Customer Expectation Management
Customer Expectation Management, the 21st Century Value Chain, and examples of companies that are leveraging the Value Chain for exemplar business success.
www.tschurter.com© 2009 All Rights ReservedCUSTOMER EXPECTATIOM MANAGEMENTSimply working harder at existing approaches – even excellentones – may not be enough to retain demanding customers. Asprice differentials narrow and product features are quicklycopied, business survival requires an unrelenting focus uponidentifying and delivering additional and differentiating valuefor customers. Terry Schurter provides a manifesto for allthose who are seeking to inspire a greater focus upon theexperience of customers.– Colin Coulson, Thomas, Professor of Direction andLeadership, University of Lincoln. Author, WinningCompanies, Winning People www.tschurter.com© 2009 All Rights ReservedOUR GOAL – THE TRIPLE CROWNTriple CrownOne Actionthat results in:1) ReducedCost2) IncreasedRevenue3) EnhancedCustomerService www.tschurter.com© 2009 All Rights ReservedWe’ve been taught that MARGIN is the game. Most of us THINK aboutbusiness 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 controllablevariable in the organization that produces PROFIT• hence, Business Success is a MARGIN-based measure…WHAT WE THOUGHT WE KNEW…Porter’sValueChain www.tschurter.com© 2009 All Rights Reserved…IS WRONG! www.tschurter.com© 2009 All Rights ReservedBusiness 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 doubtthis?Isn’t it obviousthatCUSTOMERSare the KEY toour SUCCESS? www.tschurter.com© 2009 All Rights ReservedMargin hasbecome aZERO SUMgame, due toPrice and CostContraction……with eachcost/priceiteration, returning eversmallerbusiness valueVALUE CHAIN REALITIES www.tschurter.com© 2009 All Rights ReservedCUSTOMERS determine the POTENTIAL of the Business by……determining the size of the pipeline – how many NEW customers seekto engage with the business…and by the CUSTOMER LIFECYCLE – i.e. how LONG the customerstays in the customer-business relationship.VALUE CHAIN REALITIESBusinessGrowth =New CustomersxCustomerLifecycle……where realrevenue occursAFTER Profitper CustomerEXCEEDSAcquisitionCost (Loss toProfitTransition) www.tschurter.com© 2009 All Rights ReservedWith 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 CHAINThe 21stCentury Valuechain is:Expectations(CustomerValue)……deliveredwithoutException(CustomerExperience)……maximizedthrough MarginOptimization.Which is then MAXIMIZED (Profit) through Margin Optimization (Porter) www.tschurter.com© 2009 All Rights ReservedUS CELLULAR SERVICEMarket Expectations:1) Service will be ok most of the time.2) The quality of service is generally the same no matter who Ihave service with3) If I want competitive rates, I must purchase cellular serviceunder a contract4) I will need to wait in line and I should expect that getting myservice setup will take an hour or more. www.tschurter.com© 2009 All Rights ReservedEstablished competitors use classical marketingtechniques to push contract sales……while their processes – the ones that touch thecustomer – remain stagnant.US CELLULAR SERVICEExamples:1 – Reps gethigher compsfor NewCustomers……often leavingexistingcustomers inlong wait lines.2 – Until mid-2008, averagein-store timeto open anaccount was 40minutes www.tschurter.com© 2009 All Rights ReservedUS CELLULAR SERVICEMarket opportunity rests with customers, not withtechnology or marketing……so by focusing on the processes that touch thecustomer we can drive a new – market leading – valueproposition.Sir RichardBranson isadept atfinding marketopportunitiesin margin-centricindustries. www.tschurter.com© 2009 All Rights ReservedHow does Virgin Mobile employ the dynamics of the 21st Century Valuechain to produce Business Success through Process Innovation?1) No contracts (valueproposition)2) Delivery of valueproposition withoutexception3) Success WithoutException (all customerinteractions)Purchase of service fromSprint PCS (buyinfrastructure andprimary margin-driveractivities/resources)VIRGIN MOBILE USA VALUE CHAIN EXAMPLEVirgin MobileUSAFlipping the“tables” with acore ValuePropositionfocused solelyon…CustomerExpectationsand CustomerExperience www.tschurter.com© 2009 All Rights ReservedThe results of the strategy are compelling:• Launched in 2002•By November 2003 Virgin Mobile USA touted 1 millioncustomers•By March 2004, growth had exploded to 1.75 millioncustomers (just 4 months after reaching the 1 million customermark)•By February 2005 Virgin Mobile USA’s customer base hadgrown to 3 million customers.• January 2007 – Virgin rings in at more than 4.6 millioncustomersVIRGIN MOBILE USA RESULTS 5 millioncustomers in 5years Doesn’t owna single CellTower Moreprofitable thanentrenchedplayers(includingSprint!) www.tschurter.com© 2009 All Rights ReservedZARA – THE WORLD’S #1 FASHION RETAILERInditex (Zara)opened 448 storesand franchises lastyear…everywhere fromShanghai toSerbia…and said itplanned to open afurther 410 to 490outlets in 2007-2008.Zara to keep up expansionNow the worlds largest and Europes fastest-growing fashion retailerhave reported strong profit growth and outlined further expansionplans.Spains Inditex, owner of the Zara chain, has posted a 26% rise in annualnet profits to 803m euros ($964m; £555m) for the year to 31 January.Zara started asa local SpanishFashionRetailer…and has grownto be theundisputedleader in HighStreet FashionGLOBALLY!How did theyaccomplishthis? www.tschurter.com© 2009 All Rights ReservedZARA – Changing Customer Expectations1 – In Store and On StreetSales Trends are fedthrough handheld devicesdirectly to HQ.2 – HQ Designers andProduct Managers receivetrend info directly andmake product decisions3 – Designers send newstyles/patterns directly tolocal Zara factories forimmediate production4 – Clothes move thru Zaradistribution and reachstores within 48 hours.TraditionalFashionRetailer:12 – 18 monthnew product tostoreZara:Trend Spot toStore in days(as little as 10)Customer:Gets HottestTrends Now! www.tschurter.com© 2009 All Rights ReservedCustomer Expectation Management:1) People on the “front line” capture trends in real time2) Real time connection from front line to design3) Simplistic Supply Chain executes in days4) 48 Hour Logistics turnPorter’s Value Chain:1) Much higher product costs than industry average2) ERP is home-grownTechnology1) PDA’s, Cellular, Chats, et al create “front line family”2) Point of Sale (POS) system running on DOS 3.013) Homegrown ERP – Support system don’t grow itTHE ZARA DIFFERENCEThe ZaraDifferenceProduct toStore in days…Customers getwhat theywant…Higher supplychain cost…Easily offset bypremiumpricing andsales volume! www.tschurter.com© 2009 All Rights ReservedCustomer Expectation Management:1) Market Leaders make their customers’ lives Simpler, Easierand More Successful2) They Align everything they do to the Customer and eradicatethe things that don’t3) They use Porter’s Value Chain (Margin) to maximizeprofit, not as a business strategy4) They apply technology where technology adds CUSTOMERvalue!Common Characteristics include:1) Reduction in complexity – people’s work, processes andtechnology2) Organizational alignment and empowerment3) A behavior of challenge and continual refinementLESSONS LEARNED www.tschurter.com© 2009 All Rights ReservedTO LEARN MORE…http://www.amazon.com/Insiders-Guide-BPM-Process-Mastery/dp/0929652096Would 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