Customer-Centric Transformation a no-brainer: Check out why!


I’m guilty! I admit that I’m a customer-centric evangelist because quite frankly, how else can you build meaningful competitive advantage? Customer-centricity is all about differentiation and it’s almost impossible to sustain differentiation around product, price and distribution footprint. But you can sustain differentiation around your customer knowledge, insights and understanding.

Here are 3 questions designed to get you thinking a little differently about the criticality of developing customer-centric capability within your organisation. These ideas are attributed to Don Peppers & Martha Rogers of Peppers & Rogers Group, whom I worked with very briefly around 11 years ago.

1)      Who is the one stakeholder, whom if you maximised the return thereof, would benefit ALL stakeholders?  So think about this – there are generally 5 major stakeholders in businesses today – society, partners, investors, customers and employees. Maximising the return for the investor is not necessarily good for the customer! Maximising the return for the employees doesn’t mean ALL other stakeholders will benefit. Maximising the return for the Customer, on the other hand, certainly does benefit all other stakeholders. This is why the principles of customer-centricity are so important. If an organisation is unable to propagate a supply-demand chain then they are unable to supports investors and all other stakeholders.

2)      Would you agree that customers create 100% of business value in almost all cases? Customers create value for businesses every quarter by purchasing products and services. They also create value in another way which is referred to as lifetime value (LTV). LTV is based upon their intention to continue doing business with, and paying money to the organisation. That LTV goes up and down in value, as does a stock/share portfolio. Any reduction, or potential reduction, in that value (brought about possibly through a poor engagement or experience) is bad news for the organisation. This level of understanding and insight of that value change is generally not available within organisations so this reduction in value is not reported to shareholders , albeit that it is akin to the company reporting lower earnings which in almost all cases results in company stock/shares losing value. My friends at Peppers & Rogers have a metric for this which they refer to as ‘Return on Customer’ and this metric is designed to capture both types of value created (actual and LTV) to balance the short term/long term impact of customer value. ROC = (Profit made on customer today + change in LTV)/Initial/beginning LTV.

3)      What do shareholders & investors really want? Most shareholders and investors want confidence that leadership is able to grow a company organically. That means that the organisation will have developed capabilities to Acquire customers, to Retain them and keep them buying from the business, to grow them and to get them to buy more from the business. They’d also want confidence that leadership is able to guide investment and understand the cost-to-serve different customer cohorts/segments to best manage financial return. If the business can demonstrate these capabilities then they are providing REAL value to customers which means they’re providing real value to shareholders/investors at the same time

Customers are a scarce asset. They are valuable and unique. They are measurable. They are the biggest limitation to growth and to understand this will impact the decisions we make.

So…………within your organisations, if customers are the most important asset in your business, who is managing them as such. What operational framework/ architecture/ business model are you using to optimise that asset? Who is tracking the value of the customer today and the value of the customer tomorrow? What does your customer dashboard look like?

Comments?

Advertisements

Customer-Centric Transformation: What Good Looks Like – Penetration – Increasing Customer Value – Part 14b of 14c


Designing and executing a customer-centric business model requires end to end organisational alignment. Customer-centric capability development cannot take place in isolation to the rest of the business. The customer-centric journey requires a clear quantified understanding of current organisational capability across all 14 capability areas of the SCHEMA® Customer Management framework in the centre of the REAP Customer-Centric Blueprint below. As important as an understanding of current customer management capability is, so too is an understanding of the capability to which the organisation aspires.

Each week I’ll address another single capability area, sharing with you the Transformation Intent to which your organisation should commit to, as well as ‘What Good Looks Like’ for those organisations that have achieved a fairly high level of maturity in the respective capability area.

The REAP Customer-Centric Organisation Blueprint®

REAP CCOB for Blog

 

 

 

 

 

 

 

This week we are dealing with Penetration which is one of the four Execution capability areas represented. The Execution layer relates to the capabilities and control levers needed to optimise customer value and includes Retention, Efficiency (understanding cost to serve), Acquisition and Penetration (customer development, cross-sell and up-sell) – collectively referred to as REAP. These are capabilities and initiatives that can be optimised in the short term.

These capabilities support your ability to implement your chosen customer strategies and rely on the fundamental building blocks (Foundations) as well as the Enabling capabilities already discussed in Part 1 to 10 of this series of blog posts.

Each of the four Execution capability areas is made up of sub-components. The Penetration dimension relates to the ability to develop more value from existing customers through cross-sell and up-sell activities to improve return on customer investment. Formal management of high value customers and key accounts is a critical part of this. It also requires clarity as to how you deal with low value customers from a development perspective, if at all. The 3 sub-components of the Penetration dimension are ‘Understanding Customer Value,’  ‘Increasing Customer Value,’ and ‘Managing High Value Customers.’ Each of these areas is addressed in separate, individual blog posts.

Transformation Intent – Penetration

“Delivering sustainable and superior business performance requires the on-going development and growth in the value of your customer base. To do this you need to have an in-depth understanding of your customer value so that you can identify opportunities to increase this value. This potential uplift is then supported through relevant propositions, cross-selling, up-selling, indirect value creation and expansion of existing product usage. In treating different customers differently, high value customers should also be given special attention so that the right team equipped with the necessary budget can deliver on their specific needs.”

What Good Looks Like – Increasing Customer Value

  • Value development is managed as a business discipline (like acquisition or retention) with: clear ownership / responsibility; detailed planning; specific propositions; checks that it is generating incremental value.
  • Active stimulation mechanisms are in place to increase usage / value / frequency of purchasing the organisations’ core products.
  • Opportunities to sell ‘up’ to a higher level of value are sought and supported by appropriate offers, especially at point of sale.
  • Cross-selling is driven through both outbound and inbound channels, based on clear rules-of-engagement and prompts to ensure appropriate offers are made from the organisation’s whole portfolio.
  • Low value customers are identified against clear definitions and specifically dealt with so as to drive up their value or at least prevent it being made worse.
  • The valuation of customers and stimulation of this value extends beyond pure transaction value, into areas such as advocacy and referral.

For more insight into customer-centric business model innovation as well as more insight into this particular area of the REAP Customer-Centric Blueprint, please see my book “The Customer-Centric Blueprint’ – http://amzn.to/ZILg4y

Customer-Centric Transformation: What Good Looks Like – Efficiency – Controlling Costs – Part 12b of 14


Designing and executing a customer-centric business model requires end to end organisational alignment. Customer-centric capability development cannot take place in isolation to the rest of the business. The customer-centric journey requires a clear quantified understanding of current organisational capability across all 14 capability areas of the SCHEMA® Customer Management framework in the centre of the REAP Customer-Centric Blueprint below. As important as an understanding of current customer management capability is, so too is an understanding of the capability to which the organisation aspires.

Each week I’ll address another single capability area, sharing with you the Transformation Intent to which your organisation should commit to, as well as ‘What Good Looks Like’ for those organisations that have achieved a fairly high level of maturity in the respective capability area.

The REAP Customer-Centric Organisation Blueprint®

REAP CCOB for Blog

 

 

 

 

 

 

 

This week we are dealing with Efficiency which is one of the four Execution capability areas represented. The Execution layer relates to the capabilities and control levers needed to optimise customer value and include Retention, Efficiency (understanding cost to serve), Acquisition and Penetration (customer development, cross-sell and up-sell) – collectively referred to as REAP. These are capabilities and initiatives that can be optimised in the short term.

These capabilities support your ability to implement your chosen customer strategies and rely on the fundamental building blocks (Foundations) as well as the Enabling capabilities already discussed in Part 1 to 10 of this series of blog posts.

Each of the four Execution capability areas is made up of sub-components. The Efficiency dimension seeks to manage costs from a customer profitability perspective and evaluates costs in reference to the value of the customer for whom those costs are incurred. The 2 sub-components of the Efficiency dimension are ‘Calculating & Allocating Costs’ and ‘Controlling Costs.’ Each of these areas is addressed in separate, individual blog posts.

Transformation Intent – Efficiency

“In treating different customers differently, your organisation needs to develop the capability to optimise customer profitability through the efficient calculation, allocation and control of customer costs in retaining, acquiring and developing your customers across all segments and channels. This enables you to perform value analysis in a way that supports your customer engagement within the defined profit bands per customer and per segment, and if need be, influencing their behaviour to reduce the cost-to-serve or even terminating them as customers if necessary.”

What Good Looks Like – Controlling Costs

  • The relative costs of acquiring, retaining and developing customers by each channel are understood and have an influence on customers’ allocation / entitlement to each channel. Maximum acceptable acquisition costs are calculated for each customer type and mechanisms in place to stop acquisition activity or hold back sales costs (commissions) if necessary.
  • Marketing costs are controlled by formal optimization, moving towards inbound targeting and by reducing or stopping marketing to some customers where the cost cannot be justified.
  • The drivers of cost-to-serve variations are understood and the overall cost-to-serve level is being reduced by changing buying behaviours and maximizing the use of self-service wherever possible.
  • The various costs of failure and wastage are understood and fully considered in work to improve customer processes.
  • The organisation has an ethos, relevant definition and sensitive processes that allow high cost (compared to revenue) customers to be stimulated to leave.

 

For more insight into customer-centric business model innovation as well as more insight into this particular area of the REAP Customer-Centric Blueprint, please see my book “The Customer-Centric Blueprint’ – http://amzn.to/ZILg4y

CORRECTION: Customer-Centric Transformation: What Good Looks Like – Efficiency – Calculating & Allocating Costs – Part 12a of 14


THIS ORIGINAL POSTING HAD AN ERROR – THE DESCRIPTOR RELATING TO ‘WHAT GOOD LOOKS LIKE – CALCULATING & ALLOCATING COSTS’ WAS INCORRECT. PLEASE ACCEPT MY APOLOGIES – THE CORRECT CONTENT IS NOW INCLUDED:

 

Designing and executing a customer-centric business model requires end to end organisational alignment. Customer-centric capability development cannot take place in isolation to the rest of the business. The customer-centric journey requires a clear quantified understanding of current organisational capability across all 14 capability areas of the SCHEMA® Customer Management framework in the centre of the REAP Customer-Centric Blueprint below. As important as an understanding of current customer management capability is, so too is an understanding of the capability to which the organisation aspires.

Each week I’ll address another single capability area, sharing with you the Transformation Intent to which your organisation should commit to, as well as ‘What Good Looks Like’ for those organisations that have achieved a fairly high level of maturity in the respective capability area.

The REAP Customer-Centric Organisation Blueprint®

REAP CCOB for Blog

This week we are dealing with Efficiency which is one of the four Execution capability areas represented. The Execution layer relates to the capabilities and control levers needed to optimise customer value and include Retention, Efficiency (understanding cost to serve), Acquisition and Penetration (customer development, cross-sell and up-sell) – collectively referred to as REAP. These are capabilities and initiatives that can be optimised in the short term.

These capabilities support your ability to implement your chosen customer strategies and rely on the fundamental building blocks (Foundations) as well as the Enabling capabilities already discussed in Part 1 to 10 of this series of blog posts.

Each of the four Execution capability areas is made up of sub-components. The Efficiency dimension seeks to manage costs from a customer profitability perspective and evaluates costs in reference to the value of the customer for whom those costs are incurred. The 2 sub-components of the Efficiency dimension are ‘Calculating & Allocating Costs’ and ‘Controlling Costs.’ Each of these areas is addressed in separate, individual blog posts.

Transformation Intent – Efficiency

“In treating different customers differently, your organisation needs to develop the capability to optimise customer profitability through the efficient calculation, allocation and control of customer costs in retaining, acquiring and developing your customers across all segments and channels. This enables you to perform value analysis in a way that supports your customer engagement within the defined profit bands per customer and per segment, and if need be, influencing their behaviour to reduce the cost-to-serve or even terminating them as customers if necessary.”

 

What Good Looks Like – Calculating & Allocating Costs

  • The operating costs and even a sensible proportion of overheads that can be attributed to customer transactions and behaviours have been identified and either sourced from relevant finance systems or a meaningful estimation approach developed.
  • These identified costs have been allocated to customers in a way that: allows them to be included in value analysis; recognises the difference between acquisition and service costs; enables match back to financial accounts.
  • Responsibility for the level of cost represented by all customer groups and individual key customers has been allocated and all staff understand the importance of controlling customer-related costs.

 

For more insight into customer-centric business model innovation as well as more insight into this particular area of the REAP Customer-Centric Blueprint, please see my book “The Customer-Centric Blueprint’ – http://amzn.to/ZILg4y

Customer-Centric Transformation: What Good Looks Like – Efficiency – Calculating & Allocating Costs – Part 12a of 14


Designing and executing a customer-centric business model requires end to end organisational alignment. Customer-centric capability development cannot take place in isolation to the rest of the business. The customer-centric journey requires a clear quantified understanding of current organisational capability across all 14 capability areas of the SCHEMA® Customer Management framework in the centre of the REAP Customer-Centric Blueprint below. As important as an understanding of current customer management capability is, so too is an understanding of the capability to which the organisation aspires.

Each week I’ll address another single capability area, sharing with you the Transformation Intent to which your organisation should commit to, as well as ‘What Good Looks Like’ for those organisations that have achieved a fairly high level of maturity in the respective capability area.

The REAP Customer-Centric Organisation Blueprint®

REAP CCOB for Blog

 

 

 

 

 

 

 

This week we are dealing with Efficiency which is one of the four Execution capability areas represented. The Execution layer relates to the capabilities and control levers needed to optimise customer value and include Retention, Efficiency (understanding cost to serve), Acquisition and Penetration (customer development, cross-sell and up-sell) – collectively referred to as REAP. These are capabilities and initiatives that can be optimised in the short term.

These capabilities support your ability to implement your chosen customer strategies and rely on the fundamental building blocks (Foundations) as well as the Enabling capabilities already discussed in Part 1 to 10 of this series of blog posts.

Each of the four Execution capability areas is made up of sub-components. The Efficiency dimension seeks to manage costs from a customer profitability perspective and evaluates costs in reference to the value of the customer for whom those costs are incurred. The 2 sub-components of the Efficiency dimension are ‘Calculating & Allocating Costs’ and ‘Controlling Costs.’ Each of these areas is addressed in separate, individual blog posts.

Transformation Intent – Efficiency

“In treating different customers differently, your organisation needs to develop the capability to optimise customer profitability through the efficient calculation, allocation and control of customer costs in retaining, acquiring and developing your customers across all segments and channels. This enables you to perform value analysis in a way that supports your customer engagement within the defined profit bands per customer and per segment, and if need be, influencing their behaviour to reduce the cost-to-serve or even terminating them as customers if necessary.”

 

What Good Looks Like – Calculating & Allocating Costs

  • Communication of dissatisfaction is encouraged from customers both directly and via staff. It is pro-actively drawn out by internal processes, even if there is no formal complaint.
  • Complaints via regulatory bodies are dealt with enthusiastically and in a way that ensures their response standards are always met. Formal complaints received directly from customers are dealt with consistently across the organisation, to clearly defined standards which are themselves transparent to customers.
  • Analysis of complaints extends to deep ‘root-cause’ levels and reporting is reviewed by very senior managers who are told the whole story.
  • Issues likely to cause widespread dissatisfaction are dealt with quickly and incisively, using social and traditional media, making use of advocates and fans wherever possible.
  • Relationship recovery is seen as an integral part of the dissatisfaction management process and is applied re-actively and/or pro-actively against a clear set of criteria of where it should be applied.

 

For more insight into customer-centric business model innovation as well as more insight into this particular area of the REAP Customer-Centric Blueprint, please see my book “The Customer-Centric Blueprint’ – http://amzn.to/ZILg4y