and stop fishing around!
Today, digital bells and whistles and marketing buzzwords seem to overshadow basic business and marketing approaches.
And unfortunately, Customer Centricity (a buzzword by itself) seems to have fallen into this trap as well.
So before launching into a customer centric transformation consider some fundamental prerequisites.
First, and the primary one, is whether the leadership is 100% committed. Does the organization has the right mindset to absorb this transformation?Change management is a topic by itself and I won’t dig into this today.
Assuming now that the organization is revved a up and eager to go – what’s next? Hint: the answer is not at this stage a new NPS survey (delivered with a new digital bells & whistle app), nor a retraining of the customer service organization or the creations of personas and journeys.
Indeed, your Customer Centricity requires some strategic choices before launching into execution.
According to Peter Fader from Wharton, Customer Centricity is when the company identifies the most valuable customers and surrounds them with relevant products and services. Check out a great interview with Fader here.
Hence, the most valuable marketing process in this phase is the proven Segmentation-Targeting- Positioning approach.
I’m a metaphor person so please join me for a fishing trip. Our first exciting decisions is where do we want to go and fish? Ocean fishing sounds exciting but river and lake fishing also provide some unique experiences.
Great segmentation will classify customers into like groups by attitude, behavior, needs, or other common characteristics. And notice that this goes way beyond a simple geographical segmentation (by post codes for example) or income levels. Map out your clusters according to some core variables and you identify the core segments. Finally, the choice of which segments to focus on will largely depend on:
- Size: is the segment is large enough, in terms of sales and profitability, to justify the investment?
- Access: are you able to reach the segment, particularly in terms of distribution and communication?
- Actionable: are you able to implement an effective and unique marketing mix for the segment to change behaviors?
Now you are ready to create relevant Customer or Buyer Persona. These are semi-fictional representations of your ideal customer based on real data around demographics, behavior patterns, motivations, and goals.
More on Customer Personas, tips and tricks in a later blog.
Targeting – Customer Life Value
Now that you have decided that river fishing is your sport, the question is whether salmon or trout is going to feature on the family table.
Targeting is the process of evaluating, selecting and allocating resources to the customers most likely to achieve the best returns for your business. Now you can see that Customer Centricity is indeed a true business model geared to deliver your financial goals.
It is not a fluffy “be nice” department.
Here are a couple of key notions for targeting.
First, identify the big fish!
This is where the concept of Customer Life Value comes in. You should have a clear idea on how much business potential each customer represents over a given period. This includes current products and services but also any reasonable and expected upsells. Establishing Customer Life Value requires a deep understanding of your customer’s business as well as some access to data such as production capacity, sales history, development opportunities etc.
If not, find your rule of thumb! My customer produces 50 000 widgets per year, the value of my product & services is 5$ per widget under a standard 3-year contract. Customer Life Value: 750 000$
Targeting – Cost to Serve
So you know now who the big fish are. The second question is how difficult it is to reel them in. The Total Cost to Serve sums up all the investments made to capture and serve the customer. This goes from sales reps’ visits, customer service allocation to all the so call freebies such as gifts, trips etc
You can probably guess that this makes an ideal 2-way matrix!
Oof finally, you are ready to fish. But you still need the right bait! Positioning is all about packaging the right products and services to create a compelling Value Proposition for your customer. Hence, the better you understand and empathize with what your customer is trying to achieve, the stronger your value proposition will be. True Customer Centric value propositions can be built around your current offerings and teams. But, even better, this often leads to moments of inspiration to find incremental value or sometimes disruptive innovation.
Now you are all set to embark on your Customer Centricity adventure. The only thing that you still need is to figure out the best way to cook the fish.
But that’s a different story.
Engage Customer Centricity in the Right Way:
|Segment||Where do I want to fish?||Make the strategic choice of where you want to operate.|
|Target||What do I want to fish?||Approach the most profitable customers from revenue and cost point of view|
|Position||What is the bait?||Design compelling customer centric value propositions that create differentiated value for your customers|
Find out more on how to start your customer centricity transformation in partnership with Minds & More.