Converting Customer Value: From Retention to Profit

Acknowledgments xiii

Introduction xv

1. The Customer Profit Conundrum 1

Common misperceptions about customer profitability 2

An overview of customer profitability analysis 6

How to measure profit 6

The nature of customer costs 8

Customer profitability analysis (CPA) and activity-based costing (ABC) 11

A step-by-step approach to measuring customer profitability 16

Getting started with customer profitability analysis 24

Common barriers to customer profitability analysis 27

Running a CPA project 28

The results of CPA 30

Why do companies have unprofitable customers? 32

Improving customer profitability 34

The customer response 37

Management barriers to making changes as a result of CPA 37

Conclusion 38

2. Segmentation 43

Segmentation incorporating profitability 47

Step 1: Completion of customer profitability analysis 47

Step 2: Macro segmentation 48

Step 3: Verification/Reality check 50

Step 4: Micro segmentation 57

Step 5: Investigate if strategies and operations are aligned 59

Step 6: Align operations and implement tactics 65

Conclusion 68

3. Customer Focus 73

Segmenting business markets 75

Segmenting international markets 76

Each customer wants to be treated as an individual 77

Choosing customers 77

Managing the total customer experience 79

Leading the customer experience 80

Managing the impact of delays 81

Employees connect to the customer 83

Customer retention 84

What if customers charged the organisation for their time? 84

Data collection 87

Action plan 90

Listening to customers 92

Complaint management: customer satisfaction 93

Measures influence behaviour toward (or away from) the DCP 96

The ladder of loyalty 97

Recognise and reward loyal customers 97

Gauging customer loyalty 98

Micro-marketing is the ultimate in customer service provision 99

Monitoring performance 100

Why it is vital to build trust 103

Summary 103

4. Processes and Systems 109

Process reviews/Process improvement 112

Customer requirements 115

Identification of key processes 115

Process review 118

Business process re-engineering 122

Quality in the service industries 123

Management’s understanding of customers’ expectations 128

Complaints 129

Compliments 134

Summary 137

5. Employee Involvement 141

Retention of customers 144

Understanding key concepts 146

Controlling the continuum 147

Recruitment 150

Employee audits 154

Tools for the job 156

The team approach 161

Involve employees in setting performance and service standards 165

Listen to employees 167

Employee motivation 169

Performance indicators 171

Reward and recognition – linked to customer retention 175

What makes a great employer? 179

Employee retention 181

The value of performing exit interviews 182

Summary 184

6. Training and Development 187

Employees are assets 189

There is always a payback 190

Team establishment 192

Identification of training needs 195

Competence-based training 196

Service quality training 199

Teamwork training 201

Coaching 203

Just-in-time training 206

Formal recognition 207

How is the person at the top affected? 208

Managers as trainers 209

Training customers 209

Summary 210

7. Measurement 213

Benchmarking 216

Always measure customer reaction 216

Measurement tool creation 218

All measurements must be followed by actions for improvements 219

Priorities for success 221

How is total measurement relevant to business success? 222

Tracking net promoters 224

Measurement of people 225

Leadership 227

What to measure? 228

Measurement of performance 231

What are the thresholds within which customers decide if an organisation is getting things done right? 235

Managers are judge and jury 237

Who needs to know what? 239

Measurement and response to change 240

Production processes 241

Summary 248

8. Continuous Improvement 251

Advantages of continuous improvement 253

Teamwork takes the strain 253

Problems become opportunities 254

Improvement means shared information and ideas 256

Rewards come from hard work 256

How does one start a service quality initiative and then keep it going forward? 257

Keep outside suppliers of goods and services up to scratch 260

Shopping in the global marketplace 261

Ethical distortion of customer segments 262

Benchmarks 264

Field leaders and their recipe for success 269

How does one measure continuous improvement? 270

Nothing succeeds like success 274

Cost-effective captivity 275

Summary 276

9. Communications 279

Communication can be a response, or it can call for a response 283

Management has an ongoing role 288

Leadership is the key 290

Poor communication is both damaging and unfair to employees 290

What are communications? 291

Body language also sends messages 292

Is every communication necessary? 293

Make it easy for two-way communications 294

To the rest of the world, we are foreigners 295

Effective internal communication 296

Monitor the effectiveness of communication 297

Team briefings 297

Keep it simple 301

Keep the door open to doubters 302

Summary 303

10. Culture 307

What exactly do we mean by corporate culture? 307

Beginning to develop a culture 309

Think Christmas pudding 312

Hussey’s easier approach to fundamental change 319

Rule books 319

Growing and sustaining a customer-focused culture 321

Trust 325

The decline in customer satisfaction 329

Summary 337

Cycle of success 340

Case Study 1: Alfred McAlpine Business Services Limited 341

Case Study 2: Centrica 351

Case Study 3: Eversheds 355

Case Study 4: National Blood Service 359

Case Study 5: Shell 367

Bibliography 373

Index 381