becoming relevant to consumers and customers june 18, 2002 cincinnati, ohio the myth of excellence

Becoming relevant to consumers and customersJune 18, 2002Cincinnati, Ohio

The Myth of Excellence

© 2002 Cap Gemini Ernst & Young - All right reservedFC/080202 - CR for CP Mfg - Fred Crawford / 2

The Situation

relationship in a free fall

ConsumerSpending

CustomerSatisfaction

A crisis - years in the making, hitting now!

Consumer as a free agentConsumer as a free agent


CGE&Y Conducted a Comprehensive Study:Consumer RelevancySM

CGE&Y Consumer Relevancy Study…

• Conducted in U.S. in late 1999 and February 2001, pan-European study in January 2002

• Interviewed 16,000 consumers across five channels

• Asked 60 questions about the importance of various aspects of the shopping experience

CGE&Y Consumer Relevancy Study…

• Conducted in U.S. in late 1999 and February 2001, pan-European study in January 2002

• Interviewed 16,000 consumers across five channels

• Asked 60 questions about the importance of various aspects of the shopping experience

…gets rave reviews

• [Lafley, P&G] CR “is the best tool…for incorporating customer wants and needs.”

• [Burandt, Georgia-Pacific] “…a big idea and a blueprint for action.”

• [Siebel, Siebel Systems] “…provides proven strategies for meeting the demands of today’s empowered customers.”

…gets rave reviews

• [Lafley, P&G] CR “is the best tool…for incorporating customer wants and needs.”

• [Burandt, Georgia-Pacific] “…a big idea and a blueprint for action.”

• [Siebel, Siebel Systems] “…provides proven strategies for meeting the demands of today’s empowered customers.”


Three Mega Trends

Informed and aware, but cynical and confused consumers

“Clarify my options, allow me to feel satisfied with my choices”

Proliferation of information and communication technologies

Societal Situation Human Condition Consumer Need

Societal devolution

Increasing inability to keep pace with daily life

Inability of traditional institutions to adequately reflect fundamental human values

“Fortify, reinforce, ratify my personal value”

Increase in stress, guilt, anxiety

“Help me survive psychologically and emotionally”

….A Changing Need Set


FACT: a very different consumer…

The Two Myths of Excellence

That most businesses understand what consumers are really asking for

That attempting to be great on all aspects of consumer and customer engagement is the way to win


The First Myth of Excellence

“Two countries separated by a common language” G.B. Shaw/Winston Churchill

…in 2002

“Business and consumers are two constituencies separated by a common language”

In 1942…


Broken Promises: Content vs. Context

CONTENT

Best

Value Added

Lowest

External Location

Entertainment

CONTEXT

Appropriate

Execution of Basics

Honest

Internal Navigation

Ease

Product

Service

Price

Access

Experience


Human Values Are Embedded in the Context of an Offering

Maslow’s Hierarchy of Needs

Source: Maslow, A. H., The Farther Reaches of Human Nature, 1968; CGE&Y Analysis

“Today, technical differences between products are barely perceptible, which is the reason why context has become more and more important for brands.”

A G LafleyProcter & Gamble

SelfActualization

Esteem

Love and belongingness(feeling loved and

accepted by others)

Safety, security

Physiological Needs(air, water, food, sleep)

Context = Human Values

Content = Basic Needs


The Conceptual Model for Consumer Relevancy

Experience Price Product ServiceAccess

Dominate(5)

Solution Intimacy Agent Inspiration Customization

Differentiate(4)

Convenience Care Consistency Reliability Education

Par(3)

Ease Respect Honesty Credibility Accommodation


Some Companies Have Been Very Successful at Finding Relevant Differentiation Points with Successful Execution

RetailerRetailer

FocusFocus

Year 2000PerformanceYear 2000Performance

Source: S&P, Industry Survey: General Retailing, 05/24/01; The Motley Fool, Same-store sales tell the tale over time, 4/7/00; CG&EY Analysis

• Company slogan: “Save Time, Save Money”

• Provides a limited, high-turning assortment of quality products at low prices

• Targets the growing low-, middle and fixed income population

• Focus on rural, small towns and urban neighborhoods

• Very cost-effective operations

• > 20% increase in sales• 6.4 % increase in same-

store sales• 21% increase in net income

DifferentiationDifferentiation • Price (Primary)• Access (Secondary)

• Positioned as the “Everyday Low Prices” provider

• Maintains in-depth consumer knowledge: demographics, buying patterns, frequency of purchase

• Focused on providing consumers with an enjoyable experience: store greeters, knowledgeable employees, etc.

• 20% increase in sales• 8% increase in same-store

sales• 21% increase in net income

• Price (Primary)• Product (Secondary)


Other Consumer Relevancy Examples


Leveraging Context to Build Brands

BRAND INSIGHT

Product

Service

Price

Access

Experience

All Frozen Pizza/Digiorno

Crest/Total

Cadillac/BMW

IBM/Dell

Canon/Martha Stewart

United/Virgin

Dannon/Yoplait

Zippo/Bic

All Lunch Meat Brands/Lunchables

Maxwell House/Starbucks

Honda/Harley

Miller/Budweiser

Good parenting, not just good product

Better you, not just better teeth

It’s not servicing the car, it’s servicing the owner

It’s for you

Affordable style

Responsible decadence

Good food vs. mobile nutrition

Utility trumps durability

Food as play

It’s not about the coffee, it’s about the coffee drinker

How it works is less important than who I am

Culture vs. calories


The Second Myth of ExcellenceThat attempting to be great on all aspects of consumer and customer engagement is the way to win

• Successful companies dominate on one attribute, differentiate on a second and compete at parity on the remaining three

• A company dominates when the consumer not only prefers it to the competition, but will actively seek it out

• A company differentiates when the consumer prefers its brand over another

• A company is at parity when its offering is at the industry par and consumers are willing to purchase their brand routinely

A 5, 4, 3, 3, 3 profile/mix is optimal. Companies that try to be excellent in everyattribute are either doomed to fail or leave significant money on the table.A 5, 4, 3, 3, 3 profile/mix is optimal. Companies that try to be excellent in everyattribute are either doomed to fail or leave significant money on the table.

Source: CGE&Y Research and Analysis

Dominate

Differentiate

Parity3 3

5

4

3

Access Experience Price Product Service

Ideal Value Profile(as perceived by consumers)


Domination/Differentiation Strategies in Practice

Primary Relevancy Attribute

Seco

ndar

y R

elev

ancy

Attr

ibut

e

Metro, Wal*Mart, Ames, Costco

Ferragamo, Gucci, Home

Depot,

Sony, Pepsi, Frito-Lay, 3M,

Whirlpool, Lowe’s

Zara, Best Buy, Pier 1, Tumi,

Tylenol

Walgreens, Yahoo, Amazon.com, Coke, Kodak, CNN,

Gatorade

Tesco, AutoZone, Craftsman

Tools, Saturn

Harrods, BMW, Midwest Nike Stores, Rolex,

The Disney Store,

Avon, E*Trade, Tide

Nordstrom, Singapore Airways

Attributes Price Service Product Experience Access

Price

Service

Product

Experience

Access

Lands’End

Target, Maytag, Dixons, Mazda,

Honda (car)

Peapod (Ahold), Virgin, Four Seasons, Kraft

McDonald’s, Gerber, Progressive

Superquinn, Citibank, Chevy

Truck, Cont. Airlines

Boots, M&M Mars (online), Dell Computer, American Express

CasioDollar General,

Charles Schwab, Visa

Honda Goldwing

MotorcyclesAOL, Hallmark

IKEA, Southwest Airlines, Club Med,

Gateway

iVillage.com, Starbucks, Marlboro


Moving from Myth to Reality

Implications for:

Brand Tactics

All Supporting Business Systems


The CGE&Y CDTSM Model For Transforming Consumer Businesses

Selling Community

Offer

Consumer

Messaging

Brand

CustomersDis-

continuities

Brand Tactics“Making the right

promises”

Business Systems

“Keeping promisesefficiently”

Context Levers

Manufacturer fully controlsManufacturer partially controls Consumers


Context Lever - Examples

Messaging

Company Example

• Anheuser-Busch• Nike• Absolut

• Whassup?• Just Do It!• Absolutely

Selling • Coke, Frito• Dell

• Everywhere, Always in Stock• Disintermediation, Consumer Direct

Community• Ben & Jerry’s• Tom’s of Maine• Harley

• Cause Related• Cause Related• H.O.G.

Offer• Disney Films• Colgate Total• Martha Stewart

• Licensing/Lifecycle• Lifecycle• Licensing/Lifecycle


Context Lever - Examples

Company Example

Brand

Customers

Discontinuities

Consumer

• Reynolds Metals/Alcoa• Gerber• Bose

• PL Strategy• Lifestage Management• Mass Consumer Brand Coherence

• Dawn • Gateway• Clinique

• Dollar General Special Pack• Gateway Country Store• Leveraging Dep’t Store Demographics

• J&J• Dell• Pepsi• Mobil Speedpass, Blackberry

• Tylenol Recall• Internet-Based Commerce• New Age Beverage• Technology Innovation

• Kenneth Cole/Donna Karan• Enfamil• Craftsman Tools

• Cohort Segmentation• Individualized Message• Service Recovery, Customized Offers


What is the Strategic and Operational Positioning for Companies That Will Drive Superior Financial Performance

HighLow

Revenue

Growth rate

Low

High

Profit Margin

Issue: Value-Leakage/Execution

Issue: Customer Relevancy/

DifferentiationIssue: Not

meeting financial market

expectations

Company X

Issue: Extend the lead


CR Provides the Foundation for Establishing Brand Integrity through Customer-Driven TransformationSM…

Mission Critical

Capabilities

Process &OrganizationImplications

TechnologyLeverage

Areas

IT I

nfr

as

tru

ctu

reIn

form

ati

on

, A

pp

lic

ati

on

s,

Pro

ce

ss

, O

rga

niz

ati

on

Vision &Business Objectives

& PerformanceMetrics

Strategic Imperatives


…Which Ultimately Drives Different Operational Decisions…

Marketing Sales Manufacturing SC Cust. Svce

HR IT Store Ops

Agentry

Inspire

Customize

Solution

Intimacy

Value

Features

Flexible

Answers

Comfort

Standard

Innovate

Flexible

Results

Lifestyle

Standard

Quality

Adaptive

Extend

Integrate

Basic

Inform

Response

Empower

Custom

Productivity

KnowledgeDissemination

SatisfyCustomers

ProblemSolved

Leverage

LowCost

Innovation

CustomerInsight

KnowledgeMgt

CustomerInteraction

No Frills

Test/Use

Educate/Personalize

Comfort

FacilitateRelationships

Price

Product

Service

Access

Experience


...By Creating Alignment, Forcing Trade-offs, Driving Speedand Generating Savings for Investing in Top-Line Growth

Mission Critical

Capabilities

Process/Technology

LeverageAreas

Strategic FocusAreas

Aligned & Strategic

Unaligned Non- Strategic

AlignedNon-Strategic

Initiatives

Unaligned initiatives will be used to fund strategic initiatives

Aligned, but non-strategic initiatives will be examined

for alternative sourcing opportunities

Vision &Business Objectives

& PerformanceMetrics


Key Questions - Consumer Relevancy

1. Do consumers understand and care about your brand position the same way you do?

2. Can a consumer easily articulate the difference between your brand and the competition?

3. Do all of your senior executives agree on your brand position and that of your key competitors?

4. Do all of your employees understand the brand position, and their role in supporting it?


Key Questions - Customer-Driven Transformation

1. Are all business processes aligned to deliver the brand promise efficiently?

2. Do all key process owners understand their role in delivering the brand promise?

3. Are performance metrics aligned?

4. Are all current internal projects aligned with brand promise?


Thank You!!

Fred [email protected]

917.934.8855

becoming relevant to consumers and customers june 18, 2002 cincinnati, ohio the myth of excellence

Documents

right reserved fc080202

cap gemini ernst young

cp mfg fred crawford

aspects of consumer

myth of excellence slide

different consumer

free agent slide

confused consumers