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The Customer profitability story

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Not all customers are equal, how we determine our segments manage the accountability around these segments can be very powerful towards the achievement of improved profitability, cash flow and customer satisfaction.

Published in: Business
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The Customer profitability story

  1. 1. The customer profitability story The 4 power quadrants to improved customer management by Mick Holly & Andre Gien
  2. 2. The story about how we segment our customers that enable improved margins and reduced cost to serve
  3. 3. The process The objective Customer profile matrix The methodology Criteria definition Power grid Resource map Accounta bility Performance milestones
  4. 4. Segmentation Segment Customers who we want and customers who want us Power relationship The power between us and our customer is the same Details Customers who want us have a co dependency and value what we do for them
  5. 5. Segmentation Segment Power relationship Customers who we want and The power is customers who with the are not necessary customer dependent on our value offer Details Customers who are not dependent on us does not mean they are not valuable.
  6. 6. Segmentation Segment Power relationship Customers who we don’t want and We have the those customers power that need us Details Customers who we don’t want … we know who they are!
  7. 7. Segmentation Segment Customers who we don’t want and customers who are not dependent on us Power relationship There is no relationship, transactions are based on convenience. Details These just exist lets make sure they are at least profitable
  8. 8. Customer Profile Matrix Customer that want us Customers who don't Need us Customers we want 1. Ideals 2. Converts Customers' we don’t want 3. Exploits 4. Monitors
  9. 9. Objective To profile the way customers behave based on the ideal customer.
  10. 10. Objective Customer segmentation is performed based on 4 key groups     Ideals Converts Exploits Monitors
  11. 11. Objective Each segment has a unique strategy and measurement system
  12. 12. Objective Ongoing management is performed in the one page customer scorecard.
  13. 13. Methodology    Customer criteria definition Power grid strategic setting Resource allocation
  14. 14. Methodology   Customer integration management (front line to back office) Opportunity mapping
  15. 15. Methodology    Performance measures Building milestones Review process
  16. 16. Customer Profile Matrix Customer that want us Customers who don't Need us Customers we want 1. Ideals 2. Converts Customers' we don’t want 3. Exploits 4. Monitors
  17. 17. Customer Criteria definition Defining the ideal customer (rated 1-5, 5 = ideal) Customer Behavior criteria (examples) a b c d Price 1 5 3 5 Ability to achieve targeted margins Volume 1 1 5 5 Volume quantity and frequency quality Operational 1 2 5 5 Ability to “fit in” with the way we do business Cost to acquire 4 4 Create your own criteria 1 2 ..z
  18. 18. Customer Profile Matrix Power Grid Customer that want Customers who don't us Customers we want Customers "we don’t want” Need us 1. Power is equal. 2. Power is with the customer 3. We have the relationship power. 4. We have no relationship. These are usually convenience or spot transaction customers.
  19. 19. Customer Profile Matrix Power Grid Customer that want us Customers who don't Need us Customers we want 1. Strategy: Invest 2. Strategy: Increase switching cost. Migrate to segment 1 Customers' we don’t want 3. Strategy. Increase price with the intent of migrating these customers to segment 1 or exit. 4. Strategy: Find an alternative way to serve these customers Directional objective
  20. 20. Customer Profile Matrix Power Grid Customer that want Customers who don't us Need us Customers we 1. Relationship want Management: High 2. Relationship management: High Customers' 3. Relationship we don’t want management: Low 4. Relationship Management: Zero
  21. 21. Customer Profile Matrix Power Grid Customer that want us Customers who don't Need us Customers we want 1. Acquisition cost: 2. Acquisition cost: High High Customers' we don’t want 3. Acquisition cost: 4. Acquisition cots: Very low Zero
  22. 22. Customer Resource Map Customer that want us - Customers who don't Need us 1. Ideals 2. Converts Customers we want Customers' we don’t want 1. Where are the majority of resources currently spent today? 2. Where should they4. Monitors be 3. Exploits spent? Resources may include Sales cost Support cost Cost to serve Warehouse and inventory cost After sale and disposal cost
  23. 23. Customer Integration Accountability Structure Ideals Converts Exploits Monitors Performance management. Reporting measures and milestone accountability Relationship management Accountable for exiting customer growth Sales management Sales support if required in addition to relationship management New customer development Target customer acquisition Product /service management If required
  24. 24. Opportunity mapping Behavior criteria (examples) Customer 1 Customer 2 Customer 3 Customer 4 Price 1 5 3 5 Volume 1 1 5 5 Operational 1 2 5 5 Cost to acquire 4 4 1 2 Ideal Convert Exploit Transactional Customer segment allocation Legend Opportunity Increase price Change minimum quantities Strategy Customer …n
  25. 25. Performance grid Ideal Convert Exploit Transactional High Acceptable Low Acceptable New customers Celebration Celebration ? ? Lost customers Disaster Bad news Don’t care N/A Resource deployment High High Very Low Very low Innovation High High Don’t bother Don’t bother Wallet share High Low N/A N/A Best place To Ideals Exit or to Ideals Keep as long as they are profitable Sales Growth Customer profitability Migration
  26. 26. Customer performance system Customer that want us - Today Target Customers who don't need us Progress Today Revenue Margin Margin Growth existing Growth existing Growth new Customers we want Revenue Growth new Wallet share Customers' we don’t want Wallet share Target Progress
  27. 27. Building milestones Ideals Converts Exploits • 1st 90 days • 2nd 90 days • 1st 90 days • 1st 90 days • 2nd 90 days • 2nd 90 days Monitors 1st 90 days 2nd 90 days
  28. 28. Grab our free E book Its not the numbers it’s the fundamentals Creating the treasure map to explore and discover That Improves profit, cash and returns http://www.financialstatementstory.com
  29. 29. Mick is Chief Treasure Hunter. Over the last 30 years Mick has consulted with the world’s leading companies to identify and implement performance improvements. He has discovered that behind every person and company is a story. Sometimes it’s a rocking adventure, sometimes a comedy, a mystery, a drama and on occasion, a tragedy. Going beyond mundane numbers and engaging in the story is the key to helping companies and individuals build corporate and personal wealth. Mick Holly Andre is our Evidence Wizard. He combines the Passion of intuition with the Power of Evidence to weave amazing stories that reveal the secrets and treasures that are locked within financial statements. He has deployed the financial statement story discipline in over 150 different companies releasing more than $500million in value and more importantly, demystifying the financial statements for thousands of people. Andre's favorite quote: "If you change the way you look at things, the things you look at change" Andre Gien

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