With the value proposition chosen and financial strategies determined, organizations must turn focus to their strategies and plans to win the marketplace. In other words, they must take the next step of clearly establishing and articulating their customer strategies. This is where branding and loyalty become extremely important in terms of focus.
Customer strategies should be focused in three main areas:
1. Retaining and adding customers;
2. Increasing revenue per customer; and,
3. Reducing cost per customer.
Each of these areas is important; the one (or two) that will get the most attention from a company is dependent upon the value proposition chosen.Just a reminder, the three primary value propositions are:
1. Operational excellence: these are organizations that are the best at keeping costs down and can therefore sell profitably at the lowest price (e.g. Walmart);
2. Product and/or service leadership: these companies charge a premium for their products and services and people are willing to pay it because they value the special features involved (e.g. Apple); and,
3. Customer intimacy (also known as customer solutions): these companies tend to focus on selling more than just a single product or service to customers; they also offer associated peripherals and take care of many of the tedious details that customers find value in being able to avoid (e.g. Ritz-Carleton).
Companies focused on operational excellence will drive revenues (and profits) by selling more products and services to customers who simply can’t turn down the lowest prices. In terms of branding, the image that these companies strive to attain is the “best deal”. Tight processes and budgets along with excellent supply chain management are critical for the operationally excellent.
Product leader companies will grow revenues by coming out with new versions of their products, and/or new “add-on” features. They also complement their main products with ancillaries whenever feasible. The image they are trying to promote is “best product”. While product leaders tend to not have processes and budgets as tight as price leaders, spending and cost control policies are still in place as necessary in the pursuit of product leadership.
Companies with the customer intimacy value proposition place high importance on customer programs such as bundling and loyalty programs. Whenever possible they like to offer “turnkey solutions” for customers; that is, they don’t just sell a (singular) product or service; rather, they try to take care of as much of a whole process as possible for the customers. Each ancillary product or service generates more revenue and profits for the company, and customers are happy to pay for it so that they may stick to their own core competencies. The image these customers pursue is tantamount to that of a “best friend”. Like product leaders, these companies possess processes and budgets that are not overly tight but still have reasonable controls placed upon them.
When it comes to customer strategies, the value proposition really dictates the mindset of the company involved. For example, those pursuing operational excellence are of the mindset that “we need to save money to make money”. Running the tightest ship possible equates to being able to attract many customers looking for a great deal (volume is critical here). Also involved is the fact that lower costs equate to larger profits.
The other value propositions are more of the mindset that “we need to spend money to make money”. Offering specialties such as unique features and customized bundling requires research, development and additional customer care which often has a high price tag. This is compensated through the premiums charged to customers (the market segment for these value propositions are quite happy to pay premiums for convenience and specialized features).
Strategy mapping can be very powerful and providing guidance for the step involved with choosing financial strategies. Ensuring alignment with the value proposition is critical; strategy mapping is a major boon in this context. This short video quickly walks you through all of the steps involved in building a strategy map.
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