Your Customer Strategy is a re-articulation of your Business Strategy, but in the context of the customer.
Recognising that the realisation of the goals in your business strategy will come from changes within your customer portfolio. Such as: a decrease in the portion of lower value customers; increases in the portion of higher value; changes to the relationship types (to improve value exchange), and growing the number of advocates.
Customer Strategy makes these business goals clear and aligns all resources towards making progress towards the goals.
Your Customer Strategy will provide guidance for the approaches and tactics that make sense for the product-design, sales, service and marketing people so they can collaborate to achieve the single outcome: a higher value customer portfolio.
The Customer Strategy will:
- Identify your various customers groups – recognising their unique characteristics and how they define value different to other groups.
- For each group identify what represents absolute value to them.
- Understand from each customer group the value they represent to you (the business).
- Seek to understand the optimal, and mutual two-way exchange of value.
- Select strategies for each customer group (which ones do you want to grow, maintain, or re-engineer the relationship, or perhaps retire..?).
- Value propositions are then developed for each customer group (the why and the what).
From these strategies and value propositions, we then develop the optimal tactics for the business to achieve the goal of improving the value of the customer portfolio.
Armed with a Customer Strategy, an organisation can gain greater alignment of resources and purpose.
The resources of your people, processes and budgets are aligned to deliver value for chosen customer groups, that will in turn increase the value of your customer portfolio.
When your whole team collaborates together on a common purpose for customers, you build capability and learning about how to improve performance.
With a Customer Strategy you will be able to cascade the development of you customer portfolio, rather than fragmenting your efforts.
The Customer Centric Business Model
To help with the development of your Customer Strategy, we will use the Customer Centric Business Model
The Customer Strategy is formed in Phases One and Two.
Phase Three is where you develop tactics to support the Customer Strategy.
Defining your customer groups.
I am deliberately not using the term segments. When most people think of segments they consider things like demographics (for example: age, gender, life-cycle stage, occupation), geographic (where they live) and perhaps psycho-graphics (perhaps their social class or lifestyle). From a marketer perspective this is the place to start.
Segments might be a good place to start with your customer groups, but you really need to take it further into understanding the behavioural differences in the various groups.
First, create a list of the different customer groups, then consider what defines one group from another.
What attributes do they have, what is their potential spend, how do they buy, spend and promote…?
What do they value, and how do they define that value…?
Two-way value exchange.
With those groups initially developed, we now need to examine the two-way value exchange.
What you are looking for is the specific customers that get the value you offer, and also offer good value to you.
The value you are looking for is in their lifetime value (the economic value of the customer) and their level of advocacy.
The key way to get customers of value for life and that will be advocates of you, is to find those customers that get value from what you do. The sweet spot for the customers and you.
That’s value for the customer and value for the business. When customers get the value you deliver they will respond with higher levels of retention, repurchasing and promoter behaviour. When the value exchange is in balance your growth strategy is to grow this specific portion of your customer portfolio, which in turn leads to profitable growth.
Forming these customer groups and the two-way value exchange is an iterative process. It is a little back and forth.
But do not try to perfect this. Develop your first version and move forward, knowing that you will finetune this understanding of your customer groups and value over time.
With your customer groups informed by an understanding of the two-way value exchange, you now need to determine your intent with each customer group.
Your Customer Intent
Which customer group/s are the best one/s to grow their portion of the customer portfolio?
Do you need to re-engineer how you interact with some these customer groups to enhance the two-way value? Is there any where you need to end the relationship?
Put some effort into selecting a clear intent with each customer group and determine the results or outcomes you would expect to see when that intent is realised.
You can access the Profit by Design Templates for free here, and they will help you through this process.
Now that we know our customers groups, we understand the two-way value for them and we have determined our intent with each group – now, we can work on how to communicate that value for each group.
Value propositions need to exist at two levels.
Firstly, we need to connect with our customers at a values level. We need to connect on a human-to-human level. What do we value, what do we stand for, what difference are we hoping to make in the world?
Then secondly, our value propositions can start to talk about how we bring about that change in our offerings – the products and or services we deliver.
Developing communications like this with our chosen customer groups will help us develop messages that resonate with customers. Which will also help build valuable customer portfolios.
You can access the Profit by Design Value Proposition Templates for free here, and they will help you develop your value propositions.
Your Customer Strategy
How you document your Customer Strategy is up to you, however…
It needs to identify and describe your various Customer Groups. Who are they, what do they value and what value are they to your organisation? What portion of your customer portfolio do they currently represent?
Your Customer Strategy then needs to articulate your intent with each group. Is it to maintain the current relationship, is it to grow their proportion of the customer portfolio? The intent and expected results with each customer group needs to be crystal clear. Do not chose three intents, chose one or two, maximum.
This is your Customer Strategy. A concise and clear understanding of what you intend to do with each group of customers. And then the changes your expect to see in your customer portfolio.
With a Customer Strategy like this, you are ready to enter Phase Three of the Customer Centric Business Model.
When you are in Phase Three without Customer Strategy like this – anything goes. You will argue for improvements to the customer experience, put in various systems and listening programs. But at some point later you will be asked to explain the return on investment from those efforts…
Start with a Customer Strategy. Put the effort into understanding what you are trying to do before you start trying to fix it.
You can learn more about the Customer Strategy in Profit by Design: How to build a customer portfolio full of profitable promoters.
You can download the first couple of chapters for free and get access to the templates on this page.