Selected Stories
On Being Customer-Centered Home
The Value Story at American Express
The final and perhaps the most important
customer focus endeavor is its exploration of what it calls the 'value story'.
Most businesses understand that to earn and keep a customer’s patronage, they
must deliver significant value. They identify what customers want and then work
to meet those wants. If customers express satisfaction and return to buy again,
the companies conclude that the customer is receiving value. This inference of
successful value delivery is implicit and intuitive. Not at American Express.
Here, the customer value specification is a science. It is diligently
researched and carefully documented. The nature of its business model demands
it. The higher discount rate that it usually charges merchants is a significant
initial barrier to getting merchants to accept the American Express card
payment. They need strong reason for accepting the American Express card. That
strong reason comes from the "value proposition" it makes to
merchants. "Yes, our discount rate is higher," the company salesmen
would explain, "but we bring more business to you, business that would
otherwise be lost." To support that argument, American Express
salespersons come prepared with a presentation on their laptops, detailing the
value story.
The value story is developed and
maintained by a group that regularly surveys both American Express and
competing card holders to quantify their spending patterns. For each merchant
group, it estimates the additional business the merchant would get from his or
her trading area by accepting the American Express card. These estimates become
the principal arguments in the carefully crafted "value-story." Illustratively,
the salesman would proudly declare: ‘Among the American Express card holders
who shop at retail stores, 23% carry only American Express card; 82% of them
say that American Express is their card of choice for business retail
purchases. And that customers who pay by American Express card spend, say,
‘40-60% more on their retail purchases than those who pay by competing cards.’
--
From Chapter 3 Home
On Quality Obsession.
Cat measures its product quality by defect
rate, which is any failure in machine operations. It tracks these defects by
the age of the machine in three brackets—VEHR—very early hour failure,
registered within the first 21 hours of operation; DRF1—Dealer Repair Frequency
One, registered during 22 to 200 hours of operations, and DRF2, registered
during 201-1000 hours of operations. Such close tracking is part of its
vigorous Continuous Quality Improvement (CQI) programs.
For a glimpse of the vigor and power of
its CQI programs, let us briefly look at its CQI project for the paint job on
its tractors. While some might think of paint on a heavy machine as mere
cosmetic feature, Cat recognized that the quality of the paint job (good or
poor) is the first thing a customer notices. And, indeed, customers noted and
complained about such paint defects as poor coverage, runs and sags, embedded
dirt, and uneven gloss and finish. So the paint line team in the TTT division
set up a CQI project. The team identified and implemented improvements in
equipment, processes, and worker tasks. The result? Within 20 months since the
project started, the CQI team virtually eliminated all paint defects. And Cat
counts, mind you, any slight unevenness in finish on any square inch of the
tractor surface as a defect. And customer response? Customer complaints about
paint on the machines had declined from 113 in 1990 to 7 in June 1995, and to
zero since then!
--
From Chapter 8 Home
On Relational Nurture
Andrew Sterner is a District Sales Manager
in the Jacksonville Operating Division of SYSCO, the nation’s number One
foodservice company. He also happens to be an ex-chef. So one recent month, he
was helping a customer—a restaurant-- organize a benefit dinner for Alzheimer’s
Association on the anniversary of the sinking of the Titanic. He had already
secured 90 percent of the required food as donation, and he borrowed waitstaff
from yet another customer (restaurant). As for finding some cooking help, he donned
the apron himself and cooked a 13-course meal for 160 persons. And no ordinary
meal it was-- it was identical to the one served on the Titanic itself!
--
From Chapter 1
On Performance Value
To reduce error rate on reservations,
Rosenbluth International has developed a software that reduces the keystrokes
required for each reservation by 75%. The fewer the strokes, the fewer the
wrong key entries. Moreover, the agents have to work less harder, leaving them
much less stressed, which would further improve the quality of their
interaction with the customer. The company has also developed a proprietary
quality assurance system that checks every reservation in real time. The system
can check 2000 reservations an hour. The result: the wrong tickets will never
be mailed out to clients!
--
From Chapter 4
On Innovations Home
Continuum: Travel Lab of the Future
The real showcase of RI’s innovativeness sits
on the fifth floor of its Philadelphia Headquarters building; it is a
futuristic travel laboratory called ContinuumÒ . In this state-of-the art
research and development laboratory is housed a carefully assembled collage of
prototypes of travel products and services. A testing ground for new product
ideas from a number of partner companies (in travel, technology, and
telecommunications) which provide a variety of services to the traveler. Among
its current list of partners are Apollo, AT&T, British Airways, Continental
Airlines, Alamo Car rental, Palm Computing Inc., Loews Hotels, Visa, and Lucent
Technologies.
One of the exhibits is a cut out section
of an airplane— a prototype interior design that British Airways wants to test.
Another is a section of a hotel room by Loews Hotels, featuring a contemporary
functional design for the business traveler. Yet another exhibit is AT&T’s
smart card that will allow customers to make and receive wireless calls
worldwide. Finally, there is the video-conferencing technology complete with an
oversized smart-board that is Rosenbluth’s own invention.
These are not mock displays, mind you.
They are fully functional, exactly as they would be when and if commercially
launched. And they, or their modified versions, will be launched if enough
positive customer feedback is received. From visitors to Continuum. You see,
what Rosenbluth does is to bring corporate travel managers and senior
executives, who are themselves heavy travelers, to the Continuum and ask them
to record their reactions on an electronic keyboard as they tour the facility.
This customer feedback is then analyzed and shared with the partnering
companies, for them to act on. Not only are the travel products and services
being tested innovations-in-development, but the method to market test them is
also innovative.
-- From Chapter 4 Home
On Being Customer-Centered
That takes 3M deep into customer
operations, deeper sometimes than the customer him/herself might be. Take
textile mills, for example. One of them is a 3M client, for a bonding material
that holds a rubber sheath to a roller. What is the total cost of running this
machine including the setup cost for replacing the rubber sheath at periodic
intervals? That is what the customer didn’t quite know; that is what 3M tried
to figure out. And 3M set out to reduce the total cost of this operation. Its
solution: replace the bonding resin with a hook and loop system. That method
takes less time to replace the rubber sheath; it consequently reduces machine
downtime; which reduces the total cost of operation. What will be the price of
the new system? It is set at a level so as to equitably share the gains from
the improved solution. The client saves money; and 3M makes more money. It is a
win-win situation. This is what Maier means by ‘delivering lowest total cost’.
-- From Chapter 3 Home
On Price Value
Price value to SYSCO customers comes not
as much from the price they pay SYSCO for a certain quantity of product versus
what they would have paid to a competitor. Rather it comes from how much actual
food they can make for their patrons from the same quantity of ingredients--
from the ‘yield’ that is. "We have done many many actual, what we call,
"cuttings" i.e., serving size strips of competing products and our
product, and the results show that the yield, the number of servings that our
customers consistently get is significantly higher than our competitors,"
says John Stubblefield, Executive VP of Finance at SYSCO Corporate.
Can this claim be supported? Yes. SYSCO
has documented "true value" to the customer for thousands of
products. Here is a sampler:
--
From Chapter 5 Home
On Fair Pricing
"We consider competitors’ prices and
also our own costs of doing business. If we find that competitors’ price is say
$800, and if we feel that $800 is too much, unjustified by the benefits, and we
can make a fair profit at, say, $300 then we are going to charge $300. Because
then, the customer would be happy. And for $800 we can sell them many more
services, and with those services the customer would be better protected and
they would be more satisfied with their decisions, and that pays off in our
long-term relationship. So we want to sell more – more services, and more cars
to a customer over the long haul rather than charge more in any single
transaction."
So mindful of the price value is the home
office that they monitor individual dealer’s prices on the protection services,
and if they find some dealers selling at more than a fair price, they call them
up and get them to refund the excess charge to the customer. "It doesn’t
happen often, but it has happened on a few occasions, and we have forced the
dealer to refund money to the customer," says Westfall.
-- From Chapter 5 Home
On Relational Nurture
As to relational nurture, PPG’s interface
with its customers takes the form of a partnership where they together explore
new avenues of value. Let us hear Fuentes, Fine Chemical’s General Manager,
explain it: "We have done supply chain meetings, to identify
cost-reduction strategies. In these meetings, we ask questions like, why is
certain purity level needed; why are you specifying a certain drum; can you
plan longer; can we reduce freight. In this case, we identified ways of
reducing freight. We now have a dedicated driver; we charge them the cost of
the driver but it is a lot cheaper than using a commercial freight company.
This customer buys from us 8-9 million worth of product and we saved him
$50,000 in freight, which is important to him. The result (of such meetings) is
that the customer gets committed to us and sees no reason to look for someone
else."
--
From Chapter 6 Home
On Relational Nurture
A key pillar for fostering a relational
mindset, and indeed of implementing that mindset in actual behavior, is XBS’s Focus
Executive program (a practice common across the entire Xerox Corporation). Under
the program now in effect for more than 10 years, an XBS executive is assigned
2 or 3 major clients to build relationships with the senior management at the
client company. This Focus Executive is different from the Account Manager,
Field General Manager, or Account supervisor. The latter are in place to manage
day-to-day client operations. The role of the Focus Executive is to identify a
senior executive (or executives) at the client company who would act as a
strategic partner. The Focus Executive also serves as the point of highest
contact within XBS to have any problem resolved. Says Patterson, himself a
Focus Executive for a few clients: "The client knows he or she can always
reach a member of the senior management should there ever be a problem. I meet
my counterpart in the client organization regularly. There develops a
relationship at the management level —person to person, one-on-one, that is
invaluable. To both the parties."
--
From Chapter 6
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