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PrefaceCompeting for Customers and Winning with Value brings together, for the first time, twovery powerful concepts: customer value and competitive planning. Together they createa powerful tool that will generate breakthrough strategies for market dominance.Value is not a new concept. On the contrary, the concept of value has been around for along time, but the ability to operationalize that concept into a meaningful tool forbusiness managers has come about much more recently. The previously fashionablemetrics of customer satisfaction have proven to be poor predictors of businessperformance, whereas the linkages between customer value and performance measuressuch as market share and profitability have been identified and documented. In fact,value has been shown to be one of the best predictors of market share and customerloyalty available. It is only natural, then, that developing a system to harness value as acompetitive weapon is an essential next step. This is the objective of Competing forCustomers.The second concept that Competing with Customers brings to the table is a competitiveplanning template that enables organizations to actually harness their value creation anddelivery systems to enhance their market performance. It is a planning system thatfocuses at the level where the organization makes money: selling products or services topeople in specific markets or market segments.Every business organization has plans for growth – whether these are formal or informal,well-documented or intuitive. This type of planning is typically done at the highest levelsof the organization, and usually does not and can not address the questions of where andhow the organization should compete in order to win and retain customers. And whencompetitive planning at the more granular level does take place, there is frequently adisconnect between these planning levels, with the result that the organization plowsrudderless through the competitive waters unable to navigate the demanding dynamics ofthe market place. Competing for Customers provides the framework for bringing themultiple levels of planning into alignment, and to address very specifically the question,“How do we compete?”Organizations have the power to choose where they compete and how they compete. Thecompetitive arena is a product/market – a market or market segment that buys specificproducts or services. This is where competitive planning takes place. It focuses onanswering a series of very specific questions answered by the metrics of customer value.It accommodates the shifting complexities of a constantly changing market place bycreating the necessary focus to understand how competitors compete.Within each product/market in which the organization chooses to compete, the firstquestion is “What is the organization’s competitive value proposition?” How do buyerswithin the product/market define the value they seek, and how do they perceive the value8

our organization provides relative to that of the competition? Failing to answer these twoquestions or, worse, not asking them in the first place, puts the organization at a severecompetitive disadvantage.Once the organization understands its competitive value proposition it has to ask “Is thisthe value proposition that we want?” If the organization’s value proposition isundifferentiated from its competitors, it is offering buyers no compelling reason to buy itsproducts. This shows up in stagnating share positions and mediocre profits. If its actualvalue proposition is inferior to its competitors, then it can expect declining sharepositions and lower profits.Understanding the value gaps between an organization and its competitors, along with thepotential value-enhancing opportunities those present, raises the question “How does theorganization manage its competitive value proposition in order to either close the valuegap with leading competitors or widen it in order to establish undisputed leadership?”Competing for Customers provides a blueprint for effectively managing theorganization’s value proposition by specifying clear objectives supported by a clear andfocused strategy.Finally, the organization has to monitor its competitive value proposition. Theorganization’s value proposition is an important asset providing a compelling reason todo business with the organization. It requires continuous management. Just as anorganization manages its inventories, distribution system, or pricing strategies, so too,must it manage its value proposition. Failure to do so means that the organization isleaving this critically important asset to the whims of its competitors.Competing for Customers and Winning with Value provides the reader with a clearblueprint for crafting breakthrough, value-added strategies to dominate thoseproduct/markets that the organization targets. For many readers it will challenge the waythey look at their competition, their markets and their industries. Competition will neverlook the same.9

IntroductionElementary economics would tell you that every business firm seeks to identify andoccupy a position that is somehow unique from that of its competitors. This is the veryessence of competition. Uniqueness creates a compelling selling proposition and anopportunity to increase the firm’s share of the market as long as the uniqueness issomething that is valued by the market. In the past and, to a large extent even today, thisuniqueness has been based on product differences such as those created and enjoyed byMicrosoft. Distribution differences, such as those that have powered the Caterpillarengine are another form of differentiation. Image differences have been a powerful toolemployed by companies such as Mercedes or Lexus. Price differences are yet anothertype of differentiation perhaps no better employed than by Walmart, Costco, or Yugo.Outstanding firms are constantly seeking newer and better ways to differentiatethemselves from their competitors.All firms compete. Some are better at it than are others. Less innovative firms, lackingthe ability and capacity to effectively differentiate can only challenge the leaders at best,or follow. Some industries, to their current detriment, have managed themselves into acommodity situation where differentiation is no longer possible.The retail banking industry had, in response to the dying S&L industry, bet the mortgageon a price competition where the belief was that the only way banks can woo customersfrom the S&Ls was to cut their fees and prices. In the face of the dubious S&L strategyof losing a dollar on every transaction and making it up in volume, bank managementspanicked and began cutting prices. In fact, this price cutting evolved into strategies ofgiving product and service away for free. The current result is that many banks haveturned themselves into kernels of corn or hog bellies in the eyes of their markets. Thereis little if any differentiation among banks. They are in fact commodities offeringcommodity products and services. To quote Gertrude Stein, “A bank is a bank is abank”. Unfortunately, as any marketer worth his or her salt will tell you, there need be nosuch a thing as a commodity. Just ask Orville Redenbacher or Sam Purdue.Banks are not alone. The US airline industry has flown into significant turbulence as theflying public has learned that it can endure a cramped, stressful, and all arounduncomfortable traveling experience on any airline. It doesn’t matter if it’s Delta, United,US Airways or Continental. All are the same. How to lure customers? Improve service,on time arrivals, or comfortable seating? No. Reduce prices. Now you can fly in thesame cramped, stressful and all around uncomfortable airlines at a cheaper price.Telecom has also found that the conventional wisdom of trying to differentiate a dial toneis a difficult process. Ignoring the host of attendant services and support that customerswant, telecom companies dialed down their prices in an attempt to lure customers fromone carrier to another.10

A second law of economics points to the nature of competition and how it forces firms todifferentiate. When Henry Ford began the mass production and mass marketing of hisautomobile his strategy was simple – “Give them any color car that they want as long asit’s black”. Ford saw the US automobile buyer market as homogeneous. Entercompetition. Now the challenge was how do we offer the US auto buyer a compellingreason to buy our product instead of Ford’s car? The answer, of course, was to providesomething different – a different color, style, name, etc. As more and more companiesentered the auto market, the greater was the need to differentiate.Competition forces differentiation and in the face of a growing and intensive globalcompetition, firms must learn how to compete effectively. They must better learn how tocreate and sustain a differential advantage or relegate themselves to a mere challenger orworse, a follower.The competition for a differential advantage, as indicated above, has taken many forms.Neutralization of these advantages has become significantly easier making the advantageless sustainable. Price advantages have always been recognized as the easiest andquickest to be neutralized. However, technology and its availability to all types ofbusinesses have made it easier to neutralize product, distribution and even imageadvantages.Organizations are beginning to understand how value – customer value – is a powerfuldifferentiator providing the basis for a differential value advantage highly linked toincreased market share and profitability.Value forces the organization to critically examine and understand the all importantinteraction among the enterprise’s quality offering, its pricing policies, and itsbrand/corporate image. The key to the successful deployment of a value st

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