The Momentum Effect

The Momentum Effect J.C. LARRECHE

What is momentum? • An impelling force or strength

How does it help?

• It helps in putting a serious distance between the competitors

Pushers, Plodders & Pioneers • Pushers – drive sales through aggressive increases in marketing spend • Plodders – firms that remained in the safety zone of past behaviors • Pioneers – firms who boldy moved in opposite direction of pushers and decreased their relative spending on marketing

Momentum Deficient Firms • Companies invest more in marketing to compensate for poor product. • Have to cut down on R & D because of dearth of fund. • It eats up the resources of firm and destroys the firm inside out.

Momentum Powered Firms • Focus on the product • Create initial impact • Take growth forward with that momentum

Walmart • Sam waltons knowledge of retail & customers • Deliberately opened stores only in small towns • Improved on customer service front, supply chain & supplier relationships. • Used economies of scale in purchasing to achieve “Every Day Low Price” (ELDP) • Strong, hidden, emotional value – appreciated by customer trust

Toyota • Did not focus on competitor , focused on customers • Ability to connect with customers – based on aspiration targeted their market – Prius car – low carbon emission car for city dwellers – Lexus car – focus on luxury

•

Toyota could deliver consistently reliable and impeccably engineered automobiles.

Source of Momentum • Gary Kildal VS Bill Gates • Microsoft’s source of Momentum – – – – – – –

Buying MS – DOS Selling it for as less as $40 for IBM Capture the Mass Market Programmes created compatible for MS – DOS Created windows OS based on the success of Apple Technology driven and also giving compelling offers Source of momentum Value creation

Value Creation Process

Drivers of Momentum Strategy • Exploring customers space –

Nintendo Wii

• Crafting Power Offer – –

Toyota Scion Toyota – Whyville partnership

• Mobilization of growth – –

Create a sense of urgency Organization focused on satisfying, retaining & engaging customers

• Apple’s Ipod, Itunes & Iphones • Less is more, More for less.

The Road to Momentum • Twin Engines of Momentum – Momentum Design – Momentum Execution Vibrant satisfaction

Compelling value

CompellingI nsight

Power offer Design

Compelling Design

Power offer Execution

Vibrant Retention

Vibrant Engagement

Designing Momentum Compelling Insights • Compelling Organisational Insight – The IBM Story – CEO Lou Gerstner – Virgin Atlantic

• Compelling Customer Insight – 3M Post – Alcoa Packaging : Fridge Pack – Dassault: The Falcon 7X Aircraft

Designing Momentum Retail Banking scenario

THE CUSTOMERS AWARENESS OF

UNKNOWN

RE MOTS UC

WA S MRI F E HT

KNOWN

THEIR UNSATISFIED NEEDS KNOWN UNKNOWN

Knowing – Doing Discovery Path •Inconvenient opening hours •Service quality •High charges

Listening Discovery Path •Lack of respect •Value of time •Anxieties

Learning Discovery Path •New Products •Alert System •Offset Mortgage

White Discovery Path •Personalisation •Banking “Stores” •Tele-Banking •Internet Banking •Mobile – Phone Banking

Designing Momentum Compelling Insights • First stage in momentum • Reveals new and better ways of satisfying customer needs leading to customer values • Uncovers new customers and new opportunities • Insight discovery matrix helps in systematically achieving and finding out the strength and weaknesses

Designing Momentum Compelling Value Customer value Map High g l in l pe m co

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Perceived Customer costs

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Designing Momentum Compelling Value •

Two types of organisations based on customer value map – Delighting Customers – Abusing Customers • Giving value to customers, by increasing their perceived benefits and decreasing their perceived cost

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The golden pathway to Increased customer value – Decrease perceived customer cost – Increase perceived customer value – Select customer group

Designing Momentum Compelling Value Customer Value Wedge Functional value

Financial value Intangible value

Emotional value

Designing Momentum Compelling Value • Customer value drives business, not products. • Customers buy products only to obtain the value they offer • Products are only transitory, temporary vehicles to carry from a firm to its customers • Customer decisions involve constant trade off of perceived costs and perceived benefits

Designing Momentum Compelling Value • Achieving compelling customer value requires a deep understanding of the pain and gain as perceived by the customers • Most powerful drivers are often the deep intangible and emotional determinants of value • Perceived customer value must be continuously optimised by systematically decreasing customer costs, increasing customer benefits and exploring alternative customer groups

Designing Momentum Compelling Equity • Customers are company’s main asset • They are more important to the firm than the factories, personnel or brand • The source of origin of most of the firms cash flow is through customers • Maximising the value of customers to the firm

Designing Momentum Compelling Equity Customer Equity Wedge Functional Equity

Financial Equity Intangible Equity

Emotional Equity

Designing Momentum Compelling Equity Customer Equity Map High ll i e p m o c

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Business Benifits

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High Business costs

Designing Momentum • The golden pathway to customer equity optimisation – Chase Equity Destroyers – Build up Equity Enhancers – Shift Customer Targeting

Designing Momentum Compelling Equity • Customer’s are firms most important asset • Shift customer equity focus from the most vocal or visible customers to those who are important to the firm • Average customers life time is first estimate of customers equity • Acting on customer equity requires a deep understanding of the total business cost and benefits related to serving customers

Designing Momentum Power Offer Design • First Direct – A bank that doesn’t like Banking • Power offer thro’ – Compelling value path • • • •

Customer value enhancers Customer value destroyers Customer value proposition Compelling targets

– Compelling Equity path • • • •

Customer equity enhancers Customer equity destroyers Compelling targets Compelling proposition

Designing Momentum Power Offer Design • Pillars of power offer – Compelling propositon • Swatch • Wal - Mart

– Compelling target • Dell • First Direct

– Power crafting – provide highest value to customer while extracting highest equity for the firm.

Designing Momentum Power Offer Design • Power offers resonate targeted customers need so vigorously that they “sell themselves” nd offer superior profitability for the firm • Explores the customer value & equity to determine the single compelling proposition and compelling equity • Maximum Momentum is achieved when a power offer is perfectly aligned with the three pillars.

Executing Momentum Power Offer Execution • Walkman!!! • Execution of power offer – Product focus to Value focus •

SWATCH (fashion)

• Business Value of Momentum – Not only power with customer but also power to generate growth – iPods & Wii V/S Competitor

• Chain reaction – Deliver high revenue – Reduce or redirect costs with performance – Deliver more value to customers and stockholders

– Vibrant Satisfaction – Vibrant Retention – Vibrant Engagement

• To sustain the chain reaction – Iron out problems in execution • Discover the sources of friction

– Constantly learn from customers and use them as insights

Executing Momentum Vibrant Satisfaction • Moments of truth – Jan carlzon – Scandinavian Airlines – Fifty million battles – A.G. Lafely – P&G – Election • •

Either win or loose Family accepts it or doesn’t

• Why Vibrant Satisfaction – Customer satisfaction evolves based on initial experience – Sustenance is required for momentum of firm – Only vibrant satisfaction evokes intense feelings and emotions

Executing Momentum Vibrant Satisfaction How to sustain? (MDC) • Mobilise for Vibrant Satisfaction • Detect Source of Dissatisfaction – Tetra Pack

• Convert Unsatisfied Customers – Pizza – Virgin Atlantic – JetBlue – David Neeleman

Executing Momentum Vibrant Retention • Types of Retention – Passive retention – Forced retention – Vibrant retention • cadbury’s

• Vibrant Retention How? – Mobilise for vibrant retention – Detect source of defection – Convert Defecting Customers

Executing Momentum Vibrant Engagement

Harry Potter • Business value of engagement • First engaged customers - Power offer – – –

Second engaged customer – valuable by buying more Engaged customer – new customers

Accelerators to engagement

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Boosted compelling value

– •

– •

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Listen to your lead customers – BMW

Boosted Compelling equity First Direct – cross selling

Boosted customer acquisition

Executing Momentum

Vibrant Engagement • Vibrant Engagement how? • Mobilising for vibrant engagement  Insurance firm  Inspirational leaders

 Detecting the source of engagement  United colours of Beneton

 Converting for vibrant engagement  Ferrari  Second Life

Total Momentum • What is Total Momentum – Dependent on

• Internal Momentum • Leadership Momentum

• Internal Momentum

– Wal-Mart Squiggly – Employee mobilisation for sustenance

• Building internal Momentum – Compelling Employee insight • IKEA

– Compelling Employee Value • ISS Cleaning – Service

– Compelling Employee Equity • First Direct - background

Total Momentum • Employee Power Offer • Provide substantial value to employees • Receiving substantial value from them

– First direct – Fringe benefits VS Facility – Vibrant Employee Satisfaction – Vibrant Employee Retention • Johnson & Johnson – Weldons (Retain)

– Vibrant Employee Engagement • Daniel Vasella’s – Gleevec • Richard Branson- Employees potential ideas

Total Momentum • Internal Momentum in Crisis – Wal-Mart fiasco – Johnson & Johnson- Tylenol

Total Momentum

• Momentum Leadership

– Leaders obtain momentum from stake holders, suppliers, media, government, local communities, financial analyst

• Tips for building Momentum Leadership Commit to building momentum through value origination Practice momentum principles with your contacts Have respect for people Spend quality time with customers, employees and other stake holders – Be momentum consistent over time and through your action – – – –