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The Myth of Excellence

The Myth of Excellence. Becoming relevant to consumers and customers June 18, 2002 Cincinnati, Ohio. The Situation. A crisis - years in the making, hitting now !. Customer Satisfaction. relationship in a free fall. Consumer Spending. Consumer as a free agent.

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The Myth of Excellence

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  1. The Myth of Excellence Becoming relevant to consumers and customers June 18, 2002 Cincinnati, Ohio

  2. The Situation A crisis - years in the making, hitting now! Customer Satisfaction relationshipin a free fall Consumer Spending Consumer as a free agent FC/080202 - CR for CP Mfg - Fred Crawford / 2

  3. CGE&Y Conducted a Comprehensive Study:Consumer RelevancySM • CGE&Y Consumer Relevancy Study… • Conducted in U.S. in late 1999 and February 2001, pan-European study in January 2002 • Interviewed 16,000 consumers across five channels • Asked 60 questions about the importance of various aspects of the shopping experience • …gets rave reviews • [Lafley, P&G] CR “is the best tool…for incorporating customer wants and needs.” • [Burandt, Georgia-Pacific] “…a big idea and a blueprint for action.” • [Siebel, Siebel Systems] “…provides proven strategies for meeting the demands of today’s empowered customers.” FC/080202 - CR for CP Mfg - Fred Crawford / 3

  4. Three Mega Trends Societal Situation Human Condition Consumer Need Societal devolution Inability of traditional institutions to adequately reflect fundamental human values “Fortify, reinforce, ratify my personal value” Increasing inability to keep pace with daily life Increase in stress, guilt, anxiety “Help me survive psychologically and emotionally” Proliferation of information and communication technologies Informed and aware, but cynical and confused consumers “Clarify my options, allow me to feel satisfied with my choices” ….A Changing Need Set FC/080202 - CR for CP Mfg - Fred Crawford / 4

  5. The Two Myths of Excellence • That most businesses understand what consumers are really asking for • That attempting to be great on all aspects of consumer and customer engagement is the way to win FACT: a very different consumer… FC/080202 - CR for CP Mfg - Fred Crawford / 5

  6. The First Myth of Excellence “Two countries separated by a common language” G.B. Shaw/Winston Churchill In 1942… …in 2002 “Business and consumers are two constituencies separated by a common language” FC/080202 - CR for CP Mfg - Fred Crawford / 6

  7. CONTENT Best Value Added Lowest External Location Entertainment CONTEXT Appropriate Execution of Basics Honest Internal Navigation Ease Product Service Price Access Experience Broken Promises: Content vs. Context FC/080202 - CR for CP Mfg - Fred Crawford / 7

  8. Human Values Are Embedded in the Context of an Offering Maslow’s Hierarchy of Needs Self Actualization Esteem Love and belongingness (feeling loved and accepted by others) Safety, security Physiological Needs (air, water, food, sleep) Context= Human Values Content= Basic Needs “Today, technical differences between products are barely perceptible, which is the reason why context has become more and more important for brands.” A G Lafley Procter & Gamble Source: Maslow, A. H., The Farther Reaches of Human Nature, 1968; CGE&Y Analysis FC/080202 - CR for CP Mfg - Fred Crawford / 8

  9. Customization Inspiration Agent Intimacy Solution Dominate (5) Convenience Care Education Reliability Consistency Differentiate (4) Par (3) Ease Accommodation Respect Credibility Honesty The Conceptual Model for Consumer Relevancy Access Experience Price Product Service FC/080202 - CR for CP Mfg - Fred Crawford / 9

  10. Some Companies Have Been Very Successful at Finding Relevant Differentiation Points with Successful Execution Retailer • Company slogan: “Save Time, Save Money” • Provides a limited, high-turning assortment of quality products at low prices • Targets the growing low-, middle and fixed income population • Focus on rural, small towns and urban neighborhoods • Very cost-effective operations • Positioned as the “Everyday Low Prices” provider • Maintains in-depth consumer knowledge: demographics, buying patterns, frequency of purchase • Focused on providing consumers with an enjoyable experience: store greeters, knowledgeable employees, etc. Focus Differentiation • Price (Primary) • Access (Secondary) • Price (Primary) • Product (Secondary) • > 20% increase in sales • 6.4 % increase in same-store sales • 21% increase in net income • 20% increase in sales • 8% increase in same-store sales • 21% increase in net income Year 2000 Performance Source: S&P, Industry Survey: General Retailing, 05/24/01; The Motley Fool, Same-store sales tell the tale over time, 4/7/00; CG&EY Analysis FC/080202 - CR for CP Mfg - Fred Crawford / 10

  11. Other Consumer Relevancy Examples FC/080202 - CR for CP Mfg - Fred Crawford / 11

  12. BRAND INSIGHT Leveraging Context to Build Brands Product • All Frozen Pizza/Digiorno • Crest/Total • Good parenting, not just good product • Better you, not just better teeth • It’s not servicing the car, it’s servicing the owner • It’s for you Service • Cadillac/BMW • IBM/Dell Price • Canon/Martha Stewart • United/Virgin • Affordable style • Responsible decadence • Dannon/Yoplait • Zippo/Bic • All Lunch Meat Brands/Lunchables • Good food vs. mobile nutrition • Utility trumps durability • Food as play Access • Maxwell House/Starbucks • Honda/Harley • Miller/Budweiser • It’s not about the coffee, it’s about the coffee drinker • How it works is less important than who I am • Culture vs. calories Experience FC/080202 - CR for CP Mfg - Fred Crawford / 12

  13. The Second Myth of ExcellenceThat attempting to be great on all aspects of consumer and customer engagement is the way to win Ideal Value Profile(as perceived by consumers) • Successful companies dominate on one attribute, differentiate on a second and compete at parity on the remaining three • A company dominates when the consumer not only prefers it to the competition, but will actively seek it out • A company differentiates when the consumer prefers its brand over another • A company is at parity when its offering is at the industry par and consumers are willing to purchase their brand routinely Dominate Differentiate Parity A 5, 4, 3, 3, 3 profile/mix is optimal. Companies that try to be excellent in every attribute are either doomed to fail or leave significant money on the table. Source: CGE&Y Research and Analysis FC/080202 - CR for CP Mfg - Fred Crawford / 13

  14. Domination/Differentiation Strategies in Practice Primary Relevancy Attribute Price Access Attributes Experience Product Service Target,Maytag, Dixons, Mazda, Honda (car) IKEA, Southwest Airlines, Club Med, Gateway Lands’ End Avon, E*Trade, Tide Price Peapod (Ahold), Virgin,Four Seasons, Kraft McDonald’s, Gerber, Progressive Tesco,AutoZone, Craftsman Tools, Saturn Ferragamo, Gucci, Home Depot, Service Secondary Relevancy Attribute Harrods, BMW,Midwest Nike Stores, Rolex, The Disney Store, Superquinn, Citibank, Chevy Truck, Cont. Airlines Metro, Wal*Mart, Ames, Costco Walgreens, Yahoo, Amazon.com, Coke, Kodak, CNN, Gatorade Product Zara, Best Buy, Pier 1, Tumi, Tylenol Honda Goldwing Motorcycles Nordstrom, Singapore Airways Experience AOL, Hallmark Boots, M&M Mars (online), Dell Computer, American Express Casio Dollar General, Charles Schwab, Visa Sony, Pepsi, Frito-Lay, 3M, Whirlpool, Lowe’s iVillage.com, Starbucks, Marlboro Access FC/080202 - CR for CP Mfg - Fred Crawford / 14

  15. Moving from Myth to Reality Implications for: • Brand Tactics • All Supporting Business Systems FC/080202 - CR for CP Mfg - Fred Crawford / 15

  16. Manufacturer fully controls Manufacturer partially controls The CGE&Y CDTSM Model For Transforming Consumer Businesses Context Levers Community Selling Business Systems “Keeping promises efficiently” Brand Tactics “Making the right promises” Offer Messaging Brand Consumer Dis- continuities Customers Consumers FC/080202 - CR for CP Mfg - Fred Crawford / 16

  17. Context Lever - Examples Example Company • Whassup? • Just Do It! • Absolutely • Anheuser-Busch • Nike • Absolut Messaging • Everywhere, Always in Stock • Disintermediation, Consumer Direct • Coke, Frito • Dell Selling • Ben & Jerry’s • Tom’s of Maine • Harley • Cause Related • Cause Related • H.O.G. Community • Disney Films • Colgate Total • Martha Stewart • Licensing/Lifecycle • Lifecycle • Licensing/Lifecycle Offer FC/080202 - CR for CP Mfg - Fred Crawford / 17

  18. Context Lever - Examples Company Example • PL Strategy • Lifestage Management • Mass Consumer Brand Coherence • Reynolds Metals/Alcoa • Gerber • Bose Brand • Dollar General Special Pack • Gateway Country Store • Leveraging Dep’t Store Demographics • Dawn • Gateway • Clinique Customers • Tylenol Recall • Internet-Based Commerce • New Age Beverage • Technology Innovation • J&J • Dell • Pepsi • Mobil Speedpass, Blackberry Discontinuities • Kenneth Cole/Donna Karan • Enfamil • Craftsman Tools • Cohort Segmentation • Individualized Message • Service Recovery, Customized Offers Consumer FC/080202 - CR for CP Mfg - Fred Crawford / 18

  19. What is the Strategic and Operational Positioning for Companies That Will Drive Superior Financial Performance High Issue: Extend the lead Issue: Value-Leakage/ Execution Revenue Growth rate Company X Issue: Customer Relevancy/Differentiation Issue: Not meeting financial market expectations Low Profit Margin Low High FC/080202 - CR for CP Mfg - Fred Crawford / 19

  20. CR Provides the Foundation for Establishing Brand Integrity through Customer-Driven TransformationSM… Strategic Imperatives Mission Critical Capabilities Process & Organization Implications Technology Leverage Areas Vision & Business Objectives & Performance Metrics IT Infrastructure Information, Applications, Process, Organization FC/080202 - CR for CP Mfg - Fred Crawford / 20

  21. Manufacturing Marketing Sales SC Cust. Svce HR IT Store Ops Price Agentry Value Standard Standard Basic Productivity Low Cost No Frills Product Inspire Features Innovate Quality Inform Knowledge Dissemination Innovation Test/Use Service Customize Flexible Flexible Adaptive Response Satisfy Customers Customer Insight Educate/ Personalize Access Solution Answers Results Extend Empower Problem Solved Knowledge Mgt Comfort Experience Intimacy Comfort Lifestyle Integrate Custom Leverage Customer Interaction Facilitate Relationships …Which Ultimately Drives Different Operational Decisions… FC/080202 - CR for CP Mfg - Fred Crawford / 21

  22. ...By Creating Alignment, Forcing Trade-offs, Driving Speedand Generating Savings for Investing in Top-Line Growth Process/ Technology Leverage Areas Strategic Focus Areas Mission Critical Capabilities Initiatives Unaligned Non- Strategic Aligned Non-Strategic Aligned & Strategic Vision & Business Objectives & Performance Metrics Unaligned initiatives will be used to fund strategic initiatives Aligned, but non-strategic initiatives will be examined for alternative sourcing opportunities FC/080202 - CR for CP Mfg - Fred Crawford / 22

  23. Key Questions - Consumer Relevancy • Do consumers understand and care about your brand position the same way you do? • Can a consumer easily articulate the difference between your brand and the competition? • Do all of your senior executives agree on your brand position and that of your key competitors? • Do all of your employees understand the brand position, and their role in supporting it? FC/080202 - CR for CP Mfg - Fred Crawford / 23

  24. Key Questions - Customer-Driven Transformation • Are all business processes aligned to deliver the brand promise efficiently? • Do all key process owners understand their role in delivering the brand promise? • Are performance metrics aligned? • Are all current internal projects aligned with brand promise? FC/080202 - CR for CP Mfg - Fred Crawford / 24

  25. ThankYou!! Fred Crawford fred.crawford@cgey.com 917.934.8855 FC/080202 - CR for CP Mfg - Fred Crawford / 25

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