Value above Cost: Driving Superior Financial Performance with CVA, the Most Important Metric You've Never Used

0136043321 / 9780136043324Foreword

Customer Value Added is the most critical concept for the business community to understand, embrace, and practice. The greater the value added, the greater the opportunity to drive profitability and, therefore, increase shareholder value—which is the primary objective of the CEO.

As business people, our primary responsibilities are to drive shareholder value by selling sufficient quantities of preferred and profitable products and services to consumers and customers. The key word in that sentence for marketers is preferred. Preference by consumers and customers may be real or it may be perceived—but it is a preference nonetheless.

Our job as marketers is to create preference via distinctive and differentiated communications. Not only must marketers create preference, but we must also try and grow it over time to ensure that the product or service can contribute positive cash flow to the business enterprise over the longer term. Preference equals perceived value. The more preference that marketers can drive, the more perceived value can be delivered to customers—thereby driving increasing levels of cash flow and shareholder value.

Professor Sexton can certainly explain these business dynamics far better than I—and he does—in this eloquent masterpiece of business marketing and economics. What is magnificent in Professor Sexton’s work is that he provides the fundamentals of how this business model effectively operates. By paying attention to these core fundamentals, marketers will improve their odds for delivering upon the CEO’s ultimate objective—driving shareholder value.

Many successful marketers have paid attention to the fundamentals—and have succeeded as a result. Let’s take a look at a few recent examples:

• Apple’s iPod was brilliant—not in its technology—but in its marketing. Apple didn’t invent MP3 players or flash technology or recorded music. But what it did so well was it marketed the perceived benefits of portable and customized music. Apple’s technology was easily replicated—but not its leadership position. Consumers perceived that Apple was the preferred device for personal, customized music management. Customer value added could not have been higher as it reflected substantial marketplace preference.
• Procter & Gamble’s Pampers brand is reinventing how parents choose diapers. Pampers created enormous equity and customer value by changing the conversation with consumers. While parents care about keeping their babies dry, Pampers went one step further and expanded the focus on total baby care. By doing so, Pampers tapped into the reservoir of parental goodwill, which was rapidly transferred to Pampers in terms of trust and preference. That meant marketplace leadership and growing profits. Was Pampers necessarily a better diaper? Probably not, but in the minds of parents it certainly was.

Does a lot of this sound familiar? Well it should—because this is the essence of building a successful brand. There is no greater responsibility for a marketer than to preserve, if not build, brand value. Building strong brands creates the core customer loyalty and longterm demand that gives marketers great latitude for creating price premiums among a sea of commodity-like products. What kind of price premium can marketers charge? Quite simply, it’s the perceived value that consumers ascribe to the product and service. The greater the perceived value, the greater opportunity to build margins via price, thereby increasing positive cash flows and brand profitability.

Professor Sexton’s book wonderfully and easily navigates the marketplace strategies and theories that serve as beacons for successful brand management. As you leap into the contours of this outstanding brand management perspective, know that there are many pitfalls lurking that can undercut a marketer’s ability to deliver the goods. Good marketers must follow core brand management practices that can often escape even the most savvy of marketers, for example:

• Strong marketing accountability practices. Insufficient metrics and measurements can derail any good brand building management. In fact, it’s an old axiom, “You can’t manage what you can’t measure.” Marketers must continue to work to link marketing, finance, and a solid analytics to create targeted metrics that provide quick and compelling feedback on the impact of brand management programs.
• Effective integrated marketing communications. As marketers have an expanding array of media to pursue their customer and consumer targets, they need to have a good foothold as to how they select the most effective media and decide on the levels of financial resources to devote to the use of various marketing approaches.
• Outstanding marketing and media talent. The field of marketing has received increasing criticism for failing to keep the marketing management pipeline full of holistic business thinkers that can blend great creativity with dynamic leadership potential and superb business savvy. Those needs are critical, not only at the brand management level, but also in terms of the support resources at advertising and media agencies.

It’s certainly not easy being a marketer. But Professor Sexton makes it a lot easier by providing guidance on how to think about managing the significant challenges marketers face each and every day. And, now, it’s time for you to move from my take on Professor Sexton’s work and to create your own perspective. Enjoy the good reading. You probably won’t come across this wonderful path again. Many thanks Professor Sexton—not many could have said it as well as you.

Bob Liodice President & CEO ANA—The Association of National Advertisers

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