Course Code: BRL – 013
Course Title: Customer Value Management
Assignment Code: BRL – 013/TMA/2014-15
Coverage: All Blocks
Maximum Marks: 100
Attempt all the questions.
(A) Short Type Questions
1) What is Customer Perception? How is it different from Customer expectation?
Solution:-
Customers or Consumers Perception:
Merchants aim to increase their sales by determining what drives their customers’ purchase decisions. Consumer perception theory attempts to explain consumer behavior by analyzing motivations for buying — or not buying — particular items. Three areas of consumer perception theory relate to consumer perception theory: self perception, price perception and perception of a benefit to quality of life.
Definition
Consumer perception applies the concept of sensory perception to marketing and advertising. Just as sensory perception relates to how humans perceive and process sensory stimuli through their five senses, consumer perception pertains to how individuals form opinions about companies and the merchandise they offer through the purchases they make. Merchants apply consumer perception theory to determine how their customers perceive them. They also use consumer perception theory to develop marketing and advertising strategies intended to retain current customers — and attract new ones.
Self Perception
Self perception theory attempts to explain how individuals develop an understanding of the motivations behind their own behavior. Self perception by customers relates to values and motivations that drive buying behavior — which is also an important aspect of consumer perception theory. For instance, a study by researchers at the University of Massachusetts at Amherst addressed how self perception shaped consumers’ buying behavior. The study considered the question of whether consumers believed their buying decisions had a real effect on issues such as environmental impact. The researchers concluded that consumers’ self perception was a driving factor in whether or not they placed a priority on socially conscious purchase and consumption practices. Consumers who viewed themselves as socially conscious tended to place more weight on issues such as environmental impact when making buying decisions than consumers who did not hold similar views of themselves.
Merchants aim to increase their sales by determining what drives their customers’ purchase decisions. Consumer perception theory attempts to explain consumer behavior by analyzing motivations for buying — or not buying — particular items. Three areas of consumer perception theory relate to consumer perception theory: self perception, price perception and perception of a benefit to quality of life.
Price Perception
while mass merchandisers such as Wal-Mart emphasize low prices as an inherent virtue, upscale merchants attempt to emphasize quality and value for money to appeal to potential customers. Researchers at the School of Business Administration at LaSalle University and LeBow College of Business at Drexel University considered several factors, including price perception — whether consumers believed they were being charged fair prices — in determining whether online shoppers would make repeat purchases through the same website. The researchers concluded that price perception strongly influenced whether customers were satisfied with their purchases and whether they would make future purchases. Two factors that shaped price perception were the perceived quality of the merchandise or service in question and price comparisons with merchants offering similar merchandise or services.
Benefit Perception
“It’s good, and it’s good for you.” Many consumers are familiar with this phrase frequently associated with food advertising. Researchers from Marquette University, Louisiana State University and the University of Arkansas surveyed customers to determine how nutrition claims associated with food affected their perception of that food’s nutritional value. The researchers found that consumers tend to reject general, unsupported claims of enhanced nutrition, especially concerning high nutritional value for foods that are traditionally viewed as unhealthy. The researchers also theorized that consumers would demonstrate a trend toward applying more scrutiny to nutrition claims and would demand more specific information about the foods they purchase.
Customer expectations
Excellent customer service and high customer satisfaction must start with understanding customer expectations. You need to know who your customers are and what they want.
When measuring customer satisfaction, companies generally ask customers whether their product or service has met or exceeded expectations. This is an important question to ask and is a key factor behind satisfaction.
When customers have high expectations and the reality fall short, they will be disappointed and will likely rate their experience as less than satisfying. For this reason, luxury resort, for example, might receive a lower satisfaction rating than a budget motel—even though its facilities and service would be deemed superior in ‘absolute’ terms.” – Marketing Metrics
Customer expectations set the bar for customer satisfaction which also affects repurchase decisions and customer loyalty. If a customer feels like you did not deliver a service that was expected, they won’t come back and buy from you again. On the flip-side, if you deliver a service that exceeds customer expectations, you can bet they will come back to buy again, and tell all their friends about the experience.
2) Discuss the customer value hierarchy model.
Solution:-
CUSTOMER VALUE HIERARCHY MODEL
1. Contour Model of Customer Value Hierarchy
Woodruff enhanced the CVD indicating how customers consider products in a hierarchical structure. The customer value hierarchy is presented in figure 1.
Figure 1: Customer value hierarchy
From the bottom of the customer value hierarchy, customers firstly consider the attributes and availability of products. At the second layer, customers begin to make expectations according to these attributes. At the top layer, customers form expectations about the realization of their aim. In this paper, the mobile customer value hierarchy consists of the customer demand objective layer, the Consequence layer and the attribute layer.
The objective layer – The objective layer includes the ultimate motivations of customers engaging in mobile telecommunication services. Customers may have multiple motivations in the objective layer.
Consequence layer – The Consequence layer represents the customer experience of mobile services.
Attribute layer – The Attribute layer specifies the usage of mobile services.
2. Determination of Mobile Customer Value
Hierarchy Model
In order to uncover the attribute-consequence-objective chain, an in-depth interview technique called “laddering” was developed [9]. Subsequently, Walker and Olson developed a paper-and-pencil version [12]. Laddering refers to a 2-stage process. (1) Elicite the salient criteria for products/services discrimination, which is feasibly achieved by direct specific interview.
In this step, concrete attributes (e.g. price) and abstract attributes (e.g. efficiency) are identified. (2) Elicite the salient attributes (concrete or abstract) form the top to the bottom of the customer value layer, which will reveal the entire means-end structure (this step is called the laddering probes). This stage is achieved by continuous enquiring such questions as “How important is the service to you? And why?” The response of each customer value layer is used as the basis for further questioning. This iterative questioning is a means to “abstract the subject up to the top of customer value layer” until the objective layer is determined.
Based on the complete chain of customer value layers, the next step in the procedure is to shift the layers from the individual perspective to the aggregate perspective of a group of customers. We can accomplish this step by using association methods to find the association rules among attributes of different layers or by cumulating the “connection” times of two adjacent layers’ attributes.
Based on the mobile customer interview made in Zhang Jiajie, this paper constructs the mobile customer value hierarchy presented in figure 3. The factors of objective layer and attribute layer are defined as the variable a2（i=1, 2…29）which is presented in table 1.
Table 1: Mobile customer value hierarchy
Objectives
Consequences
Attributes
Communicative
Object (a26)
Convenient
communication,
short message service
call waiting
call diversion
little secretary
voice mail box
a1
a2
a3
a4
a5
Business
Object(a27)
High quality,
knight service,
high standing,
convenient
business
U-net
Routine service
Ticket booking
Uni-colour E
E- bank
Stock exchange
Mobile purchase
a6
a7
a8
a9
a10
a11
a12
Recreational
Object(a28)
Identification,
Fashion,
pleasure,
Have fun
Color ring back tone
mobile ring
mobile picture
E-game
chat
mobile movie
a13
a14
a15
a16
a17
a18
Informational
Object(a29)
knowledge,
in time,
information
News service
Weather info
Travel info
Finance info
Physical news
Entertainment info
U-map
a19
a20
a21
a22
a23
a24
a25
Figure 2: Mobile customer value hierarchy
3) Explain the concept of customer value generation.
Solution:-
Value generation or creations is perhaps the single most important aspect of any executive’s job. As such, crystal clarity on what it is and how it’s done should certainly be top of mind. Shareholder value is fueled by customer value; shareholders leave when customers leave, not the other way around. Customer value is an ambiguous term, as it can be used either from the company’s or the customer’s perspective. Few companies know the lifetime value of their customers, or collective customer equity, and more importantly, fewer still know how much customers value their brand, and why.
Why care about how much customer’s value your brand? Because the customer view of the company’s value is a predictor of market share and shareholder value. Vodafone’s Graham Maher, Managing Director, says “The Customer Value Management (CVM) score is a leading indicator of Vodafone’s market share. We were able to predict market share a quarter out using CVM data, to within 1% accuracy! In fact, the Finance Director said the CVM score is more robust than any of our financial scores.” Customer Value Management (CVM) is a best practice for predicting customer behavior and business results, proven by 3M, AT&T, BP, BT, Chase, Disney, GE, HP, J&J, Kraft, Lucent, Nokia, Philips, Roche, Sonoco, S&P, Tata, TI, Vodafone, Whirlpool, Wisconsin Energies, and many other companies. “If you can create value, you can increase your prices. In point of fact, no one talks much about value anymore”, explains Gautam Mahajan, president of Customer Value Foundation. “They worry about competitors dropping price and whether they should match it, or advertising special discounts. You don’t have to lose money to create customer value; you simply need to know how much customers value the array of customer experience components, and act accordingly. The moment you start to think about pricing driving your product, then you’ve got a commodity product, and it’s a toss of the dice for customers to choose your brand. The only way to stay out of commodity hell is to properly manage customer value.”
Clarity on Customer Value
Untapped value for all parties is common due to the absence of clarity on customer perceptions of value, which is a composite of his or her functional and emotional judgments of your product, service, brand, culture, processes, policies, and business model — all relative to what the customer is striving to do. A keen understanding of customers’ subconscious value equations and perceptions is essential to zeroing-in on management efforts yielding highest return on investment (ROI). Yet most customer research focuses on brand recommendation and sentiment or new product development. Customer value is typically implied, or awkwardly derived from questions about price expectations, or simply assumed. However, Customer Value Management supplies tried-and-true methodologies for discovering how customers think about specific value relative to your competitors and to their expectations.
Customer Value Chain
Another reason for untapped value is weak management of the interdependencies among entities in the value creation and delivery chain. Traditional thinking charges R&D with value creation, but in reality, the customer experience is impacted even by your support functions’ internal and external policies. In fact, everyone in the company, including suppliers and alliance and channel partners, plays a role in the snowball effect of decisions and hand-offs that eventually shape the entire customer experience. The CEO is the chief value creator, balancing the common interests of all stakeholders.
Customer Value Techniques
Gautam Mahajan and Lynn Hunsaker, president of Clear Action customer experience optimization consulting, are showing companies pragmatic principles and techniques during a week-long Customer Value Management seminar series in San Francisco and San Jose, California. The series includes these topics:
Total Customer Value Management, September 19
Customer Value Creation, September 20
Customer Value Measurement, September 22
Pricing & Customer Value, September 23
Customer Value CXO Breakfast, September 23
For example, in the CXO breakfast seminar, the following questions will be discussed: Should Customer-Value-Added (CVA) be included in your financial statements? What are the customer-focus and value creation roles of your CFO, Head of HR, and other top execs? How can you recognize gaps in customer-centricity that invite competitive footholds? Mahajan and Hunsaker have implemented Customer Value Management as practitioners, and they have authored five books among them. Their collective experience will be on tap in this unique seminar series that does more than alter perspective by simplifying advanced topics; each seminar engages executives in methods for applying ready-to-use tools for improving customers’ perceived value and increasing profit.
4) What are the different levels of integration of marketing communication? Explain each of them.
Solution:- Click Here to Download the answer for this question.
5) What is data mining? Why is it important for retailer?
Solution:-
Data Mining
Data mining is the process of analyzing data from different perspectives and summarizing it into useful information – information that can be used to increase revenue, cuts costs, or both.
A user-centric, interactive process which leverages analysis technologies and computing power
A group of techniques that find relationships that have not previously been discovered
Not reliant on an existing database
A relatively easy task that requires knowledge of the business problem/subject matter expertise
Data mining is not
“Blind” application of algorithms
Going to find relationships where none exist
Presenting data in different ways
A database intensive task
A difficult to understand technology requiring an advanced degree in computer science
Importance:
Research and surveys. Data mining can be used for product research, surveys, market research and analysis. Information can be gathered that is quite useful in driving new marketing campaigns and promotions.
Information collection. Through the web scraping process it is possible to collect information regarding investors, investments and funds by scraping through related websites and databases.
Customer opinions. Customer views and suggestions play an important role in the way a company operates. The information can be readily be found on forums, blogs and other resources where customers freely provide their views.
Data scanning. Data collected and stored will be not be important unless scanned. Scanning is important to identify patterns and similarities contained in the data.
Extraction of information. This is the processing of identifying the useful patterns in data that can be used in decision making process. This is so because decision making must be based on sound information and facts.
Pre-processing of data. Usually the data collected is stored in the data warehouse. This data needs to be pre-processed.by pre-processing it means some data that may be deemed unimportant may therefore re removed manually be data mining experts.
Web data. Web data usually poses many challenges in mining. This is so because of its nature. For instance, web data can be deemed as dynamic meaning it keeps changing from time to time. Therefore it means the process of data mining should be repeated in regular intervals.
Competitor analysis. There is a need to understand how your competitors are fairing on in the business market. You need to know both their weaknesses and strengths. Their methods of marketing and distribution can be mined. How they reduce their overall costs is also quite important.
Online research. The internet is highly regarded for its huge information. It is evident that it is the largest source of information. It is possible to gather a lot of information regarding different companies, customers and your business clients. It is possible to detect frauds through online means.
6) Explain the reasons for different approaches to service quality.
Solution:- N/A
7) What are the functions of POS Software? Explain its different types.
Solution:-
Point of sale systems in the retail businesses improves productivity, but only if the right one is purchased. Making the wrong purchase in POS systems can be counterproductive.
The POS systems are today systems that are set up at every retail and hospitality outlet so that the sales are done faster.
It helps you with credit card transactions
Your cash counter and you order desk works automatically
Many retail POS systems include an accounting interface
Point of Sale (POS) System
Definition: A computerized network operated by a main computer and linked to several checkout terminals
Inventory software programs now on the market let you track usage, monitor changes in unit dollar costs, calculate when you need to reorder, and analyze inventory levels on an item-by-item basis. You can even control inventory right at the cash register with point-of-sale (POS) software systems. POS software records each sale when it happens, so your inventory records are always up-to-date. Better still, you get much more information about the sale than you could gather with a manual system. By running reports based on this information, you can make better decisions about ordering and merchandising.
With a POS system:
- You can analyze sales data, figure out how well all the items on your shelves sell, and adjust purchasing levels accordingly.
- You can maintain a sales history to help adjust your buying decisions for seasonal purchasing trends.
- You can improve pricing accuracy by integrating bar-code scanners and credit card authorization ability with the POS system.
There are plenty of popular POS software systems that enable you to use add-on devices at your checkout stations, including electronic cash drawers, bar-code scanners, credit card readers, and receipt or invoice printers. POS packages frequently come with integrated accounting modules, including general ledger, accounts receivable, accounts payable, purchasing, and inventory control systems. In essence, a POS system is an all-in-one way to keep track of your business’s cash flow.
Features to consider in a POS system include the following:
Ease of use. Look for software with a user-friendly graphical interface.
Entry of sales information. Most systems allow you to enter inventory codes either manually or automatically via a bar-code scanner. Once the inventory code is entered, the systems call up the standard or sales price, compute the price at multiple quantities and provide a running total. Many systems make it easy to enter sales manually when needed by letting you search for inventory codes based on a partial merchandise number, description, manufacturing code or vendor.
Pricing. POS systems generally offer a variety of ways to keep track of pricing, including add-on amounts, percentage of cost, margin percentage and custom formulas. For example, if you provide volume discounts, you can set up multiple prices for each item.
Updating product information. Once a sale is entered, these systems automatically update inventory and accounts receivable records.
Sales tracking options. Different businesses get paid in different ways. For example, repair or service shops often keep invoices open until the work is completed, so they need a system that allows them to put sales on hold. If you sell expensive goods and allow installment purchases, you might appreciate a loan calculator that tabulates monthly payments. And if you offer rent-to-own items, you’ll want a system that can handle rentals as well as sales.
Security. In retail, it’s important to keep tight control over cash receipts to prevent theft. Most of these systems provide audit trails so you can trace any problems.
Taxes. Many POS systems can support numerous tax rates-useful if you run a mail order business and need to deal with taxes for more than one state.
The merchants need different types of POS systems to fulfill their needs.
Cash register POS is one of the oldest and the most basic POS system. It mainly needs cash register and receipt printer.
Electronic cash register POS is same as mechanical cash register POS. This POS system has the ability to print out hourly, daily, monthly and yearly sales reports.
Software based POS systems allows the merchants to develop various types of sales reports on various factors like employee, POS product, etc.
Web-based POS systems take the software-based POS system to the next level where the merchant should have an Internet connection.
Wireless POS systems are Web-based POS systems. It allows the merchant to have a mobile presence. These POS systems are commonly used by street and conference vendors.
(B) Essay Type Questions
8) Explain the concept of customer value management. Discuss the process of institutionalizing CVM in a retail business.
Solution:-
The goal of customer value management (CVM) is to deliver optimal value to customers — to align business metrics, improvement programs, capabilities, processes, organization and infrastructure with customer-defined value. In other words, to create the kind of business that can deliver to customers exactly what they want.
In this briefing, we introduce you to the definition and key concepts of CVM. We show you how to justify the CVM approach, how to design a CVM process — including the main steps in the process — and how to implement CVM. We explore the concept of customer value analysis and look at sources of CVM information. We suggest when you should use CVM and how to get started.
We think this briefing will be of particular value to CEOs and other senior managers who wish to:
Attract loyal customers and attain growth by competing on customer value.
Put into operation a customer-focused vision — such as becoming “the premier provider of our product or service in the eyes of our customers” — and create a strong competitive position for their company that yields substantial gains in profitability and market share.
This briefing is also aimed at marketing managers and others responsible for customer and opportunity management who are considering how their strategies and tactics can be deployed more effectively to improve their company’s competitive positioning. Finally, we think it is of value to IT managers who wish to leverage technology to maximize support provided to key customer-defined business offerings and capabilities.
The drivers behind CVM
One of the biggest problems facing senior managers today is how to attract customers and attain growth, often in an environment where products and prices among competitors are moving steadily closer together. Traditional bases for differentiation, such as product features or cost, are becoming less tangible. so senior management is forced to look for new ways to be attractive to a target market. Many companies now use the CVM approach to identify the “value” they can deliver, not only with products but also through processes and services. These companies engineer their business capabilities to deliver “ideal” customer-defined value at each customer interaction.
Because of the fast introduction of new technologies and resultant rapid changes in customers’ perceived “needs” and “values”, companies are institutionalizing this approach so they can continuously monitor and maintain alignment between their customers’ vision of “ideal value delivery” and the capabilities of the business to deliver that value. In this way, CVM offers a new basis for competition and growth.
CVM(Customer Value Management)
• CVM helps corporations develop tailored products and services to their customers, in order to maximize profits on an individual customer level
• The goal of CVM is to move towards mass customized offers and price discrimination based on:
– Willingness to pay (both consumer and corporate)
– Current customer value and usage profiles
– Churn and migration risks
• CVM enables companies to manage their firm value in the face of rapidly decreasing prices and potentially slower acquisition growth
• Specifically, CVM generates or preserves value through:
– Usage stimulation through micro-targeted offers
– Rate plan and feature migration management through improved understanding of re-price potential and proactive offer design
– Churn prevention through improved predictive modeling and targeted retention strategy
– Improved acquisition strategies which consider existing base impact
Customer VALUE Management:
Focus: - Improve profitability by delivering targeted offers
Lever for Change: - Product offers
Approach: - Hypothesis, data-driven
Capabilities: - Capture detailed customer data; ability to deliver micro-targeted offers
Metric: - Customer profitability
Customer Expectations: - Exceed on customer value
Customer Service: - Direct customer to most profitable offerings
Attrition…: - …is acceptable for low value customers
Required Understanding: - Customer migration patterns; reasons for churn; value drivers
9) Explain the different ways of classification of customers. Why is this classification necessary for the retailers
Solution:-
Customers, every business has them, but why would you want to classify them. Are some customers worth more than others? Well, yes and no – some customers are more profitable than others are, while all customers could be equally profitable. Classifying customers helps you take the action right for them, targeting your marketing, and serving their different needs – while improving your profits.
What, Why classify customers?
Different customers require different actions to reach in marketing, to deliver your product to, or in how they implement your product. Your customers can be broken down into general groups reached with different triggers. Some customers are self-service, while others want you to come to them. Remember its “different strokes for different folks.” Your ability to customize your marketing will determine how far you can reach into a targeted audience that will purchase your product.
Not only does each of your customers respond differently, but also they need to be marketed differently. Information gained from this understanding can improve the targeting of your customer lists, while you giving you a better response for your specific products. Group those customers with different qualifications; perhaps identify volume accounts verses infrequent buyers or premium product verses standard product purchasers. Those characteristics that make each group unique should be the strength that focuses your marketing to get the results you desire for your business.
We have talked a little already about the fact different customers have different needs; this is very important in classifying customers. These needs spanned product features, financing, shipping requirements, and any other aspect you could imagine in your business. Extending our thinking to look for cycles of individual purchases reveals other aspects of customer categorization. If your product is consumed or wears out over a certain period, group together customers that may need a little call before their product runs out. Another useful mechanism for categorization is to find those customers that recommend your product, because they are a great channel to share new product enhancement or to tell about specials. These individuals are most likely to share the news or to communicate those things you make privy to them first. Categorizing customers into groups by needs and identifying what is important to them allows you to serve them better while fulfilling their desires with your products.
Describing the supply chain
As you get to know your customers, you may find that some customers are not the actual end users of your product. When classifying customers, understand not all customers may buy direct from you, but their needs have to be considered to maintain a viable product. Depending on what you are selling, you may find the actual end user is further down the line – this line we will loosely call a ‘supply chain’, which represents “how” your product gets to your customers.
With any analysis, we want to start with the beginning in order to gain the bigger picture of what is going on with our product before it reaches a customer. Start with the creation of the product (the beginning); do you manufacture the product or receive it completely from someone else? Follow a product around for a couple of weeks asking yourself the following questions:
Who uses it?
Who passes it along to others?
How does this happen?
When purchases are made?
Where is it purchased?
How is it delivered?
Every time the product changes hands from one organization to another, a little connection is made. You can represent this with simple boxes on paper, details on this will be provided later. This big picture approach gives you a better idea of the reach of your product; it could be anything from a screw in the back of a television, or the television itself.
If you manufacture a product, you probably sell it to a reseller or distributor who distributes it to your customer. If you sell directly to the customers themselves then that is fine too. In either case, there are three kinds of product providers, the reseller, the distributor, and the customer. The reseller receives your product to either incorporate it in their product, or turn it around to sell to their customers. Where a distributor sells to the reseller or sells at quantity to a particular customer. Finally, we all should know who the customer it is, they actually use your product to complete a specific task.
You can further classify customers into three types, even if you do not interact with the customers directly. The three customer types we are going to look are the manager, the end-users, and the integrator. Think of the manager as someone to obtain the product for end-users. The end-user ultimately uses the product for its intended purpose. Unless first an integrator received the product and incorporated it into something else the end-user uses. For example, an integrator receives software which is integrated into a computer system producing a the new product for an accounting department.
All of this will help you develop what should look something like a waterfall diagram with your organization at the top. It is interesting but some products are created far from the intended end-user, the more uses your product has the more levels this diagram (your chain) may grow. Just remember, the end-user who finally uses your product, whether they know it or not, is where we are primarily concerned when increasing profits.
Defining the customer
In the beginning, we talked about classifying customers to improve sales and marketing efforts, classifying customers can improve profitability because optimizations along any of the connections in the supply chain can reduce costs without changing product sale price. If you can reduce your cost to manufacture and distribute your product then you can earn more per each transaction. In this section, we are going to talk about your customer, their customer, and the final customer – knowing that these levels could grow and expand depending on where your company is supply chain. For this article, we will assume there are only three levels to your supply chain and your company is at the top of the list (the originator).
A clear definition of who purchases directly from you is the simplest and most direct part of classifying your customers. These individuals are the first level in your supply chain right under your organization. These individuals are most likely buy from you directly for various reasons. Look further at those “reasons for buying” they determine how your customer connects to you. In most cases the customer will use the product themselves (end-user), while in others they turn the product over to the next level below them (reseller).
When your customers turn around your product it is good for you, even if the intended end-user could buy direct, sometimes resellers can reduce your distribution costs and increase product value. This important factor must be taken into consideration, especially if you want to maintain strong channel relations. Customers who buy directly from you are yours – those who purchase from the resellers are their own. Help your resellers and distributors to earn more, but do not steal their customers for the sake of direct sales it will only hurt you in the long run. In the case where you know who “their customers” are, you are in the fortunate position to help “your customer” with leads and growth opportunities. Building the strength of your supply chain actually reduces your costs, even if “their customer” just turns around the product to a final customer, or eventually returns to you for services.
The final customer, third down on your chart, actually uses your product (consumes) and usually does not turn the product around to anyone else. This is the target user that you do not always interact with directly. At this level a lot of valuable information is available about replacements, renewals, and consumption. When you look at these individuals, also look at where this customer goes for help, perhaps they come back to you or they go to a vendor; either way optimizing this part of the channel can improve product satisfaction and increased profits by identifying possible service opportunities.
A clear understanding of each “customer category” expectations and their usage of your product is so important to improve sales and distribution. You will want to make sure you get an accurate picture. Take the time to map this out, start with moment your product leaves your facility and move on from there. A simple diagram can say a lot about your business.
Mapping your distribution system
Your supply chain or distribution system as described here is very simple to map, yet so powerful. Start with a simple workflow diagram, move along to customer interaction points, and then finally clear up the picture with specifics. There are many methods available to do this; I am going to describe the one I use with my clients – this works great for both companies providing services or hard goods.
Creating a workflow is simple, just start with you and work your way out. I like to use a dry erase board to get out my thoughts; many boards will print out your picture or scan it into a computer. For best results use a sheet of 11″ by 17″ paper –brainstorm first with customers and employees, then consolidate your notes, and finally enter your diagram into a computer using a simple flow chart program. Don’t go straight to a computer, brainstorm on a whiteboard or with paper, it’s easier and takes less time.
Start with a box at the top of one page, this box is your company. Of the different types of customers described earlier, make a few blocks, representing them, just below your block. Use lines to connect each box representing the relationships between each, and then add simple labels to describe the boxes and corresponding relationships. Connectors represent delivery methods, transactions, or anything that would move a product from one box to another.
After you have drawn the relationships from your company to end user, it is now time to look at a valuable feature of this diagramming method, the “customer interaction points.” A customer interaction point is anywhere along your chart where any customer talks to you. Concentrate on known ways your customer contacts you; this includes support calls, orders, presales support, and more. I utilize connectors with several off branches describing methods of communications and the type of communications. It is useful to draw this part in a different color than the other items.
Now that you have an overall workflow and it has been enhanced by customer interaction points, now you will want to start getting specific. This means adding in company names, points of contact, and customer category names. Your general boxes start taking life; a clear picture develops as the chart grows with information. Some organization post phone numbers on these charts so they know whom to call during the customer service process – what you do with this chart after this point is unlimited.
Before you start turning this picture of your supply chain into a mosaic of information, remember why we created it in the first place. This picture represents everyone who uses or obtains your products in any form. Reconstruct this picture as often as necessary to develop groups that best represent your classifications of customers. Note at each level how you will market those customers, as well as their individual needs and expectations. From a marketing standpoint you must also consider where to gain the best results, incorporate this new information in your marketing tests or when considering lists.
Sometimes I am almost afraid to show this method of classifying customers to my clients; they get so excited because new ideas will pop out as their chart grows with information. If this exercise is difficult for your organization, or if your chart seems too complex then you have a great opportunity to identify improvements for getting your product to market. Your entire supply chain should fit on one 11″ by 17″ sheet of paper in a very clear format that shows simple steps between levels – if it is any more complex than that, look for ways to simplify your distribution channels.
By classifying your customers with a clear supply chain, you will see areas to reduce costs and increase revenues. Thos focus will increase profits for your organization with very little effort on your part. Have fun with this, get your employees involved, and start seeing where profitable customers can grow from all levels!