training, and performance management. They can also develop internal measures to provide their company with a way of measuring quality before their services or products reach the customer. With the “Action Planning” report management can make specific changes, create initiatives and refine policies all with scheduled dates. They will have a clear “to do” list of the most important actions they need to take.
The CVA takes a “touch and feel” understanding of customer choice and turns it into data driven intelligence that does much more than reveal customer satisfaction, it shows management where to place their focus for the greatest economic benefit. It is one of the most effective tools in businesses management to understand the choices made in the hearts and minds of the customers.
The RedWind Difference
We differentiate ourselves from our competitors in two important ways. One, we are a comprehensive management firm. Many firms focus solely on survey work and this can leave their consultants with a rather narrow view. We help integrate customer data with our knowledge of strategy, organizational design, and change management to help companies achieve their desired outcomes.
Second, unlike the large firms like McKinsey and Bain, our key personnel works directly with clients and we do not send out junior people. With our highly experienced personnel, our clients can rest assured they will be offered the highest quality assistance available.
Call us for more information about a CVA and learn how you can gain a competitive advantage.