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Creating Advantage By Satisfying The Customer Over Time

Customer Analysis Case Study. Creating Advantage By Satisfying The Customer Over Time. This means ... Knowing the customer's changing needs and wants, and how they rank in importance. Knowing how you perform when satisfying those needs and wants.

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Creating Advantage By Satisfying The Customer Over Time

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  1. Customer Analysis Case Study Creating Advantage By Satisfying The Customer Over Time • This means ... • Knowing the customer's changing needs and wants, and how they rank in importance. • Knowing how you perform when satisfying those needs and wants. • Fulfilling those needs and wants at the lowest possible cost. The next several slides present two illustrations. These specific situations were selected because they demonstrate the importance of knowing the customer, knowing how you rate in satisfying the customer, and how to use information about the customer to reduce your costs. The illustrations depict companies in mature industries. The importance of developing a customer advantage and the benefits to all in the channel of doing so should be apparent.

  2. SATISFYING THE CUSTOMER Three Critical Dimensions To Satisfying The Customer • Who is the customer? • What does the customer want? • How are you doing with the customer? Only with these answers can customers be profitably satisfied!

  3. WHO IS THE CUSTOMER? A regional mass merchandiser, who once "owned the market," now competes against the big three. He has an established market position but declining profits, and is now evaluating his next steps. When we asked "Who is the customer?" we received two responses. Purchasing Department Marketing and Sales Department Do Not Enter Focus On Focus On Low-Income Consumer High- to Middle-Income Consumer The difference in each department’s understanding of who the customer is had significant implications for inventory mix decisions, pricing policies and operations.

  4. WHO IS THE CUSTOMER? Number of Competitors Profit Per Store Market Size 10 $4 Million 8 $8 Billion Market $3 Million 6 $2 Million Low-Income 20% 4 $1 Million 2 High- to Middle-Income 80% 0 $0 Million Low Income High- to Middle-Income Competitors In Area Profit Per Store • A large opportunity exists around their stores in both markets. • There is stiffer competition in the high- to middle-income market. • Stores serving low-income markets are more profitable. • This retailer is better positioned to serve the low-income market.

  5. WHO IS THE CUSTOMER? The Messages In The Illustration • One cannot serve all customer segments as profitably or as effectively as selected ones. One must choose which customers to satisfy and where to focus its resources. • After making a choice of which customers to serve, one needs to create and internally communicate a clear vision and gain commitment. • Customer satisfaction, at a profit, can only occur after this. Questions For You To Consider • Which customer segments are most profitable for you? • What are the challenges these segments are confronting which will impact you? • How do you track these changes and your position? • How does your entire organization stay in touch with changing market realities and coordinated in its response to the changes?

  6. WHAT DOES THE CUSTOMER WANT? A large manufacturer produced five product lines and had a strong market position. But, the company was only marginally profitable. Management was contemplating what to do. When we asked them what their internal perceptions were regarding their customers' wants, they offered a "gut feel," but had no hard internal data. Internal Perception External Perception (what customers want) (what management thinks) 1. Best product ? 2. Broadest product line 3. Best engineering 4. Special design capability

  7. WHAT DOES THE CUSTOMER WANT? What The Customer Says Customers were asked to rank the importance of 14 different satisfaction attributes on a scale of 1 to 5, with 5 being the most important. Importance Ranking 4.5 4.0 3.5 3.0 Parts availability Low price Product innovation Product line breadth Spare parts packaging Quick response to inquiry Customer specialty items Brand recognition Quick delivery On-time delivery Sales rep attention Tech. training Tech. assistance High product quality

  8. HOW ARE YOU DOING WITH THE CUSTOMER? What The Customer Says The company is under performing in areas identified as most important, and is expending resources to over perform in areas which are not as highly valued. 4.5 Importance Ranking Performance Ranking 4.0 Under Performing Over Performing 3.5 3.0 Low price Tech. training Quick delivery Parts availability On-time delivery Tech. assistance Brand recognition Product innovation Sales rep attention High product quality Product line breadth Spare parts packaging Customer specialty items Quick response to inquiry

  9. REDUCING COST WHILE SATISFYING THE CUSTOMER Eliminate Those Activities Which Support The Attributes Not Valued By The Customer And Reduce Your Cost Product Image Related Attributes 25% Other Valued Attributes 30% • Redirect Effort Of Company • Eliminate nonvalued activities • Augment valued activities • Allocate resources to get satisfaction ratings up in areas considered critical by the customer Delivery Related Attributes 40% Nonvalued Attributes 5% The pie chart illustrates the characteristics of customer satisfaction, which were ranked in importance on the previous slides, after they have been aggregated into four attribute categories to include those attributes; related to delivery, related to product, other attributes which were valued and those other attributes that were not valued.

  10. WHAT DOES THE CUSTOMER WANT? The Messages Of The Illustration • Internal perceptions do not necessarily reflect external realities. • Only spend resources on those things the customer values and do those things only as well as the customer needs. • Recognize the customer's expectations will change over time. • Track these changes and your performance. • Adjust your capabilities and processes in tune with target customer expectations. • Customer satisfaction, at a profit, can only occur after this. Questions For You To Consider • How do you know what your customer expects and how do you rate in fulfilling? • What programs are underway to align your business to customer expectations? • What are you doing to position your company in the mind of the customer? • When the customer thinks of you, what does he see? Is there a GAP between what they think and what you think?

  11. CUSTOMER IS ONLY ONE ELEMENT IN CREATING ADVANTAGE • Today, the game has changed. To sustain profitable relationships, you must implement a four prong strategy: • Understand and respond precisely to targeted customers • Streamline all business processes - internally and in the channel • Eliminate time and cost from the business equation • Build enduring profitable relationships with employees, customers and suppliers

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