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

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Customer-Centric Transformation: What Good Looks Like – Penetration – Understanding Customer Value – Part 14a 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 – Understanding Customer Value

  • Definitions of how customer value is calculated have been agreed and implemented for the current, to-date & future/lifetime value levels. Proxies have been developed where real data is not available.
  • Analysis has been carried out of value distribution across the customer base and there is clarity about what each of the main value drivers are (e.g. acquisition rate, attrition rate, product holding, market cost etc.).
  • The development of value (upwards and downwards) over time at the absolute level and at the share-of-spend level is understood for different types of customers.
  • Opportunities to develop customer value are identified based on analysis of current purchase patterns, predictive modelling and any other identifiable indicators.
  • Staff are clear on how much value varies between customers and the critical importance of taking special care of the most valuable.

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 Experience – still an empty promise!


If you google Customer Experience you have the option of reviewing 158M results. Scary isn’t it?

It’s scary because in spite of all the talk about organizations building their ‘sustainable and competitive advantage’ through the design and delivery of a unique and distinctive customer experience the majority still screw it up.

I’m not sure about you but I’m really sick and tired of being on the receiving side of RANDOM experiences. In our many client engagements I almost always hear of the intention to ‘delight’ the customer. Why I ask? Can’t you simply deliver a consistent experience everytime ? I’d be happy with that!

The reality is that the 21st Century organization requires interoperation and integration. It needs to be ‘joined-up’ with a clear understanding of the intentional customer experience it’s trying to deliver as well as the capabilities of executing against that intention. It needs to have clear definitions and a common vocabulary so that EVERYONE is talking the same language with consistent meaning.

Customer Experience has got to be ‘connected’ with the overarching business strategy. It cannot exist as a ‘bolt-on.’ It’s way too important for that. It must be fully embedded into the very core of what the business stands for. People today expect a customer experience. No organization can differentiate merely by having an experience – the differentiation comes through the ‘kind’ of experience delivered.

The 4 levers of Customer Value Management


At the heart of every business are its customers. And if you’re looking to improve your business performance, your customers should be at the centre of your company strategy.

Experience has shown that by applying a Customer Management (CM) strategy, improvements in business performance are achievable where it counts most – the bottom line. But CM strategies can’t remain purely theoretical and strategic – they need to be translated into practical tactical interventions which deliver real results.

There are four basic principles involved when applying CM – Retention, Efficiency, Acquisition and Penetration. These four concepts (a REAP strategy) are levers which create improved business performance and are intended to support rather than replace current business planning activities.

Applying CM encourages companies to build an understanding of where your business comes from in terms of contribution from new customers, contribution from existing customers and contribution from increased sales and/or service to existing customers. Once a company understands this, you are then able to model and develop different REAP strategies for different groups or segments of customers.

Excellence in CM begins with a deep understanding of the nature and value (actual and potential) of existing customers and potential prospects. This needs to be supported by a robust strategy for managing them and clear plans of the type of management activity to be implemented for different types of customers.

One of the most cost-efficient ways to drive operating profit in any organisation is to examine the means of retaining good customers. However this can’t be done in isolation because simply retaining customers at any cost can represent reduced value to the company. Both extremes must be examined in order to see where the greatest value can be created.

Without the planning and management of Acquisition activity, ‘acquisition at any cost’ may result. Attention must be paid to the targeting of good quality new or previous customers and the managing of the relationship with them from their first expression of interest right through to their conversion to a customer.

Equally critical to an organisation’s return on its customer investment is penetration i.e. the ability to develop more value from existing customers through cross-sell and up-sell activities. An investment in extending the value of existing customers can deliver much more value than the same investment in winning new customers.

Implementing a CM strategy and utilising the REAP concept begins with extensive planning. This is not a trivial or instant process. Before any company embarks on this approach, clear commitment from the senior management team is imperative. Since the tools necessary to implement CM may need to scale to millions of customers, full support is needed from the IT and information management teams. This commitment must be matched to a thorough activity plan, further supported by access to the necessary skills and competencies. The whole exercise will be redundant unless it results in potential changes to business development activities.
CM is an extensive and even onerous undertaking for any business. However, an improved understanding of the customer, the creation of strategies and tactics that enable your organisation to generate value for the customer, carry with it the promise of great rewards, improved business performance and the creation of true value.