Greetings!!

Value has many meanings, and it is the customer who always defines it. To customers, value is satisfaction of their requirements at the lowest total cost of acquisition, ownership and use. Delivering value to customers, however, does not mean merely satisfying them. One has to strive to delight and 'wow' them. Customer value can carve a sustainable competitive advantage in most markets.

One has to understand the unique characteristics of the various customer sets which have different needs and expectations. Customer value is always dynamic. That’s because customers keep changing their minds. The things that go onto their balance scales keep changing, as do competitors' offerings! Therefore, focus should remain on increased customer value.

The very existence of organisations is associated with customers -- both internal and external, to market their products and services. The concept of internal customers creates channels within a company through which value can be delivered to the external customer. Every person’s performance in a company affects the ultimate customer, directly or indirectly.

This issue of Quality Digest aims to highlight the importance of creating value for internal and external customers.

Happy reading!

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A company’s ability to survive and grow in today’s increasingly competitive global environment is tied to customer value. Meeting the ever-increasing customer demands necessitates listening carefully to customers and responding well to their needs.

Today's customers are demanding more while paying less for products and services. At the same time, most companies are facing new and ambitious competitors. This apart, they are being challenged unusually to differentiate their products in a "commodity" market.

The relationship between buyers and sellers is constantly changing. Sales personnel assume that lowering prices alone can attract customers. However, what customers are actually looking for is better value, better solutions to their problems, rather than doing business with low-cost providers. Smart companies must offer competitive prices and focus more on value-added services to win and retain customers.

Every company, no matter what it sells, should focus on the following:

Customer problems

Value Challenge: What key problems do customers face in their endeavour and how can a company resolve these problems?

Companies should think beyond just selling products or services. They need to don different roles, that of customer consultants, problem-solvers, coaches, motivators and partners. The success story of Don Tyson exemplifies this practice.

Don Tyson of Tyson Foods, USA, sold the idea of Chicken McNuggets to McDonalds. Before selling, it seriously considered the benefits of adding chicken to McDonald's menu. It reviewed each potential objection McDonalds could raise with the McNuggets -- in areas like product development, manufacturing, shipping and delivery. It tried solving every potential problem before approaching McDonalds. Today, Tyson Foods is the sole supplier of Chicken McNuggets and poultry products to 88 of the top 100 restaurant chains in the US. Therefore, before offering a product, companies should identify their customers' key problems and think of ways to help solve these problems.

Easing customers' lives

Value Challenge: What can a company do to ease its customer's life?
Every business has a "Convenience Quotient (CQ)." A customer calculates CQ by dividing his/her desire for fulfilment by the hassle and annoyance that may accrue while performing various business operations. Are companies ready to do business with this calculated CQ? A company that adds an extra measure of user-friendliness to its product delivers added value to today's anxious customers. Bill Kelley, of Plymouth Rock Assurance Company, adopted such an approach.

Bill Kelley observed that most clients hated the claims process more than getting involved in an automobile accident. Hence, he was determined to make the process easier for his clients. Plymouth Rock Assurance provided a facility wherein its clients could call the company directly from the accident scene. The company personnel would immediately travel to the accident spot, estimate damages, calculate the costs of repair on a laptop, and deliver a cheque so that the customer could go to the automobile shop of his choice

Updating the customer

Value Challenge: What creative ways can a company adopt to educate its customers about products and services?

This is often the most cost-effective practice to add value for customers. Companies should shift their focus from selling products to selling solutions. They need to find how educating their customers gives them a strategic advantage. The example of Jim Miller of Miller Office Systems, Texas, helps understand this practice better.

Jim Miller conducts customer workshops on how to avert carpal tunnel syndrome, a repetitive-motion condition resulting from improper use of computer keyboards and other office equipment. Clients, who have attended these workshops, have a much better understanding of how to improve comfort and office productivity, while reducing medical costs arising from on-the-job injuries.

Managing the customer's complexity

Value Challenge: What aspect of a company's product or service could make a customer's business or life more complex, and how can this be managed?

Generally, companies find it difficult to distinguish what attracts customers -- unique products or better prices? Companies should create unique value-adding services that cement their customers’ relationship with their services. One way is to identify unpleasant or complex tasks the customer needs to perform and find ways to simultaneously reduce both the customer's annoyance and costs. During this process, a company will definitely become indispensable to the customer.

For a comprehensive view on this practice, consider the example of John Titus of F.D. Titus & Sons, USA, a highly profitable health care products distributor. He observed that his clients, doctors who devote their precious time to their patients, were unable to manage their inventory. Hence, John offered to manage it for them. In addition, he made arrangements to deliver his products directly to the various departments in clinics and unpack them. Many customers agreed to give all their business to Titus, at negotiated prices.

Improving responsiveness

Value Challenge: The kind of time-based assumptions a company has, and what it can do to make its customers realise how it values their time.

Smart sales personnel reduce customer waiting time by challenging time-based assumptions, that is the time lapse between a customer expressing his/her desire to buy a product or service and when they actually get the product or receive the service. Customers will listen to sales personnel who value their time.

If Dr. Neil Baum, a New Orleans urologist, finds his patients still waiting after 20 minutes of their scheduled appointment, he does not charge them.

Involving the customer in creating value

Value Challenge: What a company should ask its customers to know what they value most?

Sales personnel of most companies forget to ask their customers what they value most in the product or service they offer. They rely on survey reports or what they have heard. Very often, customers value or desire what sales personnel assume they cannot offer.

Tom Monoghan was a stores manager of Dominos Pizza during its launch. It started as a small three-man shop in the US. For almost a year, he stood at his counter and asked each customer one question -- what do you want most in a pizza? Their answers surprised him because more than pizza toppings, or thicker crust, it was home delivery that impressed most customers.

Customisation and offer choices

The customers’ ability to adopt a company's product to meet their changing needs adds value to the company’s product. Companies should offer products or services that have utility value in today's market. Companies need to communicate with customers regularly. –What is to be remembered is though the customers' demands may vary, they need more guidance from the company.

The secret of every company's success lies in differentiating between choices that add value to the customer and those that add costs.

Besides external customers, a company has internal customers, a person/group of persons within the company who receive others’ work and add their contributions to the product or service before passing it on to the next step. In manufacturing, the internal customer is the next person down the production line who contributes to building the product. Likewise, in software engineering, a computer programme passes from one internal customer to another until a ‘bug free’ programme is offered to the external customer.

By meeting the requirements of internal customers, a chain of quality is made that reaches out to external customers. This article focuses on some of the vital steps organisations can take to create more value, apart from focusing on quality:

1. Always keep the company’s external customer in mind

Often, we come across employees who say ‘I have nothing to do with external customers, all my customers are internal’. Such employees begin to believe that their main aim of working is to serve only internal customers. However admirable these intentions may seem, they tend to have an undesirable impact on the external customer. Every person’s performance in a company ultimately affects the customer, directly or otherwise.

2. Change the nature of the internal supplier-customer relationship from mere vending to real-time partnerships

Rather than asking an internal customer ‘What can I do to serve you?’, an internal supplier can ask, ‘How can I serve you better so that we collectively serve our end customers better?’ This helps bring out problems which can be resolved collectively through collaboration. Efforts should be made to match the capabilities of internal suppliers with the real-time needs of internal customers. These real-time needs should be in terms of delivering the greatest value to customer.

3. Interaction between internal suppliers and customers should be through conversation, not through interrogation

Internal suppliers must not approach their customers with the air of a benefactor. Instead, they should engage in conversations and discuss areas of concern and improvements. There should be a genuine exchange of ideas, information and suggestions. Open- ended questions should be asked for a better understanding of the internal customers’ requirements and to enable the internal supplier play a more effective role. Conversation improves internal supplier-customer relationships. Once employees become part of a true collaboration in the quest for real customer value, they begin to ask questions, whose solutions add value.

4. Create a customer-value statement

Interestingly, in any company at any given point of time, there are numerous internal customer-supplier relationships at work. However, do all these ‘value vectors’ point in the same direction even roughly? How to ensure that these value vectors collectively ensure delivery of maximum value to the ultimate customer? This is impossible without a sense of direction. Hence, it is important to arrive at a ‘customer-value guide’ containing a few statements that summarise what really adds value to the external customer. A ‘customer-value guide’ highlights how and where different internal customers add value to the external customer.

5. Ensure that internal supplier-customer relationships are in tune with the ‘customer-value guide’

In simple terms, the goal is not merely to create value for the internal customer. A company can ensure maximum value for the external customer by working more effectively and collaboratively through its internal customers. Before establishing crucial targets, companies must analyse which customer value statement the planned action will add value to.

6. Involve different people in creating the customer-value guide

Conventionally thinking, only certain areas in a company like sales, marketing and customer service have direct contact with customers. If these are the only sources of customer insight for a company, the insight is incomplete and skewed. By getting a new pairs of eyes (for example people from finance, human resources or administration) in front of the customer, new insights are developed. Moreover, a new, richer and deeper vein of information is established. This helps in creating customer-value advocates throughout the company.

7. Ensure customer-employee interactions

To create maximum value for the external customer, a company has to remind its employees that in serving its internal customers, it is adding value to the final customer. Hence, it should find ways to get customers in front of its employees or the other way around. One company even made room in its monthly newsletter for stories on its customers… who they were, how they used the company’s products and how the company’s products added value to them.

8. Treat the customer-value guide as a living document

Customer requirements change rapidly and consequently, what represents real value to them changes. Hence, the effectiveness of the ‘customer-value guide’ will fade over time. It must be constantly revisited and updated. This should be treated as an opportunity for the company to bring more of its people in direct contact with its customers. The customer-value guide is like a beacon using which people take their bearings before making decisions and deciding on actions. It plays a powerful role and if not kept up –to date, it can be dangerously misguiding.

Customer Value Management and The Measurement System
This article shows how an organisation can boost its value proposition by evaluating its strengths and weaknesses on key value drivers and comparing them with the competitors’.
http://www.apqc.org/portal/apqc/ksn?paf_gear_id=contentgearhome&paf_dm=full&pageselect=detail&docid=105491

Value Based Marketing and Pricing
It describes the tools that can be used to achieve a comprehensive, consistent approach for measuring customer-perceived value. It also talks about how to execute value-based pricing.
http://www.cval.com/pdfs/VBMarketingAndPricing.pdf

What Do Customers Value?
It contains a five-step approach linking customer value to business processes. You need to become a member of ASQ to view this article.
http://www.asq.org/qic/display-item/index.html?item=15188

What is Your Value to the Customer?
It shows how a company can get the most of the customer feedback to devise value-based and market-driven strategies.
http://www.customerchampions.co.uk/articles/Aforget.htm

Mastering Customer Value Management: The Art and Science of Creating Competitive Advantage
by Ray Kordupleski
Book description
This book deals with Customer Value Management. It starts with fundamentals like the tools of customer value management. The book gives a 10-step approach on how to manage customer value. It also talks about the future of customer value management. The book concludes by discussing the essentials of customer value management.

Managing Customer Value: Creating Quality and Service That Customers Can See (Hardcover)
by Bradley Gale
Book description
This is a very useful marketing study where the author puts in his thought-provoking insights on the relationship between customer-perceived value and quality management initiatives. The author painstakingly makes use of relevant case studies to support his ideas.

Market Driven Strategy: Processes for Creating Value (Hardcover)
by George S Day
Book description
The book offers the key to becoming "market-driven." It offers guidance to companies on how to reach out to customers so that they can deliver customer value par excellence. This book will give you some important insights into what steps are necessary for a company to be truly market-driven. It integrates with consummate ease the latest business theories with useful practical examples.

Taking Quality Decisions: A guideline