The Competitive Component of CVA

The adjacent picture says it all. Your competition is working hard to attract your customers. The better you understand your value proposition and the value propositions of your competitors the better equipped you are to make smart business decisions regarding retention strategies and where to allocate scarce resources so that you retain your existing customer base. Armed with the competitive knowledge you can develop winning acquisition strategies to attract your competitor’s customers as well as new prospects entering the market.

Looking at the Customer Satisfaction Score graphic, the Customer Satisfaction or Value Perception is on the horizontal axis with 1 being Poor and 10 being Excellent. The vertical axis represents Customer Loyalty or Retention with High Loyalty on the upper end of the scale.

The “S” curve (black line) represents the statistical regression results of the customer value scores for the designated population. In a typical data plot the slope of the line is fairly steep in the middle and flatting out on each end as shown here. The middle portion of the curve is called the “Slippery Slope” since a little movement in customer satisfaction results in a bigger movement on customer loyalty.

Review of the “S” curve reveals that at 8 and above the curve begins to flatten out. It is at this point that companies who perform at 8 or above enjoy greater revenues from their existing customer base as well as attracting new customers, which grows their revenue and market share – the High Return Zone.

The red line represents the probability of a customer defecting. Notice that when the customer satisfaction score is at 8 or above the probability of your customers defecting drastically declines. This is a result of the customers being satisfied and enjoying your strong value proposition relative to your competition.