Net worth: capturing the customer.

Faced with intense competition and demanding consumers, companies are recognizing the value of delivering a positive customer experience from start to finish.

When it comes to building brand awareness, the AFLAC duck is a clear winner. People know it on sight and, even better, smile when they see it. Daniel Amos, chairman and CEO of the $9.6 billion insurance firm, smiles, too -- and for good reason. Since introducing the duck campaign two years ago, AFLAC's brand awareness has jumped from 44 percent to 87 percent. In fact, the only complaint about it is a half-joking reproach from a mom who reports that when she asks her 4-year-old what sound a pig makes, he says "oink," but when you ask him to mimic a duck, he says, "AFLAC!"

But while name recognition is a wonderful thing, Amos told the audience at the CEO2CEO Conference, it's just one piece of the company's integrated program to capture and keep customers. "The AFLAC duck creates positive name recognition, but it doesn't tell us what customers want in terms of products or services," he said.

"We still rely heavily on our frontline salespeople and research team for that information. And it's still up to our salespeople to actually make the sale."

As competition intensifies and customers grow more demanding, companies are recognizing that reaching out to consumers takes much more than a catchy slogan or flashy packaging. It means delivering a positive overall customer experience from start to finish, catering to wide-ranging customer segments in the process and, in many cases, combating commoditization by delivering added value.

Some companies are succeeding by using powerful data warehouses that collect and mine customer data and sophisticated sales support tools that bring the resulting enhanced products and services to customers. Capital One, for example, was founded on the notion of using technology to deliver both customized credit card product offerings and customer service.

"Credit cards are totally flexible and intangible -- you don't have inventory issues or physical distribution issues -- so there's the ability to customize on a massscale," said Richard Fairbank, chairman and CEO of Capital One Financial, who admitted that Capital One uses its customers as guinea pigs. "The credit card business is a massive scientific laboratory in disguise," he said. "If you have millions of customers and a very flexible product, you have the ability not only to customize but to try different things with different folks. And that can transform a business."

Capital One tested this theory by varying its response to customers who threatened to switch to another company with a better deal -- a common problem in the credit card industry. "The concept was to randomize the calls coming in and try giving a third of them whatever they asked for, meeting another third halfway, and taking the final third arid calling their bluff," Fairbank explained. "You can actually build from the results by seeing what the economics are of who stays and who leaves. Then you can build predictive models."

Call Capital One with such a threat today, and there's an "instantaneous calculation of the lifetime value of that account on a present-value basis, as well as the statistical likelihood that you're bluffing and your price sensitivity in terms of negotiation," said Fairbank. "The incentive plan of the rep on the phone with you is based on what he or she can negotiate based on that instantaneous calculation and the message that comes back in real time."

Sound complicated? Not for Capital One, which in 2002 did 65,000 such tests that covered at all aspects of its business, from marketing to collecting on delinquent accounts. But building the company from a concept into one of the nation's top 10 credit card issuers was a lengthy endeavor. "To me the fear along the way was that this nice-sounding idea would drown in the logistics and cost and complexity of doing this," Fairbank said. "It took four years to hire the people and build the technology and infrastructure to be able to do this:'

Leveraging the Customer's Mind

If the hurdles in pulling off large-scale customization are formidable for a startup like Capital One, how do companies hobbled by legacy systems -- and existing product lines and policies -- manage the task? Very carefully, said Lawrence Babbio Jr., vice chairman and president of Verizon Communications.

At Verizon, customer research has led not only to the development of myriad service packages, but also to new ways to communicate service requests. "People today expect integration of wireless and wire line products and are looking for more bundles, so we offer a whole variety of new combinations of things," said Babbio.

Yet while new offerings are essential to attract new customers, it's equally important to continue nurturing satisfied existing customers. "We create dozens, probably hundreds, of different packages," he said. "But at the same time we preserve the hundreds of thousands of service offerings we have for the entire customer base."

So even as Verizon debuts a new Digital Companion product geared toward its tech-savvy customers -- allowing them to receive alerts on their PCs whenever one of their telephone lines, whether home, work or mobile, gets a voice mail message -- the company also continues to provide four-party service plans for more cost-conscious rural customers. "The mentality is, 'Yes, get anything new you'd like out there, but don't forget to manage everything you have;" Babbio said.

In fact, the companies most successful at enhancing customer value are those that not only nurture current customers but also leverage those relationships in developing new products and services. It was by looking at its existing transaction base that United Parcel Service, for example, developed products and services for a sister company, UPS Capital. "The one thing that seemed to be disconnected was the flow of funds," explained Robert Bernabucci, CEO of the global transportation and information services firm's supply chain financing arm. "We went in and looked at the $1 billion a year that was running through our COD services and said, 'Is there a way we can speed fund flow in an arena that is typically thought of as being fraught with credit risks?' We found a way to underwrite it and advance those funds -- and it wound up becoming a cornerstone of the business."

To isolate more opportunities like these and act on them, UPS Capital draws on input from both customers and frontline workers. "We have 4,000 account executives who deal with customers and understand their wants and needs," said Bernabucci. "The 100,000 drivers we have on the street touch our customers daily and know the businesses we deal with. And we have a group of about 30,000 intimate customers that we have contact with on a periodic basis to evaluate technology and its impact on what we do in the aggregate. We listen to all of them."

Progressive and Pragmatic

"For us, technology is liberating," said Susan Alderton, managing executive of Stephens Financial Group," and it allows us to take a step back in time to where service and quality went hand-in-hand. It's a bit like knocking down the local Wal-Mart and rebuilding it as a morn-and-pop shop, where they know your name and whether you bought Viva or Bounty paper towels."

Yet as companies rush to collect indepth data on thousands of customers and analyze it in search of value-add opportunities, it can be all too easy to get caught up in what's possible -- and lose sight of what's practical. "Who's going to pay for all this mass customization?" asked Elisabeth DeMarse, president and CEO of Bankrate.com. While mass customization is possible, thanks to new technologies and the Internet, she noted, the economic models to make it profitable are lagging behind.

"Is the consumer going to pay a premium for mass customization? Are advertisers going to be prepared to pay for one-to-one marketing? The answer is no," DeMarse said. "So just because you can do it doesn't mean you will. It will get there; it's just that the economic models have not [kept pace]."

Some companies are addressing that issue by developing customer outreach programs with built-in checks and balances aimed at minimizing the risks innate in implementing any large-scale innovation. "We created a split personality in the company," said Fairbank. "On the one hand, people believe they can reach out and go to the moon. On the other hand, we not only preach but hardwire the most negative assumptions about everything that can affect the business -- the economy, credit, competition, financial outcome -- into the decision-making process."

It's essential to be willing to retrench if necessary. "If your gut cells you that the project is not on track, pull the plug," said Robert M. Dutkowsky, chairman, president and CEO of software and consulting firm J.D. Edwards. "Because if you plow ahead with a project chat the average employee knows is doomed to failure, credibility is going to be hurt more than it's helped... .every project can be saved. If you go back through the management cycle and reevaluate the phn, the selection process and the implementation, you can get it back on crack."

Having the right people also helps guard against costly failures, Fairbank said. "To me, the Capital One story has not been about building a financial services company, it's been about building a recruiting company," he explained. "In the end, execution is not really about building systems, it's about figuring out a way that we can, at every level in the company, go out and hire incredibly talented people."

Multicultural Marketing: Walking the Talk

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"Companies need to take the money they spend on diversity training right now -- which gives them very little to no return on investment -- and spend it on training their employees where they touch customers. Car companies like General Motors and Ford spend all this money to drive traffic into their dealerships. But if an African-American woman walks in, she's made to wait 175 minutes -- and all that money they spent to create brand awareness is out the window."

-- Gary Berman, CEO, The Market Segment Group