Page 275 - DMGT308_CUSTOMER_RELATIONSHIP_MANAGEMENT

Customer Relationship Management

Notes how customers perceive the product relative to a competitor and how price and quality
perceptions will affect their choice in purchasing (Gallagher & Kordupleski, 2000). Most of the
analysis work is in determining the components to quality, although depending on the product
and category, price can have several components that require analysis as well. When performing
this analysis, perceived price (or price satisfaction) and perceived quality are the key measures
versus actual price and quality. Surveys are a primary means of capturing CVA data. Frequencies
and sampling can vary depending on how dynamic the customer base and competitive
environment are and how frequently internal processes within the company change.
CVA fits inside of a comprehensive framework call Customer Value Management (CVM). CVA
is the information component of customer value management (APQC, 2001).
CVM has a strategic component that helps companies answer four basic questions:
1. Where are we now?
2. Where do we want to go?

3. How do we want to get there?
4. Are we there?
CVM also has a continuous improvement component or an operational component that helps
companies understand the root cause of delivery failures, improve the value delivery systems,
enhance team development across all improvement initiatives and establish customer recovery
or intervention programs to keep and enhance profitable customers and shed unprofitable ones.
The APQC identifies four basic steps for establishing and monitoring a CVM measurement
system:
1. Identify strategic priorities in the context of customers and products.
2. Conduct qualitative research to get a comprehensive understanding of the ways customers
think about value.
3. Conduct surveys that will provide data for analysis so that the company can determine
what from the customer’s perspective are the 3-4 key benefits of the 10 or 12 benefits for
each product. These surveys need to be specific to customer segments.
4. Monitor the value proposition with a limited subset of questions.
CVM proponents feel the method addresses limitations within the customer satisfaction survey
approach. According to the APQC, customer satisfaction scores lack linkage to key internal
performance metrics and may be unrepresentative of how customers really evaluate product
and service purchase decisions. The customer satisfaction framework is older and widely adopted
in North America while the customer value framework is newer and being adopted by leading
edge companies (Gale, 2002). Gale positions CVM as the latest evolutionary version of voice-of-
the-customer initiatives with conformance quality as the first followed by the customer
satisfaction and then the customer loyalty paradigm.
Loyalty Monitoring: Frederick F. Reichheld’s writings on loyalty (not just customer loyalty, but
employee and shareholder loyalty as well) are widely cited with the CRM world as a framework
for measuring the effect of customer-facing activities. This measurement framework helps
companies look at the customer base along a longitudinal axis. The central notion is that if a
company can cause fewer customer defections, the long-term effects on company performance
would be significant. Customer loyalty data, then, serves as a predictor of financial performance.
For example a 5% increase in customer retention rate can have between a 30% and 95% impact on
customer net present value and a similar impact on corporate profits (Reichheld, 1996).

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