Implementation of a Global Customer Loyalty Process Year 1: Successes and Lessons Air Products & Chemicals

Air Products and Chemicals $5.5B Sales, 17,000 employees worldwide Complex, highly matrixed organization 2 Business Groups and 4 regions worldwide 6 Divisions with sales to >50 countries 16 business units with multiple product lines Varying size, complexity and autonomy Serve multiple markets with a variety of different business models Industrial chemicals & gases Electronics (semiconductor industry) Petrochemical & energy Home Healthcare Performance Materials

Air Products And Chemicals Customer Loyalty Process The Challenge (Spring 2001)… CEO: Develop a single, global approach to measure how effectively we are satisfying customers Business Units: We don’t need a one size fits all corporate solution but… We need actionable information to support our strategy and the tools to identify opportunities & take action

“Customer Loyalty Process” Key Elements Ongoing process to capture and utilize the Voice of the Customer Listen to key customers Understand the messages Focus on opportunities Take Action Using a company-wide model for “Customer Loyalty” Measures the strength of the customer relationship Delivers credible, actionable information and is linked to other key business processes Strategy development/validation Customer segmentation (needs based) Continuous Improvement

Continuous Improvement by using the Voice of the Customer Customer Loyalty Process Continuous Improvement by using the Voice of the Customer LISTEN ACT FOCUS UNDERSTAND Key Elements Leadership Support Resources Meaningful goals & measures Action Teams Deployed Communications Accountability Apply Learnings Sustain Gains Take Action & Sustain Improvement External Input Loyalty Survey Call Reports Complaints Customer Scorecards Internal Data Accts Receivable Retention Rates Listen to Customers Understand: Strengths & areas of weakness Identify Key Drivers Communications -Internal/External Input to: Segmentation Sales Process & Business Strategy Other Customer facing processes Understand & Communicate Continuous Improvement (CI) Integrate Voice of the Customer with an Improvement Process Prioritize Customer requirements with business objectives Identify and foster organizational buyin on Critical Customer Requirements Focus on Opportunities Key message that this is not just about a survey. The Loyalty survey is just one tool to collect customer data and the leverage point that we are starting with in Customer Engagement. Ultimately this needs to be linked with other ongoing customer voices that include ongoing data. One can thereby monitor this ongoing “surrogate” metric to gauge the ongoing impact on the customer relationship.

Global Customer Loyalty Survey Objective: Credible, actionable information “Meaningful” sample of existing customers Key customers as defined by the business units 20 minutes long in “major” local languages Rotated through Air Products on a quarterly basis (12…24 month cycle) Survey Components “Core” elements utilized globally Loyalty, Brand, problem resolution & verbatim Business specific performance attributes Importance, performance & competition Basis for “actionable” information As developed by the business units

Key Survey Deliverables A “relationship metric” (Loyalty) that distinguishes between business models Analysis of performance attributes Competitive Comparisons Effectiveness at “Problem Resolution” Access to verbatim improvement suggestions Account specific issues (“Red Alerts”)

Customer Loyalty Model Satisfaction Rebuy Recommend SECURE CUSTOMERS FAVORABLE CUSTOMERS VULNERABLE CUSTOMERS INDIFFERENT CUSTOMERS AT RISK CUSTOMERS

21% Secure is “geographic” B2B Median Customer Loyalty Responses Metric distinguishes between business models 21% Secure is “geographic” B2B Median Division A Division B Division C Division D High switching costs Low switching costs

Loyalty Driver Analysis Business Specific Performance Attributes High Most Important to Customers Relative Strength Critical Issues The correlation between an attribute and Loyalty Attribute Impact Maintenance Items Secondary Issues Low Performance Gap Low High The Customers’ perception of our performance relative to their need

Loyalty Driver Analysis Business Division H 1 Communicate regarding new products 2 Sales reps visit frequently 3 Sales reps have tech knowledge 4 Sales reps take ownership for problems 7 Sales reps effectively coordinate resources 8 Sales reps take time to understand 10 Easily reach a knowledgeable CS rep 11 CS reps resolve problems quickly 12 Provide delivery confirmation 13 Provide complete/accurate invoices 15 Consolidated invoices minimize burden 16 Provide error-free delivery 17 Provide consistent/reliable product 22 Help you operate your site safely 25 Respond to supply problems 30 Easy to reach a knowledgeable TS rep 32 Product increases productivity/efficiency 33 Provide innovative products/services 34 Provide safety experts 36 Ability to place orders online easily 37 Provide needed information online 38 Understand your e-business needs 39 Easy to do business with 42 Help you lower cost of business 43 Products & services are a good value 44 Manage activities in an integrated manner 45 Understand your business needs Relative Strength Critical Issues High Attribute Impact Secondary Issues Maintenance Items Low High Performance Gap Sales Support Customer Service Product Supply Technical Support E-Business Capabilities Overall Supplier Relationship

Communicating the Results via Online Access Provided open access* for all results to all employees (17,000) on line Up front filtering tools to focus on “User Relevant” information Advantages: Cost effective Flexible Easily updateable Challenges: Training & Understanding * Note: We maintain absolute confidentiality of anonymous respondents

Results made available to the entire enterprise online

Turning Data into Action “Where the rubber meets the road” Integrating the Voice of the Customer into our Continuous Improvement Process Critical Success Factors Business Leadership support Accepted improvement process tied to the annual business operating cycle Credible customer input Meaningful tools to focus on opportunities Measurement & Accountability Annual individual performance metrics Scorecards, etc

Customer Loyalty is a Key Input for our Continuous Improvement Process Cycle tied to annual operating plan What How Do It Prepare Focus & Prioritize Plan Implement Learn Start of fiscal year Develop understanding of key drivers and gaps from the Customers’ perspective Align with business strategy and objectives (financial & non-financial) Establish high level plan & identify resources Customer Loyalty Voice of the Customer

A Tool to Focus on Opportunities Quality Function Deployment Customer Input on their needs & our performance Critical Customer Requirements Business Input on goals and the impact of improvement QFD that is completed with a cross functional team And facilitated by an “expert” Results in a remarkable buy-in for the results

QFD/House of Quality Used for “turning” customer input into product, process and organizational direction setting Not “new”; around since the 1970’s Reference: “Quality Function Deployment, Linking a Company with its Customers” by Ronald G.Day Organizational Capabilities Customer Attributes Planning Matrix Inputs Customer Need Our Performance Competitive performance Business Goals Business/sales impact Critical Customer Requirement Contribution

Examples of Customer Improvement Opportunities Division A Responsiveness Problem Resolution Division B Lowering Cost of business Division C Invoicing & ease of order placement Problem resolution Division D Flawless execution/Problem Resolution

Celebrate the Successes Initiated a global, one company Customer Loyalty Process (Voice of the Customer) ~2500 key customers worldwide responded Key messages are evident Established a leverage point to drive action Customer Loyalty & Continuous Improvement Demonstrated value to many “in the middle” “I wish I knew at the start what I know now”

The Future direction… Evolving the survey content based on feedback from internal & external customers Provide added value by enabling analysis for customer segments within a business unit Examine linkages between : Customer Loyalty & Financial Performance Employee Engagement & Customer Loyalty Improve our ability to collect sufficient, valid customer contact data (especially in B2B) Integrate complaint feedback with survey “Remind” the organization that Customer Loyalty does not equal a survey !

Table 1.1 Problem Solving Research

Table 1.1 Problem Solving Research (Cont.)

Table 1.1 Problem Solving Research (Cont.)