Delivering Customer Value Marketing/Operations Report

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Delivering Customer Value 27/11/2008

Delivering Customer Value

Module Lecturers:xxxxxxxxxxxxxxxxxxxxxxx

How can the xxxxxxxxx Garden Centre improve the value delivered to aspecific customer or group of customers?

Student ID Number: xxxxxxxx

Bristol Business School: F/T MBA January 2008University of the West of England

3500 WORD COUNT STARTS AT DELIVERING CUSTOMER VALUE

Page 1 of 29 xxxxxxxx


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Self Evaluation Element

This report has clearly defined the problem of the non expert gardeningcustomer not being able to find the Hellebore plant.

It is worthy of consideration because non expert customers will be lost if theycannot find what they want. They have little knowledge of similar plants. Itshould also be considered because the non expert segment makes up 80% ofXGCs business.

Non expert customers would value the problem being solved because itmakes it easier for them to get what they want.

The practical impact on the customers and the organisation was analysedthrough the gap analysis and the root cause analysis. Theory from Berry et al.

(1990), Hooley et a. (2007) and other academics was used to understandconcepts and their implications. All of whom are cited in the text andreferenced according to the Harvard referencing system from the UWE BBSwebsite:http//www.uwe.ac.uk/library/resources/general/info_study_skills/guideref.htm

The options considered were; process and flow, CRM, improvement prioritiesand targeting strategy. There is extensive academic literature on these ideasand concepts. The concept in described and applied to the customer notbeing able to find the Hellebore plant. Advantages and disadvantaged of theappropriateness of the model are then listed.

The impact of the concepts on customer value is evaluated during each optionand the more specifically during the solution recommendation.

A combination of CRM and process flow is proposed to be a solution.

The document is represented in a report format and has uses a researchbased approach.

In the report it was very difficult to include all the academic knowledge gained

during the assignment and only selected areas were used.

Throughout the report the focus has been on delivering customer value to thenon expert customer.



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The Xxxxxxxxx Garden Centre

Clift House Road - Southville - Bristol - BS3 1RX



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Table of contents:

Title Page 1Self evaluation element 2The Xxxxxxxxx Garden Centre 3Delivering Customer Value 4

Xxxxxxxxx Garden Centre 5

Segmentation 6Gap analysis 7Root cause analysis 9

Option 1 Process and flow 8Option 1 Customer Relationship Management 8Option 3 Improvement priorities 8Option 4 Targeting Strategy 9

Recommendations to resolve the problem 10Solution CRM 11

Solution Process and Flow 13

Conclusion 12References 13Appendices 15



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Delivering Customer Value

Organisations must understand the nature of their business and how they aremeeting a customer need. Corporate success will be achieved only if acompany continues to meet customer needs (Levitt, 1960).

There are a number of consumer groups. Each group have differentrequirements and will value different things. Consequently there are a numberof ways to deliver customer value to the various groups (Jobber & Fahy,2006). A company is faced with managing available resources and options toeither please their customers or risk loosing their business. Abraham Lincolnfamously said You can please some of the people all of the time, and all ofthe people some of the time, but you can not please all of the people all of thetime (Lincoln, 1838 cited in Hughes, 2007).

It can be argues that customer value will be delivered if the customer receives

exactly what they expected. However Professionals argue that if a companycan strategically position itself a fraction above the market needs, consumerperceptions would change and the company would be seen to be deliveringcustomer value (Littler, 2007).

Xxxxxxxxx Garden Centre (XGC)

Located along the river that runs through Bristol and set beneath Cliftonsfamous Suspension Bridge, Xxxxxxxxx Garden Centre claims to be the South-Wests leading co-operatively owned and independently run garden centre(XxxxxxxxxGardenCentre.com, 2007).

Recently Xxxxxxxxx Garden Centre has invested in an award winningarchitectural extension. Although there has been the investment into theextension there has been little other investment into the business. There stillremain many plants outdoors with the risk of weather or logistical damage.

Xxxxxxxxx Garden Centre has been relatively successful and has capitalavailable for investment into the business to develop their delivery ofcustomer value.

The management team consist of four members who do not have directoperational or marketing experience but have demonstrated theirentrepreneurialship over the years to bring the company to where it is (FAME,2007). The company has a vision to grow and is optimistic about the future.



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Customers Segmentation

Xxxxxxxxx Garden Centre is located in South Bristol and attracts customersfrom the area as it is the main garden centre there. XGC is also reasonablyclose to the centre and likewise is able to appeal to customers who can

access central Bristol easily.

Generally South Bristol customers can be divided into two groups. The firstgroup are considered to be expert gardeners and the second group are nonexperts (Wedel & Kamakura, 1999).

XGC compete with a portfolio of companies ranging from B&Q to StWerburghs City Farm. XGC is considered to be a smaller company. Hooley etal (2007) suggest that small companies should segment as it will offer themopportunities. XGC has a high market share of non expert customers 80% ofcustomers interviewed were non experts.

Here we will be concentrating on the core market segment of XGC.

This segment is entering a gardening hobby. The non expert customer isusually unaware of products, availability and seasonal plants. As a halfhearted gardener the customer seeks an experience at XGC that does notrequire the physical engagement of real gardening.



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Gap Analysis

A gap analysis assignment tool will be used to compare customerexpectations and perceptions with business performance (Barry, 1990).

Gap1

The customer would like a plant, is told of XGCs range, views the XGCwebsite and reads about the Hellebore plant and its exclusiveness to XGC.Thus the customer expects to get a Hellebore plant easily at XGC.

Traditionally there have been weak forms of assuming the customers view(Barry, 1990). Management not knowing what has influenced the consumerassume customer expectation (see appendix 1).

Management consider cost to be more important to the customer, whereasthe customers themselves do not consider the cost to be as important asspeed. Without this analysis the management strive towards cost reductioneven if it means reducing the speed.

Gap 2

Management assumptions regarding the importance of flexibility are moreaccurate. Performance standards must be set to create flexibility (Berry et al,1990).

Employees are trained to cater for every customer need which is not apractical performance standard. There are no standards in place that interpretthe managements view of flexibility into practical application. Consequentlythe functioning of XGC revolves around inadequate standards.

Gap 3

XGC want to implement a labelling standardisation strategy to help customers

find products. The procedure is to collect a label from admin who haveelectronic labels if one is missing.

Employees show lack of willingness because labels should be dealt with onarrival of products. The site is outdoors, large and staff are alreadyoverstretched.



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Gap 4

The customer wants to go to XGC and collect a Hellebore plant. Thecustomer expects to locate the plant easily as that is how it was advertised

(pictured) on the website.

Messages from XGC are converted into customer expectations (Berry et al,1990). On arrival the customer does not locate the plant easily. Images on thewebsite show a neat and tidy area. XGC is not as tidy and orderly as thewebsite displays, and the customer cannot find the Hellebore plant easily.

The gap is therefore the broken promises of what XGC said they would doand what they actually did.



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The Problem Focus on clear defined marketing and operationalproblem and its root causes

Results derived from interviews with XGC customers pointed towards someareas of concern They fact that labels were bad, not readable and

inconsistent.

Gap 4 identifies a promise to the customer that the Hellebore plant is easy tolocate and purchase at XGC. The problem is that the non expert customercannot find the Hellebore plant.

A root cause analysis can identify reasons for why the problem occurs (seeappendix 4). The practical problem is the non expert customer is unhappybecause the Hellebore plant cannot be found. This is because the Helleboreplants are not visible. This is because the labels are not readable. This isbecause XGC have no labelling equipment. This is because they have not

allocated funds to this issue.

A number of other causes have been identified in the analysis, all of whicharguably could be addressed and tackled.

The particular root from the customer being unhappy to the issue of thefinance is selected because it is considered to have priority. It is worthy ofconsideration because a high number of customers experienced this problem.

If resolved it would have an impact on the value delivered to the non expertcustomer (Thull, 2003). Non experts do not know their way around a gardencentre and they can feel frustrated it they cannot find what they want (Fraser-Robinson & Mosscrop, 1999). Practicality and ease of use would be valued bythis customer.

Although not in the scope of this report, the inherent nature of this root willencourage employees, which consequently will affect the customerexperience. This will contribute to delivering customer value.

This is a marketing problem of communication, resulting in an operationalissue of customers searching in the wrong areas (Johnson & Weinstein,

1999).



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Option Analysis

Analysis and Possible Solutions

Option 1: Process and Flow

A functional layout is used by supermarkets and manufacturing who groupproducts or activities together. It is designed to make it easier to move aroundin a systematic way. It addresses four main areas.

o The distance travelled around the premises.

o Quality in terms of damage or annoyance from constantly moving from

one place to another.

o Higher throughput time due to longer distances covered.

o Availability of space (Chambers et al, 2007).

Application

XGC can adopt a functional layout which lends itself to items being groupedtogether similar to a supermarket. Customers can then take a route fromproduct to product according to their needs (Chambers et al, 2007). However,not all customers will have the same route so it is also important that thelayout addresses other needs.

Naylor (2002) suggests that customers should be relaxed moving at thespeed where they can comfortably pursue their shopping. Customers shouldenjoy the experience and notice displays of special offers as they pass. Afunctional layout would structure the floor plan. A non expert customer wouldbe helped by the process flow. This would help identify the area in which

Hellebore plants are displayed.

Advantages

It would be relatively easy to implement as already there exists some degreeof product grouping. It could be implemented immediately.

XGC could design into the functional layout passing by and exploiting theirnew award winning interior extension (appendix 5). XGC could takeadvantage of their unique view of the River Avon. A structured functionallayout would designate particular places for promotional items (Hal, 1998).

The non expert would be delivered value through this option as it would havea direct impact on the problem of not finding the Hellebore plant.



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Disadvantages

Currently XGC have no clear sign boards. Functional layouts used in

supermarkets have large and clear sign boards. XGC would have to get thesemade. This may have cost implications. It would take time to design suchboards as standardisation is more than likely to be an issue (see appendix 6).

The new indoor extension will limit layout options. Currently the extension issituated on one side of the site so many visitors do not get the opportunity tosee the structure (appendix 5).

Option 2: Customer Relationship Management (CRM)

CRM is an approach that attempts to build customer loyalty and optimise longterm profitability (Hughes, 2007).

CRM is often referred to as a philosophy because it tends to stipulate theorganisational culture towards customer satisfaction. CRM recognises thecustomer to be the key asset that needs to be managed (Rigby et al, 2002cited in Hughes, 2007).

CRM acknowledges that businesses now have many channels with theircustomers so emphasis is placed on developing better awareness ofcustomer needs. CRM focuses on:

o The internet.

o Customer databases.

o Profiling customers.

o Telephone conversations.

o Postal questionnaires.

CRM usually comes with sophisticated software packages. There is anemphasis on sharing information between departments. This is done to know,

understand and address the customer needs. There can often be sensitivedata and building customer rapport is stressed in CRM.



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Application

XGC could develop their existing website to allow for online purchasing. This

could initially form the basis of data collection at least for the segment that willuse e-business.

XGC have already identified that they need to develop their e-commerceoptions. E-commerce will be part of a CRM solution system, so XGC couldaddress the two issues simultaneously.

There is a restaurant in the XGC which is popular and so questionnaires couldbe given out to customers.

Advantages

The main advantage is to understand what the customer actually wants but isnot getting. The customer dissatisfaction explained in the root cause analysiswould be identified if CRM was introduced to XGC.

CRM is argued to be simpler in a smaller business unit and it analysescustomer information for multiple purposes (Piercy, 2001). Traditional modelfor customer interaction (appendix 7) would not identify a problem such as thecustomer not being able to find the plant. Customers will communicate withmore than just marketing and admin.

XGC would be able to create customer profiles, customer preferences andcustomer order histories.

Better customer service could be provided to the non expert customers asthey would quickly be identified as non experts and dealt with accordingly(Jobber & Fahy, 2006). New selling opportunities would be identified. Nonexperts could be offered products that would encourage easy gardening orloyalty to XGC. This kind of focus on the customer will produce value for theconsumer.

Disadvantages

Non expert customers may not want to be too involved with XGC. Makingphone calls to customers would be impractical for XGC at this stage, as theydo not have the human resources.

XGC have a simple IT system that is unlikely to integrate with a new CRMsystem. CRM has an inherent relationship with information systems. For XGCit would mean a new IT and CRM solutions system.



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Many companies have attempted to implement CRM but have failed.Incompatible technology and low team collaboration have been a problem(Precision Marketing, 2007).

Quantifying the economic benefit of CRM is difficult. A cost benefit analysis

would need to be carried out.

A fully operational CRM package is implemented in stages and the overalltime taken is often unpredictable (Peelen, 2005). High data collection isrequired for the system to generate useful information. This can beunderestimated.

Option 3: Improvement Priorities

Improvement priorities focus on paying particular attention to a selected

performance objective. The fundamental purpose is to shape the objective ofthe operations (Chambers et al, 2007).

When assessing organisational performance improvement priorities isconcerned with::

o The needs and preferences of the customers.

o The performance and activities of competitors.

Improvement priorities will take parts of the business and categorise them intohow critical they are:

o Order winner: those that directly win business for the company.

o Qualifier: those which may not win extra business if it is improved, but

will lose existing business if the performance level drops.

o Less important: those that are relatively unimportant (Chambers et al,

2007).

The performance objectives can be placed in an importance performancematrix to determine the importance of the improvement (appendix 8). Theyare then given a status of excess, appropriate, improve or urgent action.

Application

XGC could undertake a reorganisation on the centre. An innovation basedimprovement strategy would inculcate newer ideas and products. For examplethey could offer garden furniture, clothing, pets and aquatics, craft and

giftware. Online shopping, loyalty cards and clearance lines have beenintroduced by similar centres.



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XGC have the space to exploit and so they could accommodate new ideasand a new image.

Advantages

The introduction of new products such as pets is likely to produce abreakthrough effect. This strategy will add more value to the non expertcustomer as they will be offered many related products.

The introduction of new innovative products would naturally influence thelayout design. This will help the customer in locating the desired products(Hal, 1998).

The garden centre can move towards becoming a garden and leisure centre,which would be the natural progression for the business.

Disadvantages

Competitors that are in the garden and leisure sector are much bigger andcan offer customers better facilities. XGC have no knowledge of thecompetitions corporate success.

It would be trial and error as there currently is no similar business in the area.Risk assessment must be carried out as the strategy may be a completesuccess or failure.

Option 4: Targeting Strategy

Targeting strategy determines the selection of the customers a companywishes to service. The decisions involved in targeting strategy include whichsegments to target and which products to offer them (Daly & O'Dea, 2004).

The principle is to concentrate and satisfy the needs of a particular group somaximum resources are used to deliver customer value to the targetconsumer (Hooley et al,2007). There are three steps to targeting strategy:

o M arket segmentation

o Target market choice

o Product positioning (Hughes, 2007).

http://wiki/Market_segmenthttp://wiki/Positioning_(marketing)http://wiki/Positioning_(marketing)http://wiki/Market_segment


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Targeting strategy is influenced by market maturity. Consumer behaviour ismonitored closely as targeting strategy will attempt to provide differentiationfrom the competition (Daly & O'Dea, 2004). Emphasis is placed onunderstanding the customer needs and what other providers are offering.

Finally there is importance placed on break even points as customisation canincrease cost. The volume of sales required to make a profit is identified.

Application

Other than the visitors mentioned in 3.1.2., there those looking for a leisurelyactivity. Many people frequenting XGC are over 40 however couples, thosewith families and elderly people also visit XGC.

XGC can start collecting information on their customers through their website.XGC can reduce the number of specialised plants that appeal only to theexpert gardener.

Advantages

If XGC target the non expert segment they will be addressing 80% of thebusiness.

XGC have a differentiation aspect of being along the river. It is something thatcompetitors cannot offer.

Non expert customers will be given more attention. XGC will concentrate ondelivering value to this group.

XGC are already prepared to make information system investment.

Disadvantages

A target marketing strategy in essence aims to serve a niche market thatmainstream providers consider to be too small and not profitable enough. Thisstrategy will not lend itself to the business growing (Daly & O'Dea, 2004).

XGC do not have the sophisticated systems to inform a targeting strategy.Decisions based on unreliable information can be extremely costly.



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Recommendation: a combination to resolve the problem

Solution CRM

Solving the marketing problem (not being able to find the Hellebore plant) thathas a resulting operational issue.

To improve the value delivered to the core customers a good sound rapportwill be necessary. Interaction and feedback will allow XGC to cater for theneeds of its customers. This will contribute to the customer retention andultimately to customer loyalty.

With the arrival of technology, customers are integral part of the IT systems.

Each of the business departments is sharing information to improve theirefficiency. This multi-channel customer interaction model helps to betteraddress the customer needs and enables each department to perform better.

As we apply CRM to XGC we can see that the customer dissatisfactionidentified in Appendix 3 will soon be recognised. The customer not being ableto locate a particular plant, would not normally be communicated through thetraditional model for customer interaction (Appendix 4). With CRM a customermay have been contacted by telephone where they express dissatisfaction.They may also be given an option to comment on the website.

Departments

Data collected from the CRM system can be fed back into the otherdepartmental systems. Departments can take initiatives.

Marketing may choose to address the issue of labelling.

Finance will be informed of any investment requirements.

HR will be informed of the HR requirements, so they can allocate resources tothe problem

Marketing will liaise with the customer and offer product labelling similarity.They could consider a promotional label range. There can be opportunities forbranding through packaging.

Resistance

However CRM recognises that people can become alienated by the distance

put between them and the organisation through technology. This is why CRM



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must be built into the corporate strategy so customers feelings are considered(Hughes, 2004).

Each company will vary in how it approaches CRM.

XGC is run as a cooperative so there is a sense of responsibility amongemployees. They do not have a blame culture. Many employees findthemselves multitasking. However, XGC already have an organisationalculture which is resistant to change. The cultural challenges of the XGCwould perhaps prove more difficult. XGC staff would need training and supportto get them to think about the customer.

Above all CRM requires a buy in by top management as results initially arehard to measure yet the CRM approach would require financial commitment.CRM acknowledges that quick wins may need to be achieved in pursuit of abigger strategy (Hughes, 2007).

Once resistance is overcome CRM will fit nicely with XGC because the co-operative was set up as a hobby of the current management. They have aninherent passion for gardening and can relate to customer needs.

Standardisation

Customer feedback on the poor labelling would be addressed.Standardisation of product labelling and labelling technology would bewelcomed by CRM. XGC will be in a better position to build on past mistakesand make a commitment to continued improvement.

Customer

There remains a danger of annoying customers if CRM fails to identify thetolerance zone for liaising (appendix 8). For the non expert it is only a smallportion of their disposable income they spend at XGC therefore they may notwish to have high interaction with the company.

XGC benefits from strong social bonds and many customers know the peoplein the co-operative personally. CRM and customer interaction may affect thealready powerful bond between the customer and business. It could also beargued that due to the fact that customers have a close relationship with staffmembers they are reluctant to voice their complaints or concerns. In thissituation a formal relationship marketing approach would be preferable forlong term success strategy.

Employees



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Someone who was experienced in CRM would have to be employed. Userswould need to be trained on how to interpret and adjust the stock mix toincrease customer value (Fox, 2002). All staff would eventually have to betrained on CRM systems.

Data made available encourages strategic decisions from departments.Products need to match sales, public holidays and seasons (Fox, 2002).

Risk

CRM can only be a success if the technology is right for the company. CRMneeds the full collaboration and teamwork of the whole organisation. Skyattempted to implement CRM but failed and is subsequently involved in alegal case against the IT vendors used for CRM solutions (PrecisionMarketing, 2007).

Solution Process and Flow

XGC is essentially retailing in garden products and other specialised products.Items are displayed, customers generally walk around the site with a trolleypicking up the things they want and then heading to the exit rather like asupermarket. The item available at XGC have been summarised in the tablebelow

Plants General Plants, Flowers, Seeds

Gardening Sheds, Groves, pesticides, shovel, spade

Pets Bird Cages, Dog Baskets

Clothes Hiking, Gloves, Rain

Publications Books, Cards, Gardening Literature

Restaurant Snacks, Drinks, Lunch

We can see the example of a supermarket as there are similar characteristicssuch as pattern of arrival, trolley pushing, checkouts etc.

Supermarkets used to have frozen food near the entrance. There was nostrategic layout. Customers quickly made their way to checkouts withoutbrowsing knowing that frozen products were thawing. After redesigning thefrozen products were placed near the entrance. Sales increased as customerswere prepared to browse more (Naylor, 2002).

XGC could use the functional layout design to achieve this. A possibleexample of a functional layout is given in appendix 9. The clarity of flow

constitutes a successful layout (Chambers et al, 2007). Both customers andstaff will be able to locate where certain products are kept as everyone will not



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have the same route. The entrance is changed so that the extension can beseen straight away and the cafe offers a view of the river. The XGCexperience will become a relaxed environment for shopping, adding value(Naylor, 2002).

Conclusion

It would appear that process flow can address the identified problem. Whilethis is the case it cannot be ignored that CRM has a fundamental principle ofengaging with the customer. This means that CRM has a commitment tocontinual improvement.

A combination of both is inevitable because the problem is related to both

marketing and operations.

In the same way there are several other models that offer a solution or part ofa solution.

RGS have demonstrated their commitment to development through theextension. Financially XGC can afford a CRM solution. Assuming a CRMsolution was compatible the other options would be rejected.



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Appendix 1

Figure 1

GAP 1 Illustration

The gap analysis models require quantitative and qualitative measures forassessing the customer expectation. Information used has been derivedfrom interviews.

Here we can use the five performance objectives to deal with the

expectations gap (Slack et al, 2007).


Dependability (respond)

Flexibility

Speed (locating)

Quality

H

L

Management Assumptions

Customer Priority

(parking, access, layout)

Cost

Dependability (respond)

Flexibility

Speed

Quality

H

L

(parking, access, layout)


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The black line represents how customers prioritise the different elements.The black line represents the management assumptions needs to priority.

Appendix 2

Method

Initially a group of 6 MBA students visited a local garden centre. It was acasual visit intended at just acquainting ourselves with the functions of agarden centre, its general products, services, human resources and layout

styles used.

At this stage it was merely an investigation exercise as the choice of thegarden centre had not been made by any of the participants. Theparticipants consisted of an accountant, a software engineer, a companydirector, an IT consultant, a civil engineer and a social scientist.

The visit provided a valuable insight into the issues deriving from such abusiness. The co-operation of the staff and the appreciation of this type ofbusiness operation provided the zeal required for 2 of the initial 6participants to warrant further investigation. Another visit followed shortly

after which included liaison with both staff and customers in an attempt toidentify possible areas of improvement in value delivered to a specificcustomer or group of customers. Work started on defining customer groupsand associated implications for the value delivered to them.

Having spoken to customers it was decided that a visit to a well-establishedand renowned garden centre was necessary. Frequently customers wouldrefer to Cadbury. Typically, if Cadbury were closer I would go there.Cadbury has more variety. Things are easier to find etc.

We also visited Cadbury for knowledge of; benchmarking, competition,

customer expectation.



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Appendix 4

Root Cause Analysis. Why Why Diagram



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Appendix 5

Award Winning exterior Extension


Customer Unhappy

Cannot Find Hellebore Plant

Cant see Hellebore Plant Wrong Location No Stock No Signposts

Lack of Knowledge of Plants

Label Not Readable

Not displayed In View

Staff Not Trained

Staff Not Interested

Rare Plant Type

Not a Good Selling Plant

Wrong Stationary (Pens)

No Labelling Equipment

Lack of Labelling Knowledge

Label Not Waterproof

Obstructive Objects

Bad Layout Of Plant Display

Not At Eye Catching Level

No Highlighting, Capitals Etc.

No Knowledge of AvailableEquipment

No Funds to Purchase

No Infrastructure to Support

No Operating Knowledge ofEquipment

Isolated from related Plants

Too Many/Few Plants

Too Mush/Not Enough Storage

Display Tables Not Tall Enough

Plants Not Tall Enough

Plants Facing Away the Customer


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(XxxxxxxxxGardenCentre.com, 2007)

Appendix 6

Sign Board Examples



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Appendix 7



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Traditional model of customer interaction

Administration

IT/Systems

Finance

HR

Marketing

Sales Customer

Source: Hughes, 2007c

Appendix 8



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Importance Performance Matrix

Appendix 9



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Possible Functional Layout

(Garden & Leisure, 2007)

Existing Layout

PLAYAREA Restaura

RIVE VIEW OF

ModernExtension

Flowers

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Delivering Customer Value Marketing/Operations Report