1. Becoming relevant to consumers and customers June 18, 2002 Cincinnati, Ohio The Myth of Excellence

2. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 2 The Situation relationship in a free fall Consumer Spending Customer Satisfaction A crisis - years in the making, hitting now! Consumer as a free agent

3. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 3 CGE&Y Conducted a Comprehensive Study: Consumer Relevancy SM CGE&Y Consumer Relevancy Study… Conducted in U.S. in late 1999 and February 2001, pan-European study in January 2002 Interviewed 16,000 consumers across five channels Asked 60 questions about the importance of various aspects of the shopping experience CGE&Y Consumer Relevancy Study… Conducted in U.S. in late 1999 and February 2001, pan-European study in January 2002 Interviewed 16,000 consumers across five channels Asked 60 questions about the importance of various aspects of the shopping experience …gets rave reviews [Lafley, P&G] CR “is the best tool…for incorporating customer wants and needs.” [Burandt, Georgia-Pacific] “…a big idea and a blueprint for action.” [Siebel, Siebel Systems] “…provides proven strategies for meeting the demands of today’s empowered customers.” …gets rave reviews [Lafley, P&G] CR “is the best tool…for incorporating customer wants and needs.” [Burandt, Georgia-Pacific] “…a big idea and a blueprint for action.” [Siebel, Siebel Systems] “…provides proven strategies for meeting the demands of today’s empowered customers.”

4. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 4 Three Mega Trends Informed and aware, but cynical and confused consumers “Clarify my options, allow me to feel satisfied with my choices” Proliferation of information and communication technologies Societal SituationHuman ConditionConsumer Need Societal devolution Increasing inability to keep pace with daily life Inability of traditional institutions to adequately reflect fundamental human values “Fortify, reinforce, ratify my personal value” Increase in stress, guilt, anxiety “Help me survive psychologically and emotionally” ….A Changing Need Set

5. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 5 FACT: a very different consumer… The Two Myths of Excellence  That most businesses understand what consumers are really asking for  That attempting to be great on all aspects of consumer and customer engagement is the way to win

6. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 6 The First Myth of Excellence “Two countries separated by a common language” G.B. Shaw/Winston Churchill …in 2002 “Business and consumers are two constituencies separated by a common language” In 1942…

7. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 7 Broken Promises: Content vs. Context CONTENT Best Value Added Lowest External Location Entertainment CONTEXT Appropriate Execution of Basics Honest Internal Navigation Ease Product Service Price Access Experience

8. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 8 Human Values Are Embedded in the Context of an Offering Maslow’s Hierarchy of Needs Source: Maslow, A. H., The Farther Reaches of Human Nature, 1968; CGE&Y Analysis “Today, technical differences between products are barely perceptible, which is the reason why context has become more and more important for brands.” A G Lafley Procter & Gamble Self Actualization Esteem Love and belongingness (feeling loved and accepted by others) Safety, security Physiological Needs (air, water, food, sleep) Context = Human Values Content = Basic Needs

9. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 9 The Conceptual Model for Consumer Relevancy Experience PriceProductService Access Dominate (5) Solution Intimacy Agent Inspiration Customization Differentiate (4) Convenience Care Consistency Reliability Education Par (3) Ease Respect Honesty Credibility Accommodation

10. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 10 Some Companies Have Been Very Successful at Finding Relevant Differentiation Points with Successful Execution Retailer Focus Year 2000 Performance Year 2000 Performance Source: S&P, Industry Survey: General Retailing, 05/24/01; The Motley Fool, Same-store sales tell the tale over time, 4/7/00; CG&EY Analysis Company slogan: “Save Time, Save Money” Provides a limited, high- turning assortment of quality products at low prices Targets the growing low-, middle and fixed income population Focus on rural, small towns and urban neighborhoods Very cost-effective operations > 20% increase in sales 6.4 % increase in same- store sales 21% increase in net income Differentiation Price (Primary) Access (Secondary) Positioned as the “Everyday Low Prices” provider Maintains in-depth consumer knowledge: demographics, buying patterns, frequency of purchase Focused on providing consumers with an enjoyable experience: store greeters, knowledgeable employees, etc. 20% increase in sales 8% increase in same-store sales 21% increase in net income Price (Primary) Product (Secondary)

11. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 11 Other Consumer Relevancy Examples

12. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 12 Leveraging Context to Build Brands BRANDINSIGHT Product Service Price Access Experience  All Frozen Pizza/Digiorno  Crest/Total  Cadillac/BMW  IBM/Dell  Canon/Martha Stewart  United/Virgin  Dannon/Yoplait  Zippo/Bic  All Lunch Meat Brands/Lunchables  Maxwell House/Starbucks  Honda/Harley  Miller/Budweiser  Good parenting, not just good product  Better you, not just better teeth  It’s not servicing the car, it’s servicing the owner  It’s for you  Affordable style  Responsible decadence  Good food vs. mobile nutrition  Utility trumps durability  Food as play  It’s not about the coffee, it’s about the coffee drinker  How it works is less important than who I am  Culture vs. calories

13. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 13 The Second Myth of Excellence That attempting to be great on all aspects of consumer and customer engagement is the way to win Successful companies dominate on one attribute, differentiate on a second and compete at parity on the remaining three A company dominates when the consumer not only prefers it to the competition, but will actively seek it out A company differentiates when the consumer prefers its brand over another A company is at parity when its offering is at the industry par and consumers are willing to purchase their brand routinely A 5, 4, 3, 3, 3 profile/mix is optimal. Companies that try to be excellent in every attribute are either doomed to fail or leave significant money on the table. A 5, 4, 3, 3, 3 profile/mix is optimal. Companies that try to be excellent in every attribute are either doomed to fail or leave significant money on the table. Source: CGE&Y Research and Analysis Dominate Differentiate Parity Ideal Value Profile (as perceived by consumers)

14. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 14 Domination/Differentiation Strategies in Practice Primary Relevancy Attribute Secondary Relevancy Attribute Metro, Wal*Mart, Ames, Costco Ferragamo, Gucci, Home Depot, Sony, Pepsi, Frito-Lay, 3M, Whirlpool, Lowe’s Zara, Best Buy, Pier 1, Tumi, Tylenol Walgreens, Yahoo, Amazon.com, Coke, Kodak, CNN, Gatorade Tesco, AutoZone, Craftsman Tools, Saturn Harrods, BMW, Midwest Nike Stores, Rolex, The Disney Store, Avon, E*Trade, Tide Nordstrom, Singapore Airways Attributes Price Service Product Experience Access Price Service Product Experience Access Lands’ End Target, Maytag, Dixons, Mazda, Honda (car) Peapod (Ahold), Virgin, Four Seasons, Kraft McDonald’s, Gerber, Progressive Superquinn, Citibank, Chevy Truck, Cont. Airlines Boots, M&M Mars (online), Dell Computer, American Express Casio Dollar General, Charles Schwab, Visa Honda Goldwing Motorcycles AOL, Hallmark IKEA, Southwest Airlines, Club Med, Gateway iVillage.com, Starbucks, Marlboro

15. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 15 Moving from Myth to Reality Implications for:  Brand Tactics  All Supporting Business Systems

16. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 16 The CGE&Y CDT SM Model For Transforming Consumer Businesses Selling Community Offer Consumer Messaging Brand Customers Dis- continuities Brand Tactics “Making the right promises” Business Systems “Keeping promises efficiently” Context Levers Manufacturer fully controls Manufacturer partially controls Consumers

17. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 17 Context Lever - Examples Messaging Company Example Anheuser-Busch Nike Absolut Whassup? Just Do It! Absolutely Selling Coke, Frito Dell Everywhere, Always in Stock Disintermediation, Consumer Direct Community Ben & Jerry’s Tom’s of Maine Harley Cause Related H.O.G. Offer Disney Films Colgate Total Martha Stewart Licensing/Lifecycle Lifecycle Licensing/Lifecycle

18. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 18 Context Lever - Examples Company Example Brand Customers Discontinuities Consumer Reynolds Metals/Alcoa Gerber Bose PL Strategy Lifestage Management Mass Consumer Brand Coherence Dawn Gateway Clinique Dollar General Special Pack Gateway Country Store Leveraging Dep’t Store Demographics J&J Dell Pepsi Mobil Speedpass, Blackberry Tylenol Recall Internet-Based Commerce New Age Beverage Technology Innovation Kenneth Cole/Donna Karan Enfamil Craftsman Tools Cohort Segmentation Individualized Message Service Recovery, Customized Offers

19. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 19 What is the Strategic and Operational Positioning for Companies That Will Drive Superior Financial Performance HighLow Revenue Growth rate Low High Profit Margin Issue: Value-Leakage/ Execution Issue: Customer Relevancy/ Differentiation Issue: Not meeting financial market expectations Company X Issue: Extend the lead

20. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 20 CR Provides the Foundation for Establishing Brand Integrity through Customer-Driven Transformation SM … Mission Critical Capabilities Process & Organization Implications Technology Leverage Areas IT Infrastructure Information, Applications, Process, Organization Vision & Business Objectives & Performance Metrics Strategic Imperatives

21. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 21 …Which Ultimately Drives Different Operational Decisions… MarketingSales Manufacturing SCCust. Svce HRITStore Ops Agentry Inspire Customize Solution Intimacy Value Features Flexible Answers Comfort Standard Innovate Flexible Results Lifestyle Standard Quality Adaptive Extend Integrate Basic Inform Response Empower Custom Productivity Knowledge Dissemination Satisfy Customers Problem Solved Leverage Low Cost Innovation Customer Insight Knowledge Mgt Customer Interaction No Frills Test/Use Educate/ Personalize Comfort Facilitate Relationships Price Product Service Access Experience

22. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 22...By Creating Alignment, Forcing Trade-offs, Driving Speed and Generating Savings for Investing in Top-Line Growth Mission Critical Capabilities Process/ Technology Leverage Areas Strategic Focus Areas Aligned & Strategic Unaligned Non- Strategic Aligned Non-Strategic Initiatives Unaligned initiatives will be used to fund strategic initiatives Aligned, but non-strategic initiatives will be examined for alternative sourcing opportunities Vision & Business Objectives & Performance Metrics

23. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 23 Key Questions - Consumer Relevancy 1.Do consumers understand and care about your brand position the same way you do? 2.Can a consumer easily articulate the difference between your brand and the competition? 3.Do all of your senior executives agree on your brand position and that of your key competitors? 4.Do all of your employees understand the brand position, and their role in supporting it?

24. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 24 Key Questions - Customer-Driven Transformation 1.Are all business processes aligned to deliver the brand promise efficiently? 2.Do all key process owners understand their role in delivering the brand promise? 3.Are performance metrics aligned? 4.Are all current internal projects aligned with brand promise?

25. © 2002 Cap Gemini Ernst & Young - All right reserved FC/080202 - CR for CP Mfg - Fred Crawford / 25 Thank You!! Fred Crawford fred.crawford@cgey.com 917.934.8855