3. Xxxxxxxx WHY FOCUS ON CUSTOMERS? THE 3D VIEW - THREE DIMENSIONS OF COMPETITIVENESS All three are important, but you can only excel in one - and should choose your focus: Competitive edge based on cost (and price competition) is not sustainable in the long term. Product leadership is short-lived, too. Technology moves fast and even products that are not overtaken are easily replicated. Customer centricity is about long-term relationships, therefore provides sustainable advantages. It also results in added competitiveness in the other two dimensions Operational Efficiency Customer Intimacy Product Excellence
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5. xxxxWHERE TO START Number of Customers Customer Value Highest Value Customers CRM Mass Marketing Picket Fence
6. Customer value segments Service costs Strategic value (potential share of customer) Xxxxxxxxxxxxxxxx DIFFERENT CUSTOMERS BY VALUE Actual value Most Valuable Customers: Retain Most Growable Customers: Grow Marginal customers: Business as usual? ‘ Below Zero’ Customers: Dismiss, or?
13. Xxxxxxx Customer Profiles ( Who they are?) Sets of (static) attributes reasonable assumptions, e.g. “families with babies require nappies”, “teenagers require bright-coloured mobile phones” or “companies with vehicle fleets require motor insurance”… xxxxxxxCustomer Behaviour ( What they do?) Based on assumptions like are more likely to choose” or “once a gambler, always a gambler”. Xxxxx THE WORLD OF PROXIES
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16. Customers have individual (and group) preferences often exhibited in behaviour patterns, xxxxxxxxxxsometimes declared in dialogue with the company, but sometimes also withheld and/or unknown. Product or service xxxxx preferences are directly linked to needs. The chance that those are true behaviours is somewhat higher, although product preferences may often reflect perceived needs. Attribute preferences xxxxxx also manifest needs , however those are secondary, ‘satellite’ needs accompanying the core need in a dynamic ‘bundle’. The likelihood here is greater that they are perceived needs, particularly in the less tangible areas of taste, fashion, peer influence etc. For practical xxxxxxx purposes of needs modelling and needs group management, explicit and implicit preferences can be considered a proxy for needs. Xxxxxxxxxxxxx HOW ABOUT PREFERENCES? Slide 12
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19. It's easy to understand the survival of popular traditional techniques such as syndicated market research, simplistic quantitative surveys, and focus groups, [yet] conventional research methods often gather incomplete information. McKinsey Quarterly, November 2006 PSYCHOLOGY – ANTROPOLOGY – NEUROLOGY – SIMULATIONS - … TRADITIONAL RESEARCH OFTEN MISSES THE POINT
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23. Allocating communication channels according to the value of segments Xxxxxxxxxxxxxxxx RESOURCE OPTIMIZATION Slide 3 Source: Peppers & Rogers Group Most valuable customers Most growable customers Marginal Unprofitable KEEP GROW share of customer Maximize profit, minimize cost Divest Media E-channels Direct mail Telemarketer In-person service reps Dedicated service reps Customer value
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Editor's Notes
06/22/09 In which it is IMPERATIVE to let go of the orthodoxy of traditional segmentation and start looking at the people we service as “people” rather than numbers on a chart. Because traditional segmentation doesn’t really tell us a lot about the PEOPLE behind the numbers Take the case of Elsa, Same segment, yet is she the same consumer ?
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06/22/09 Every business has three key objectives for its customers: to get some (as many as possible!), to keep them (for as long as possible), and to grow them (as much as possible). Let’s examine a simplified model, focussing on the ‘keeping’ part (in line with the theme of this conference). For each of three value segments, a business has a ‘portfolio’ of objectives that include all three: acquisition, retention and growth. They are not , however, present in equal measures! (see font sizes used). For the high-value segment, for example, retention is a top priority (lose a few customers here and you lose significant revenue). This justifies corresponding investment in achieving loyalty: from the choice of communication channels (live reps, even face-to-face meetings), through appropriate service levels (the higher – the more costly), to the rewards for loyalty. The medium-value segment has retention as a second priority (in this example – your segment objectives maybe different). This company will spend more on acquisition, yet sufficient resources will be allocated to protect outflow of revenue through churn. Service levels will still be excellent (just not exceptional), and the mix of communication channels may include less of the most interactive (and expensive) ones like face-to-face and outbound reps. The low-value segment has a top priority to stop losing money form the least profitable customers: not by deliberately losing them, though. Migrating them to a higher segment by encouraging usage is a high priority. Needless to say, retention (especially of loss-causing customers) is a low priority. There may be little or no dedicated spend towards this end. A basic service level still doesn’t mean bad service, but self-service is encouraged as cost-effective. Exclusion fro direct marketing of the least profitable customers saves a lot of costs and helps a break-even or small profit there. What if this approach leads to lower satisfaction and (God forbid!) defection by some of these customers? This should be a planned probability, and if it does happen, the effect may not necessarily be negative (it will be negative in the higher segments). Anecdote (real-life example from a client): Call centre receives inbound call from a customer tagged as the lowest value segment. He wants a handset upgrade, but is uncomfortable with the bundles on offer. ‘Can I have that colour model with the pictures, but still pay my old tariff?’, he asks. No, he can’t – is the answer, as his minimal tariff is only offered with economy handsets. After several minutes of polite explanation by the agent, the customer persists. The agent has a time limit and is getting frustrated with the situation; he says: ‘What you are asking is impossible – at least I cannot help you; but I will give you a number to call where they may help you’ – and he gives the customer the sales number of a competitor. Moral1: Sometimes we don’t necessarily have to be afraid to lose a customer. Moral2: This can only happen with an empowered employee (in this case he was not, and risked punishment). It will never happen with an outsourced offshore call centre ;o)
06/22/09 More valuable customers at the top of the pyramid deserve more personalised (and more expensive) service; going down the value scale, cost-effective channels become more appropriate; lowest value customers only get mass media communication and self-service
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