Janet LeBlanc Director, Canada Post --------------------------------------------------------------------------

Presentation Objectives Define customer value management (CVM), Understand the difference between customer value and customer satisfaction, describe key CVM concepts and tools, and communicate the importance of measuring quality in the eyes of your clients. --------------------------------------------------------------------------

WHY invest in CVM? Canada Post will be a world leader in providing innovative physical and electronic delivery solutions, creating value for our customers, employees and all Canadians --------------------------------------------------------------------------

What is Customer Value? VALUE Quality Price -------------------------------------------------------------------------- Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998

Customer Value Defined --------------------------------------------------------------------------

Quality Attributes Performance Rating Importance Weight ABC XYZ Product Information 50 6 8 Advertising and Promotion 20 7 Customer & Consultation 9 Customized Solutions 10 100 --------------------------------------------------------------------------

Competitive Focus on Targeted Markets 21st Century Growth Company Stage One Stage Two Stage Three Stage Four Minimum Requirements Customer Focus Customer Attitudes Competitive Focus on Targeted Markets Customer Value Customer Loyalty Meeting critical needs of targeted customers Outperforming competitors Creating new, unique benefits Customer Satisfaction Retaining our customers Getting them to recommend us Conformance Quality Delivering what we promise Meeting standards Providing what customers want Responding to customer complaints -------------------------------------------------------------------------- 21st Century Growth Company Source: Adapted from Managing Customer Value by Bradley T. Gale, (New York, The Free Press, 1994)

I can’t get no (customer) satisfaction… Satisfaction in itself does not lead to customer loyalty Positive empirical relationship between value focus and link to market share Satisfaction = Satisfy Existing Customers Better Value = Improve Your Competitive Position Attract and Retain Targeted Customers -------------------------------------------------------------------------- Where are leading-edge companies headed?

VS Satisfaction Value Current Service The Entire Customer Relationship Lag Indicator Lead Indicator VS Company Performance Company Vs. Competition -------------------------------------------------------------------------- Tenuous Link to Business Performance Proven Relationship to Business Performance

DEFINITION GOAL INPUTS OUTPUTS KEY MEASUREMENTS Customer Value Management is a process designed to develop and execute value-based strategies which impact marketing, strategic planning, competitive positioning, branding, pricing, and selling. GOAL To establish CVM as a core competence for the Canada Post Group of Companies. INPUTS Customer Value Management Council External/Internal Data Sources OUTPUTS Customer Value Tools and Data Competitive Value Proposition Customer Loyalty and Market Share Analysis -------------------------------------------------------------------------- KEY MEASUREMENTS Customer Loyalty Market Share Profitability Customer Retention 12

Ideal Customer Value Process Capabilities Performance Improvement CUSTOMER-CENTRIC Ideal Customer Value Process Capabilities -------------------------------------------------------------------------- Performance Improvement

Customer Value Management 2. Conduct Analysis Assess Market Opportunity Customer Value Management 4. Measure and Reward Performance 3. Commit to a Value Proposition --------------------------------------------------------------------------

Head-to-Head Comparisons Value Analysis Tools Value Map Price Performance Profile -------------------------------------------------------------------------- Head-to-Head Comparisons Value Scorecard

Price Performance Profile --------------------------------------------------------------------------

Value Map --------------------------------------------------------------------------

Value Scorecard --------------------------------------------------------------------------

Head-to-Head Comparisons (Average) --------------------------------------------------------------------------

Conduct Baseline Study Business Process Improvement On-going Identify Value Drivers Measure Value Creation After Transaction Develop Action Plans Measure Market Perception feedback -------------------------------------------------------------------------- Conduct Baseline Study Business Process Improvement On-going Transactional Surveys On-going Market Surveys

The Value Proposition Deployment Process Plan/Do/Check/Act Define/ Refine Value Proposition Build Commitment To Value Proposition Process & Organization Gap Analysis Changes To Deliver Value Proposition Internal Tracking & Measurement Tracking Market Impact The Value Proposition Deployment Process -------------------------------------------------------------------------- Plan/Do/Check/Act Internal Management/ Staff Group of Companies

Customer Value Yields Big Dividends Wireless Telecom Company Heavy Equipment Dealership Underground Mining Equipment Manufacturer / Distributor International Health and Leisure Firm Reclaimed more than $8mm in lost sales 30% improvement in on-time deliveries Improved margins on equipment repairs from 11% to 28% Doubled sales revenue – from $250M to $500M+ Tripled market share in a strategically important market: 4% - 12% Increased employees from 600 to 1000+ Achieved record profitability last year Doubled profits in a single year Moved from being a market “nicher” to the market leader 50% reduction in customer churn Improved equipment delivery time from 10 days to 2 days Total estimated bottom line contribution = $4.5M -------------------------------------------------------------------------- Source: Adapted from Customer Satisfaction in Practice by the American Productivity & Quality Center, 1998

Retention Acquisition Positive Turnover Employee Value The Right Workforce” MODELING EMPLOYEE VALUE Retention Acquisition Positive Turnover Employee Value -------------------------------------------------------------------------- Relative Compensation Relative Job Quality Base Salary Pay Equity Bonus Benefits Manager Quality Brand Equity Work Life Balance

The “Value” of Customer Value Strengthen value propositions – value is the basis for customer decisions Identify responses with the greatest impact on customers’ future purchase behaviour Hone in on winning client strategies Discipline and focus—across all functions Dramatic impacts and performance gains The key to attracting, satisfying, and retaining customers. --------------------------------------------------------------------------

November, 2003 --------------------------------------------------------------------------