Providing Outstanding Value

Every once in a while we run into an incredible value delivery situation and feel compelled to comment. I just had such an experience with a supplier of color printer supplies. These folks obviously know what the critical to quality factors are for their business customers – and they deliver!

I had just tried this supplier of color toner for the first time. After replacing one of my toner cartridges I began having printing problems – streaking of the toner I had just replaced. I contacted the supplier, and they immediately agreed to replace the cartridge – and did so overnight. Unfortunately, the problem continued and I reported back.

This time the supplier began to act like a repair service. They sent me specific files to print to try to assess the problem, They made several suggestions, which we tried – to no avail. Then – get this – they had a working model of my printer in their facility which they disassembled – while instructing me to do the same – in order to diagnose the problem. At this point, they believe that the problem is associated with another part in the printer (the transfer belt, for you technophobes). I expected them to toss the problem back in my lap. Are you ready? They volunteered to send a replacement for the malfunctioning part in order to see if that will solve the problem. And they expect the new part to be here tomorrow (Friday). And they asked if they could call back on Monday to see how things turned out!

Here’s a manufacturer of printer products that clearly understands what drives quality and value from a customer point of view – and they understand that it goes well beyond the physical product itself. As for the physical product – that’s table stakes. So long as they make good products, they’ll remain in the game. How do they differentiate? By understanding those CTQs better than the competition! Do their people and processes deliver the goods? In remarkable fashion! Will they continue to get my business? You bet!

By the way – the name of the company: Media Sciences. And no, I have nothing to do with them other than being a (future) loyal customer.

 

Six Sigma Marketing: You Can’t Pound a Nail with a Screwdriver

Several writers have commented on Six Sigma Marketing. The major thrust of these comments is focused on how to apply Six Sigma to Marketing. And, while making Marketing and Marketing activities more efficient, Six Sigma Marketing must focus on making Marketing more effective – actually acheiving sales and market share objectives.

Six Sigma Marketing is all about integrating the disciplined, data driven principles of Six Sigma with Marketing’s focus on revenue growth and market share. This integration has as its core the idea of value – creating and delivering the highest quality at the best price. Value has been shown to be the best leading indicator of sales and market share growth.

Six Sigma Marketing accordingly, requires a new set of tools not resident in either Six Sigma or Marketing. In other words, applying the tools of Six Sigma to Marketing will not do the job. You can’t pound a nail with a screwdriver. You have to learn how to use a hammer.

Six Sigma Marketing requires the jettisoning of much of the conventional wisdom surrounding both Six Sigma and Marketing. Chief among the ideas that have to change is the reliance on customer satisfaction as the principle metric. Satisfaction has little, if any, linkage to changes in sales and market share. Consequently it makes little sense to rely upon customer satisfaction as the strategic goal since it does not impact either sales or market share. Customer value does.

Market Value Solutions has been practicing Six Sigma Marketing for about ten years and experiencing significant successes. The tools of Six Sigma Marketing are powerful and provide a clear guidance for growing sales and share. No longer does Marketing have to be agenda driven or based on company lore. Six Sigma Marketing is driven by the voice of the market (VOM) and not the VOC (voice of the customer).

In subsequent blogs I will be discussing several other points of departure between Six Sigma Marketing and Six Sigma and Marketing as it is currently practiced.

For more information on Six Sigma Marketing contact Dr. Eric Reidenbach at Eric@marketvaluesolutions.com or call 601 213 4849. Dr. Reidenbach is the author of the soon to be released book, Six Sigma Marketing, to be published by ASQ’s Quality Press.

 

The Black Belt and Six Sigma Marketing

(With apologies to Lewis Carroll, the Walrus and the Carpenter)

“The time has come,” the Black Belt said,
“To talk of many things:
Of Markets, and value and quality
OF Six Sigma Marketing,
Why we are short of projects
And, how to move away from simple cost cutting.”

“But wait a bit” the CEO cried,
“Our market share is low
With poor quality and poor value
How are we to make our sales grow?”
“No worries” said the Black Belt
“Six Sigma Marketing is clearly the way to go!”

“The Voice of the Market,” the Black Belt said
“Is what we chiefly need-
Value and value tools besides
Are very handy indeed…
Now if you’re ready, O Six Sigma team
Let us plant, grow and nurture the SSM seed.”

“But lose the VOC?” the team cried
Turning a little blue,
“After such a long dependence, that would be
A very radical thing to do.”
“The path is clear,” the Black Belt said
For now, more than ever, we need the market view!”

“But what of DMAIC?” all the lesser belts did cry,
“Or the 4Ps?” the diffident marketers whined.
“No sweat” said the Black Belt
“Six Sigma and Marketing are now aligned.
It’s time for us to change,
For Six Sigma Marketing – this is the exactly time.”

“Six Sigma Marketing” the Black Belt said
“Is what we need to do.
Forget the cost cutting
Instead, let’s concentrate on revenue.
It’s time to think externally
And how we can create and deliver superior value.”

“O defect reduction”, the Black Belt intoned,
“You’ve had a pleasant run.
Let’s turn our face to market share
And start to count the mun!
With Six Sigma Marketing our success is guaranteed
Our superior value will put all of our competitors quickly on the run.”

For information on Six Sigma marketing contact Eric Reidenbach at eric@marketvaluesolutions.com or 601 213 4849.

 

Value Propositions versus Sales Propositions

Just came across a question from a “Marketing Profs” reader regarding the communication of her organization’s value proposition.  Once again, the questionner revealed a fundamental misunderstanding of the difference between the organization’s existing value proposition and its promotional, or “sales” proposition.

 Every organization already has a value proposition – one that exists in the minds and perceptions of its current and potential customers. In fact, most organizations have multiple value propositions – one for each of their products or services within each of the markets they serve.  The first challenge these organizations face is to quantitatively identify those value propositions (i.e., measure them), and then to manage them in order to maximize the value delivered.

Stephanie’s question makes it clear that her CEO is really looking for a sales proposition – a statement that will effectively communicate what the organization provides.  That’s all well and good if the organization understands the nature of its existing value proposition, which means that it can quantify the relative importance of Quality, Image, and Price, and that it can further quantify the relative importance of the key components of Quality – those critical-to-quality factors, or CTQs, in Six Sigma parlance.  This requires the type of measurement that will produce a model of Market Value.

The second thing Stephanie’s CEO will require is a quantitative assessment of how the market perceives the value that his company delivers versus the value provided by competitors – because one of the fundamental aspects of value is its relativity.  This assessment will enable the CEO to identify value performance gaps – areas where his organization is outperforming competitive, and areas where his organization is underperforming.

Here’s where the real answer to Stephanie’s question comes in: she can now develop a sales proposition to summarize those positive gaps (organizational strengths) identified by the value measurement system.  Moreover, her organization can now also develop strategies and actions to “fix” those negative gaps (value-based weaknesses).  So, she gets a double whammy for her measurement efforts: an effective sales proposition, and the basis for the development of future organizational strengths.

Oh, and Stephanie made one other significant point: she thinks that the sales proposition should be unique for each customer, but is puzzled about how that translates into effective mass market advertising.  That goes back to the first point I made, namely: the organization will have a unique value proposition for each product/service it provides to each market it serves.  So, develop a product/market matrix for the organization, evaluate the importance of each business opportunity, and go after the ones that will provide the greatest return on investment!  It’s really pretty simple – but extremely powerful!

 

Pricing Problems Are Often Hidden Value Problems

At a recent meeting of manufacturers, a question arose regarding the importance of price. One participant bemoaned the need for reducing price to stay competitive. He argued that competition was compelling him to reduce price and this, of course, was hurting his margins. When asked why price cutting was the only option he replied, my product is a commodity. It is undifferentiated from the products of my competitors. There was a lot of head nodding, indicating the apparent universality of the issue.

What to do? The quick answer to those not in this situation is simply don’t get into this situation. Once you fall into the commodity trap it is extremely difficult to get out. You have taught your customers that there is no difference between you and your competitors. The only thing that can differentiate you is price. This starts a downward spiraling falling further and further into the commodity abyss. I asked the gentleman who brought up the subject how frequently he talked with his customers. Do you clearly understand what it is that they value? Did he understand what the specific critical-to-quality factors were? Could he prioritize them in terms of importance to the customer? He offered a couple of answers, each of which was contested by the other participants. While there was unanimity about the nature of the problem, there was no unanimity regarding the nature of the CTQs and their importance. In other words, there was considerable doubt as to whether this manufacturer, or any others present for that matter, really understood their customers!

Value is defined as the quality of the product or service relative to the price of the product or service. Too often, companies that think they have a price problem really have a value problem. Think about it. When customers want a price cut they are actually telling you that they do not think that the quality you are providing is worth the price you are charging. Is this a pricing problem or is it, in actuality, a value problem?

The commercial banking industry is a classic example of an industry that has actually managed itself into a commodity position. With little differentiation among offerings, be they checking accounts, credit cards, savings accounts, mortgages, etc. the only variable left to manipulate is price or rates. They have taught the banking public that there is no difference among banks – a bank is a bank is a bank – similar to pieces of corn or other commodities.

Understanding how customers define quality and value is critical to non-price competition. These CTQs will not be limited solely to product or service characteristics. They will include such factors as ease of order placement, order confirmation, on-time delivery, repair capabilities, technical support, correct billing etc. Too often these factors are overlooked because some organizations, especially manufacturers are very product oriented and not customer focused. The point is, these are customer defined CTQs and not the guesses of internal personnel. Some people will tell you that some information is better than none. Some information, especially if it is erroneous, can be worse than none.

Two questions: What are your customers key CTQs and what is their order of importance?

For more about this subject see: www.marketvaluesolutions.com.

 

The Dissatisfaction with Satisfaction

The conventional wisdom says that a satisfied customer is a profitable customer. Reality, as is often the case, denies the conventional wisdom. Here is some unconventional wisdom about satisfaction.

• Satisfaction is a lagging indicator. It is a reactive response to an experience.
• It is synonymous with happy. A satisfied customer is a happy customer. This is an emotion.
• Satisfaction typically focuses only on the organization’s customers and ignores the competitive dynamic that drives changes in market share and top line revenues.
• Satisfaction ignores the interaction of price and quality. It is this interaction that makers value the powerful concept that it is.

All of the above reasons explain why satisfaction has little, if any, linkage to changes in market share. This is why:

• during the 1980s AT&T was losing market share while experiencing some the highest satisfaction scores in their history.
• during the same period, Cadillac was losing market share among its most satisfied customers.
• one of our clients was churning 50% of its satisfied customer base.

Moreover, Fredrick Reichheld, writing in the Harvard Business Review (2003) about the lack of linkage between satisfaction and performance states:

Indeed, in some cases, there is an inverse relationship; at Kmart, for example, a significant increase in the company’s ACSI rating was accompanied by a sharp decrease in sales as it slide into bankruptcy…Our research indicates that satisfaction lacks a consistently demonstrable connection to actual customer behavior and growth. This finding is borne out by the short shrift that investors give to such reports as the American Consumer Satisfaction Index. The ACSI, published quarterly in the Wall Street Journal, reflects the customer satisfaction ratings of some 200 U.S. companies. In general, it is difficult to discern a strong correlation between high customer satisfaction scores and outstanding sales growth. (p. 4)

This lack of linkage makes it even more perplexing why many Six Sigma writers and practitioners hang their hats on customer satisfaction as an objective especially when the stated target is increased value. If value is the objective, then value should be measured, not satisfaction!

Two questions: How many are still using customer satisfaction as a strategic metric and how successful have you been in linking it to market performance (top line revenues, market share or profitability?

For more on this subject go to www.marketvaluesolutions.com.

 

Putting Value into Your Value Proposition

The concept of value is not new. In fact, in 1776 Adam Smith makes use of it in explaining how a market-based economy operates. What is new is our ability to measure value and with that measurement capability comes the added power of being able to manage it. Value is the interaction between the quality of a product or service and the price that the customer has to pay to get that product or service.

Customers buy on the basis of value whether what they are buying is an automobile, cheese, tractors, bank accounts, or any other product or service. One of the strongest buying signals customers use is the value proposition that a brand or organization communicates. Every brand or organization has a competitive value proposition whether it knows it or not. And, often times it’s not the value proposition that the organization desires. The US auto industry has been trying to change its value proposition since the 1970s when American car buyers began to find superior value in Japanese and German cars and continue to do so today. Toyota is threatening to become the number one seller of automobiles in the US. The banking industry has been hemorrhaging customers to other financial services options as customers realized that they could get better value elsewhere. KMART lost the value battle to its arch rival Wal-Mart.

Value is a relentless shaper of competition and industries. Unfortunately, too many organizations turn a blind eye to their value propositions failing to understand that if they are not actively managing their own value proposition, their competition is. That’s because value is relative. Your organization’s value proposition is relative to that of your competitors. And, if they are actively and effectively managing their value proposition, they are also managing yours.

Lean and Six Sigma are two methodologies for shaping an organization’s competitive value proposition. Unfortunately, many organizations have turned these powerful tools inward focusing on cost reduction instead of value creation. But fortunately, this practice appears to be changing. Don Linsenmann, a VP and Corporate Champion of Six Sigma at DuPont delineates four generations of Six Sigma:
• Generation 1: a focus on defect reduction
• Generation 2: a focus on projects that affect the bottom line
• Generation 3: a focus on value
• Generation 4: a focus on the customer experience and enterprise value
I would agree with Mr. Linsenmann. Six Sigma as a customer focused value enhancing tool is still in its infancy. Black belts have told me that to elevate Six Sigma to the next generational level requires an ability to:

1. Clearly identify the CTQs (critical to quality factors) for a specific market segment using a product or service
2. Prioritize the importance of the CTQs to this segment
3. Link these CTQs to specific processes within a value stream
4. Clearly identify and prioritize Six Sigma projects designed to enhance the organization’s competitive value proposition.
Two questions: What is your competitive value proposition (if you know it) and, at what generation of Six Sigma is your organization?