Much to Alphas surprise processor speed and secondary access speed ranked only

Much to alphas surprise processor speed and secondary

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Much to Alpha's surprise, processor speed and secondary access speed ranked only fourth and sixth on their list. Software and hardware compatibility, perceived reliability, and quality of vendor technical support ranked above raw processor speed. Even quality of user documents (the manual that accompanies the hardware) ranked above secondary access speed. As it turned out, processor speed was indeed important, but most cus- tomers had a minimum processor speed requirement that all competitors easily exceeded. However, the nature of most network applications made secondary access not that important. In fact. Alpha was understood 102 THE McKINSEY QUARTERLY 1997 NUMBER 1
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SETTING VALUE. NOT PRICE by customers to be slightly better than Keycomp on processor speed and secondary access speed, but these features just did not matter that much to them. The research also showed that Keycomp was highly rated on compatibility, reliability, vendor support, and user documents. Alpha, on the other hand, fell short on these. Its operating system software and hardware plug configuration created compatibility problems for many customers. Some remembered reliability problems with an earlier generation of Alpha's minicomputer that tainted their perception of its new product. Alpha's technical support was considered difficult to get hold of and its user documents were seen as the weakest in the industry. Minicomputer value map Actual customer perception Customer-perceived benefits • Compatibility • Reliability • Vendor support • Processor speed (MIPS) • Documentation Secondary access speed Exhibit 4 shows how the value map was redrawn to reflect customers' perceptions of benefits and performance rather than Alpha's. It showed that Keycomp performed so well on the attributes most important to customers that, despite its higher price, it was value-advantaged and therefore justi- fiably gaining market share. Conversely, Alpha performed so poorly on attributes most essential to customers that, despite its low price, it was still value-disadvantaged and predictably losing share. The insights from this properly constructed value map prescribed a clear course for Alpha. It mounted a crash program to correct the important attributes on which customers had rated it so poorly. A minor rewrite of operating system software and a simple redesign of the hardware plug configuration fixed the compatibility issue. The company then mounted an aggressive market information campaign to demonstrate the improved reliability of its latest model. Additional service representatives and toll-free access lines were put in place to enhance technical support, and user documents were redrafted. The results are shown in Exhibit 5. In only six months. Alpha increased customer-perceived benefits so much that it was able to increase its price by 8 percent and still gain its fair market share. The price and volume increase more than doubled Alpha's operating profits.
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  • Fall '15
  • Brad Davis
  • Marketing, Customers, Alpha

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