Intensive Workshop in
COMPETITIVE MARKETING STRATEGY FOR
CUSTOMER VALUE CREATION

- Building the Market-Focused Organization -

DR. PETER C. WILTON

Haas School of Business
University of California, Berkeley

　

WORKSHOP OVERVIEW

As world markets continue contraction in productive capacity and infrastructure, the managers must look ahead to address some fundamental commercial and strategic questions: How can the firms continue to leverage its existing productive skills and technology to ensure sustained growth into the new century.

	What "next-generation" core competencies should the firms develop to lead the emerging requirements of a changing market;
	How can the firms continue to develop products and services which meet the rising expectations of increasingly sophisticated and demanding customers
	How can the firms protect itself today from increasing pressure tomorrow from regional and international competitors
	How can the firms plan for the inevitable transition away from cost- and price-oriented strategies towards more powerful, enduring, and profitable, alternative sources of advantage

This workshop focuses upon the single most important element of business strategy for companies experiencing such challenging change: - becoming Market-Driven. Only by becoming Market-Driven will the managers be able to anticipate, understand and prosper from the opportunities constantly presented in a dynamic marketplace.

The Market-Driven company knows, better than its competitors, how to:

	Anticipate the future evolution of market/industry structure;
	Develop new market segments and customer insights through an in-depth understanding of customer markets; and
	Develop superior strategies for differentiating the company based on an in-depth understanding of the vulnerabilities and competencies of direct and indirect competitors.

The Market-Driven company knows, better than its competitors, how to strengthen and protect its existing positions in its established market segments by:

	Developing a clear vision for building leadership reputations in external markets;
	Translating this vision into a consistent, actionable Customer Value statement
	which delineates precisely how the company intends to sustainably differentiate itself in customer markets; and
	Developing and coordinating a set of integrated marketing support programs which ensures that everyone (customers, employees, suppliers) understands their role in delivering truly superior customer value and marketing performance.

The Market-Driven company also recognizes, better than its competitors, that capturing the largest market share does not necessarily mean marketing success. The Market-Driven company realizes that market share must be delivered profitably, and understands that some markets and market share gains can be too costly. Instead, the Market-Driven company has the skill to find the right balance between Customer Value and company profitability.

THE ESSENCE OF MARKET LEADERSHIP

As competition intensifies globally, firms in all markets face dramatically higher risks of loss of customers to new or more aggressive competitors. This is because, in most markets, new or increasingly aggressive competitors will only succeed by stealing the customers of their competitors. In addition, as customers become more sophisticated, they become more powerful, learning how to better judge the differences between competing products or companies, and demanding higher performance, service and quality and competitive pricing. Firms who fail to manage this shift in competitive and customer behavior face the loss of customers.

While lost customers can temporarily be replaced with new ones using short-term incentives (often based on price competition), as markets mature and market shares stabilize, attracting new customers becomes increasingly difficult and expensive, often leading to financial losses. Such customer replacement strategies are often referred to as "Leaky Bucket" strategies for customer management.

In order to avoid this pressure, the firms must learn how to protect its existing customers, and create strong bonds or affinity between the company, its products and the customer. The firm needs to learn how to avoid aggressive, no-win, head-to-head competition based upon price, or even product/service performance. Instead, the firm needs to learn how to develop innovative programs that create results that customers value highly and closely identify with. The firm managers need to learn the difference between reactive management of the customer relationship, and a true, binding, partnership management of customers, learning how to bring this powerful partnership style of customer management to every customer, not just a select few. They need to learn how to avoid aggressive, direct price competition aimed at building market share or short-term sales by understanding and innovatively managing a wide spectrum of customer-value opportunities over the life cycle of the customer's relationship with the product or the company.

In short, the firm managers must learn how to redefine the mission of market and customer management, away from the capturing of customers and the building of market share, towards the strengthening of customer franchise through the creation and sustainable delivery of superior customer value.

Customer Franchise, refers to the state of customer commitment towards a market supplier. When a customer perceives a particular supplier to be so superior to all other competitors that the customer effectively blocks out all other suppliers from consideration, the firm is said to have a franchise, or ownership, over the customer. Although such commitments have in the past been rare, they are increasingly becoming the overriding objective of a carefully conceived customer partnering program.

Customer franchise is quite distinct from customer satisfaction. Customer satisfaction does not guarantee customer franchise. Recent studies indicate that while customers may be highly satisfied with a particular competitor, they may hold very little commitment to the competitor, especially if the satisfaction is based upon low customer expectations. Indeed, as many as 90% of customers who defect from a particular supplier report being satisfied. Such customers may readily switch to other competitors based upon a wide variety of motivations, including variety-seeking, impulse, product availability, price-sensitivity, etc. In these situations, no customer franchise exists, and the firm must go beyond satisfaction management to build customer commitment. In this seminar, we will review the relationships between alternative measures of organizational success - including profitability, market share, customer satisfaction, customer loyalty, and customer franchise - to show that the popular pursuit of market share and customer satisfaction may often prevent the firm from building lasting customer commitment.

EXTERNAL VISIONING FOR CUSTOMER VALUE CREATION

The key to achieving customer franchise is the ability to invent new approaches to the creation and delivery of superior Customer Value. Customer Value refers to the company's strategy for integrating its products, support services, relationship management, and image building efforts, at competitive prices, to achieve superior outcomes for customers. Customer Value strategy serves as the foundation for all interactions between the institution and its marketplace.

While many firms espouse a strategy of customer-value creation, very few seem to achieve it. This is because most firms lack the intimate knowledge of the customer's order-winning criteria (and therefore "add-value" in unimportant ways), or else lack the knowledge of how customers measure the results of each competitor's product/service offerings in their business or individual purchase settings. Value-creation is not simply the addition of more enhanced products or services, for which the customer must pay, but instead is a carefully orchestrated strategy for continually improving the ratio of total customer benefit delivered (measured in customer-perceived results) to total customer costs incurred. Effective Customer Value strategy requires management of a system of integrated decisions known as the Value Delivery Sequence, comprising both an external, and an internal, focus, as follows:

The initial step in effectively managing the Value Delivery Sequence is to recognize and understand the market shifts confronting the firm, and to review the firm's strategy for achieving leadership in its external environment. The organization must recognize that new market structures, increasingly sophisticated customers, and increasingly agile competitors, creates the need for a program of constant innovation in strategies and techniques for building customer loyalty and strengthening market position. In such a context, the firms will need to continuously reassess its core Customer Value Strategy, to determine to what degree the benefits offered and delivered to the market under this strategy still remain meaningful to key client segments. In most instances, shifts in the external environment will require the firm to innovatively re-think the manner in which it creates value for key customer groups, or competes against rivals; i.e., to develop a new vision for creating customer value.

Managing this dynamic process is the key to sustained client loyalty and company profitability. Organizations which have mastered effective dynamic Customer Value Strategy exhibit several powerful differentiating qualities, including:

	Relentless monitoring and management of client interactions and subjective experiences throughout the product and client life cycle;
	An ability to envision and clearly articulate innovative paths for redefining Customer Value Propositions in dynamic markets;
	Commitment to the firm's Customer Value Strategy as a guide for managing all interactions between the firm and its marketplace;
	Unambiguous communication of shifts in the Customer Value Strategy, both externally to the firm's clients, suppliers and competitors, and internally to its employees and stakeholders.

Unfortunately, this process involves much more than simply innovative products and services. Two forces are constantly working against the firm whenever it attempts to compete by focusing principally upon the tangible elements of its product/service mix:

	most product/service advantages are not sustainable: they can be quickly imitated by competitors;
	most customers find it difficult to judge the performance differences between competing products, or where differences can be identified, they are usually seen as marginal.

As a result, the managers must look beyond product quality as the key to successful competitive strategy.

Similarly, Customer Value is not simply the management of pricing decisions in order to become the low price leader. Superior Customer Value can, and must, be created within pricing constraints. Despite its pivotal role in Customer Value, many managers incorrectly view low prices as a source of additional benefit for clients. This view reflects a major misunderstanding of the role of price in business development strategy. When viewed in the Customer Value framework, price competitiveness is not a client benefit; price competitiveness merely enables clients to access benefits more efficiently.

Firms which master effective customer franchise strategy begin with a total commitment to customer value leadership, initiating a search for innovative, integrated and sustainable ways of creating and delivering superior customer value. This commitment serves as the platform for continual benchmarking of customer commitment and competitive superiority.
In this workshop, we present the key concepts and techniques of Building the Market-Focused Organization, showing how firms can use these concepts to win customer satisfaction and develop customer loyalty which translates into superior profitability.

The workshop will illustrate major themes of the seminar through videos and readings of actual case company histories. In addition, participants will have the opportunity to immediately apply key concepts and techniques to their own companies through a series of practical exercises and worksheets illustrating the link between industry structure, competitive strategy and company profitability.

BENEFITS

By attending this seminar, the managers will gain valuable working knowledge of the elements of a successful customer franchise strategy. Using the frameworks and examples presented in the seminar, participants will develop increased understanding of:

	The importance of building customer franchise as the pathway to market leadership, and profitability;
	The differences and links between market share, customer satisfaction, customer loyalty, and customer franchise;
	How to build barriers to customer switching, and increase customer loyalty, through closer customer access and responsiveness;
	Methods for analyzing and understanding trends in industry structure, customer needs and competitor positions
	Steps in developing winning marketing strategies
	The critical elements for achieving superior market position
	The critical elements for sustaining superior market position
	How to determine the right mix of market share growth and profitability
	The role of superior customer service in marketing strategy
	Techniques for designing and pricing successful products and services
	The link between marketing strategy and company profitability

　

WHO SHOULD ATTEND

The seminar is designed for the executives who wish to equip themselves with the knowledge necessary to take advantage of the multitude of opportunities emerging from the dynamic restructuring of domestic and foreign marketplaces. The seminar will be especially helpful for executives who wish to:

	Achieve greater awareness in their companies of the importance of Market Focus:- of being on the forefront of competitor and customer responsiveness;
	Take the initiative in exploiting market opportunities, rather than be forced to react to others who have moved early;
	Bring themselves up-to-date on the latest concepts and techniques for achieving superior market positions;
	Increase their understanding of the integration of marketing strategy with other functional areas of the business.

The major themes of the seminar will be relevant to managers in all functional areas of the firm's operations, and to managers of companies competing in either B2B or B2C market situations.

The following the managers are encouraged to attend:

　

	Chief Executives, Managing Directors, and General Managers
	Divisional or Business Unit Managers
	Marketing Directors and their staff
	Sales Directors and their staff
	Communications Directors and their staff
	Strategic and Corporate Planning Directors and their staff
	Managers from other functional departments (e.g., finance, operations, human resources) wishing to enhance their understanding of the role of marketing strategy

WORKSHOP CONTENT

I. Changing Market Realities

In this topic, we introduce some important emerging developments in domestic and international markets which are challenging traditional notions of marketing and competitive strategy. The implications of these developments for building future market leadership will be explored.

	Challenges and Opportunities facing Companies in Global Markets: The Cycle of Industry Restructuring
	The Challenge of Micro-Segmentation
	The Challenge of Customer Franchise
	The Future Role of Marketing in Ensuring Organizational Survival and Prosperity
	Characteristics of The Market-Driven Competitor

II. Building Customer Franchise: The Strategic Imperative

In this topic, participants will be introduced to a new paradigm for achieving market leadership; - the creation of Customer Franchise. The module explores the imperatives and benefits from pursuing customer loyalty, the framework for designing effective customer loyalty strategies, and presents new approaches for measuring customer commitment and assigning customer priorities. The module explores the difference between customer satisfaction and customer loyalty, showing that the popular pursuit of customer satisfaction may in fact prevent the firm from effectively managing customer loyalt

	What is Customer Franchise?
	Why Not Customer Satisfaction?
	The Benefits of Building Customer Franchise
	The Determinants of Customer Franchise
	Knowing Customer's Order-Winning Criteria
	Managing the Zone of Competitive Tolerance
	Climbing the Customer Commitment Ladder
	Designing Customer Franchise Strategy 　　　・Selecting Candidates for Customer Franchise 　　　・Setting the Transformation Objectives

Application Exercise: Managing for Loyalty

III. The Foundations of Market Focus: External Analysis

In this topic, participants will be introduced to frameworks and approaches for interpreting information about customers, competitors, technologies and general business conditions, as input to strategic market planning. The emphasis will be upon anticipating future changes in markets, rather than analyzing past or current positions. Participants will gain first-hand experience in applying important analytic tools and concepts to their own or competitors companies.

A. Industry Structure Analysis

	The Forces Determining Market Structure
	Analyzing Industry Structure: Identifying the Drivers of Industry Profitability
	Developing Strategies to Respond to Industry Profitability Drivers
	Avoiding Industry "Blind Spots"
	Forecasting Industry Evolution
	Identifying and Exploiting Strategic Windows
	Understanding Strategic Posture: To Be a Shaper, Holder, or Reactor?

Application Exercise: Discovering the Future: - Identifying Strategic Windows

B. Competitor Analysis

	Competitive Position Assessment: Building The Competitor Response Profile
	Identifying Competitors: the Visible & Invisible
	Identifying Key Success Factors
	The Principle of Unfair Advantage: Selecting Core Competencies 　　　・Building the Portfolio of Advantages
	The Theory of Efficient Innovation: Leveraging Core Competencies 　　　・Exploiting New Product/Market Growth Opportunities
	Identifying Key Differentiation Opportunities
	The Trap of "Competitive Surrender"

Application Exercise: Market-Focused Competitive Position Assessment

IV. Achieving the Strategic Edge: External Visioning for Value-Creation

In this topic, we explore in depth the characteristics of Market-Focused Organizations, and the important principles and techniques of winning competitive strategies. A central theme is the creation of "Customer Value", the sum total of the tangible and intangible benefits received by customers in a segment of the marketplace, divided by the sum total of all tangible and intangible costs incurred by the customer. Since superior organizational profitability is a result of delivering Customer Value in a sustainably superior way to competitors, this session examines (using numerous case histories) the various approaches for uncovering and delivering Superior Customer Value. An important objective of the Customer Value strategy is to mitigate the costly effects of price-based competition by measuring and controlling customer price sensitivities.

A. The Pathway to Competitive Advantage: Creating Superior Value for Customers

	Characteristics of the Value-Driven Organization
	The Pathway to Profitability: The Value-Creation Cycle
	Competing Along The Value-Delivery Sequence
	The Key Customer Value Decisions ・Articulating a Compelling Customer Value Proposition: The Strategic Architecture ・Deciding How Much Value to Offer: Strategic Value Positioning ・Deciding How to Compete: The Differentiation Platforms
	Uncovering the "Order-Winning" Customer Benefits

Application Exercise: External Visioning for Superior Value-Creation

The purpose of this workshop is to allow participants the opportunity to apply the key concepts of Customer Value Creation to their own organizations. Participants will be asked to develop a fundamentally new approach to competing within a familiar market segment, incorporating elements of the Customer Value Framework for building superior, sustainable, market position.

B. Competing with Quality in Service Delivery

	The Competitive Value of Superior Customer Relationship Management
	The Growing Importance of Service in Manufacturing Organizations
	Understanding Principles of Service Strategy
	Developing the "Legendary Service" Reputation ・The Dimensions of Service Quality ・Understanding the Source of Breakdowns in Service Quality ・Building Quality into Service Strategy: Closing the Gaps ・Service Recovery Strategy

C. Rethinking Pricing Strategy

	Understanding the Role of Price in Customer Choice
	The Role of Costs in Pricing Strategy
	Breaking the "Commodity Magnet"
	A Framework for Value-Driven Pricing Strategy
	Measuring & Managing Total Life Cycle Costs

VI. Building Future Marketing Capability

	Anticipating The Future Business Environment
	Building Tomorrow's Customer Management Capabilities: The Role of e-Business in Marketing ・Competing with Information: Building Dynamic Learning Relationships with Customers ・Building the Demand Chain Network
	Managing the e-Business Opportunity Portfolio

VII. Program Review