I learnt about the Customer Value Performance Matrix from reading Customer Power by David Swaddling and Charles Miller which they called the Customer Perceived Value Performance Matrix.
It is another 2 x 2 matrix – like the Innovator’s Portfolio Matrix – that I find myself wondering “why didn’t I think of this?”
The Customer Value Performance Matrix
The customer value performance matrix lets you look at your individual customer value attributes and convert them into a SWOT analysis by identifying the strengths, weaknesses, opportunities and threats.
The two axis are:
- Relative performance which identifies good and bad attributes.
- Relative importance from the customer’s perspective.
According to Swaddling and Miler you can calculate your relative performance of each attribute based on the customer’s next best alternative. This may be difficult to determine since it requires you to crunch through the customer value numbers to determine which is the best alternative (see Managing Customer Value).
Alternative ways would be to
- Average the attributes across your main competitors and compare your performance against the average. This risks over-assessing your strengths and opportunities if there is one outstanding competitor who has a clear advantage, but if that’s the case, you can use that competitor as your benchmark in the customer value performance matrix.
- Picking the best customer value attribute performance from all the competitors which would be a tough test.
On the other axis, Relative Importance, Swaddling & Miller draw the cut-off line at 12.5%. I believe this depends on how many attributes you track in your customer value formula. If you’ve got five attributes then the dividing line would be 20% with a possible sample of importance ratings of 35%, 25%, 15%, 15% and 10%. If you’ve got eight in your customer value formula, then the 12.5% is appropriate.
SWOT From The Customer Value Performance Matrix
Strengths – high relative performance (i.e. you’re better than your competitors) but low relative importance. The customer value strategy would be maintain performance.
Weaknesses – low relative performance and importance are low priority improvement targets unless they are order qualifiers and performance is below the threshold or risks falling below it.
Opportunities – high relative performance and importance – these are the competitive advantages of the business, the key factors of difference.
Threats – low relative performance but high relative importance – these attributes are priorities to the customer but the company does not perform as well as competitors. These are priorities to improve the underlying capabilities.
Putting Customer Value Into Perspective
Customer value can seem a complex, intangible concept when you start working with it but techniques like the Customer Value Performance Matrix help to make it much more relevant to sceptical management since it guides priorities and decisions.
Paul Simister is a business strategy coach who helps business owners to differentiate their businesses and develop winning strategies. Get your free copy of the ebook The Six Steps Profit Formula.
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