Converting Customer Value

Professor John A Murphy, Alfred McAlpine Professor of Customer Management, Manchester Business School, Head of Development, Faculty of Humanities, combines the roles of academic and international consultant specialising in service quality management and customer retention. He has held a series of senior management positions both in Ireland and the UK.At Manchester Business School, he has established a unique cohort of PhD scholarship students in conjunction with leading UK companies. This is the largest doctoral research group in this specialist area in Europe. He is a regular contributor to programmes at the Executive Development Centre. He also chairs and co-directs the Customer Management Leadership Group.Professor Murphy holds five professional fellowships and is a member of the International Academy for Quality, whose members are chosen from the most active protagonists of quality in the world.He is the author of four books, the most recent of which, The Lifebelt: The Definitive Guide to Managing Customer Retention, was published in 2001.Dr Jamie Burton is a lecturer in Marketing at Manchester Business School and Director of Research for the Customer Management Leadership Group. He won the Yorkshire Water doctoral research scholarship, which allowed him to study for his PhD. He has published research in the areas of customer behaviour, satisfaction and loyalty. Dr Burton is also a regular contributor to the BBC GMR breakfast show business news.Robin Gleaves and Jan Kitshoff met whilst at Manchester Business School and founded their consultancy in order to develop and implement their thinking in the field of customer profitability. They were involved in a benchmarking project for the CMLG on this issue and this is where the relationship with John and Jamie began.

• Acknowledgments xiiiIntroduction xv1. The Customer Profit Conundrum 1Common misperceptions about customer profitability 2An overview of customer profitability analysis 6How to measure profit 6The nature of customer costs 8Customer profitability analysis (CPA) and activity-based costing (ABC) 11A step-by-step approach to measuring customer profitability 16Getting started with customer profitability analysis 24Common barriers to customer profitability analysis 27Running a CPA project 28The results of CPA 30Why do companies have unprofitable customers? 32Improving customer profitability 34The customer response 37Management barriers to making changes as a result of CPA 37Conclusion 382. Segmentation 43Segmentation incorporating profitability 47Step 1: Completion of customer profitability analysis 47Step 2: Macro segmentation 48Step 3: Verification/Reality check 50Step 4: Micro segmentation 57Step 5: Investigate if strategies and operations are aligned 59Step 6: Align operations and implement tactics 65Conclusion 683. Customer Focus 73Segmenting business markets 75Segmenting international markets 76Each customer wants to be treated as an individual 77Choosing customers 77Managing the total customer experience 79Leading the customer experience 80Managing the impact of delays 81Employees connect to the customer 83Customer retention 84What if customers charged the organisation for their time? 84Data collection 87Action plan 90Listening to customers 92Complaint management: customer satisfaction 93Measures influence behaviour toward (or away from) the DCP 96The ladder of loyalty 97Recognise and reward loyal customers 97Gauging customer loyalty 98Micro-marketing is the ultimate in customer service provision 99Monitoring performance 100Why it is vital to build trust 103Summary 1034. Processes and Systems 109Process reviews/Process improvement 112Customer requirements 115Identification of key processes 115Process review 118Business process re-engineering 122Quality in the service industries 123Management’s understanding of customers’ expectations 128Complaints 129Compliments 134Summary 1375. Employee Involvement 141Retention of customers 144Understanding key concepts 146Controlling the continuum 147Recruitment 150Employee audits 154Tools for the job 156The team approach 161Involve employees in setting performance and service standards 165Listen to employees 167Employee motivation 169Performance indicators 171Reward and recognition – linked to customer retention 175What makes a great employer? 179Employee retention 181The value of performing exit interviews 182Summary 1846. Training and Development 187Employees are assets 189There is always a payback 190Team establishment 192Identification of training needs 195Competence-based training 196Service quality training 199Teamwork training 201Coaching 203Just-in-time training 206Formal recognition 207How is the person at the top affected? 208Managers as trainers 209Training customers 209Summary 2107. Measurement 213Benchmarking 216Always measure customer reaction 216Measurement tool creation 218All measurements must be followed by actions for improvements 219Priorities for success 221How is total measurement relevant to business success? 222Tracking net promoters 224Measurement of people 225Leadership 227What to measure? 228Measurement of performance 231What are the thresholds within which customers decide if an organisation is getting things done right? 235Managers are judge and jury 237Who needs to know what? 239Measurement and response to change 240Production processes 241Summary 2488. Continuous Improvement 251Advantages of continuous improvement 253Teamwork takes the strain 253Problems become opportunities 254Improvement means shared information and ideas 256Rewards come from hard work 256How does one start a service quality initiative and then keep it going forward? 257Keep outside suppliers of goods and services up to scratch 260Shopping in the global marketplace 261Ethical distortion of customer segments 262Benchmarks 264Field leaders and their recipe for success 269How does one measure continuous improvement? 270Nothing succeeds like success 274Cost-effective captivity 275Summary 2769. Communications 279Communication can be a response, or it can call for a response 283Management has an ongoing role 288Leadership is the key 290Poor communication is both damaging and unfair to employees 290What are communications? 291Body language also sends messages 292Is every communication necessary? 293Make it easy for two-way communications 294To the rest of the world, we are foreigners 295Effective internal communication 296Monitor the effectiveness of communication 297Team briefings 297Keep it simple 301Keep the door open to doubters 302Summary 30310. Culture 307What exactly do we mean by corporate culture? 307Beginning to develop a culture 309Think Christmas pudding 312Hussey’s easier approach to fundamental change 319Rule books 319Growing and sustaining a customer-focused culture 321Trust 325The decline in customer satisfaction 329Summary 337Cycle of success 340Case Study 1: Alfred McAlpine Business Services Limited 341Case Study 2: Centrica 351Case Study 3: Eversheds 355Case Study 4: National Blood Service 359Case Study 5: Shell 367Bibliography 373Index 381

"…reminds marketers of the vital link between customer relationships and profitability ... shows how companies can effectively implement the changes needed." (The Marketer, March 2006)"...a worthy read..." (Quality world, May 2006)