Defining Your Customer Strategy

Organisations recognise that their customer strategy is a top business priority. Indeed, improving customer experience was identified as the top business priority amongst executives (58% of respondents) in a 2021 HBR study – higher than reducing costs (47%), increasing revenue (44%) and increasing innovation (37%). But what a good customer strategy looks like is not always clear. Defining and implementing a successful customer strategy is even harder.

Ultimately an organisation’s customer strategy is about how it is going to win, retain and grow customers, through a combination of who it will target (targeting), its unique selling proposition (offering) and the customer experience it provides (experience).

With that as the goal, it’s clear that while a customer strategy may be the purview of the Chief Customer Officer, to be successful it requires a strong team-based approach across the entire organisation, particularly Brand, Marketing, Product, People, Sales, Service, Operations and IT.

Targeting

Customer targeting is about defining which customers an organisation wants to target. Which customers does it actually want – what is the ideal customer and which customers can it most successfully win, retain and grow? A company’s current portfolio of customers may or may not be the ideal portfolio tomorrow, and even if it is, their needs are likely to change. Defining which customers to target requires consideration of strategic questions such as:

• Which customers are likely to grow and sustain or improve their margins?
• Where is the white space – customers with needs that are not currently being well served?
• Where are there emerging needs and emerging business models to meet those needs?
• Which customers have higher profitability and/or lower cost to serve?
• Which customers have needs that align with the strengths of our offering and business model? i.e. where we can meet their needs better than our competitors?
• Which customers will we be able to provide additional services to, and grow our relationship with over time?
• What customers can we reasonably expect to win and retain based on our current and future capability?

Offering

Customer offering is about why a customer will choose you as a provider. Different segments of customers have different sets of needs, both functional and emotional – understanding those and carefully and credibly developing a differentiated offering to meet those needs is vital. Key questions to consider include:

• How is our brand perceived and what brand attributes are likely to resonate with different segments of the market?
• What are the functional and emotional needs of different segments of the market? What are the primary and secondary factors in their purchase decisions?
• What is the economic value of our offering in the context of our customers’ businesses?
• What sets of trade-offs do customers make in different elements of the overall offering, what is their relative value and how can we optimise these?
• What competitors do our customers compare us against, how does our offering compare, and how might we differentiate our offering?
• What capabilities do we need to build or buy in order to strengthen our value proposition?

Experience

If targeting and offering is about attracting customers, experience is about keeping them. However, customer experience leaders can also expect to achieve higher word of mouth, greater revenue per customer, lower cost to serve and higher employee engagement, as well as greater retention. Improving customer experience is the top priority of executives, yet achieving tangible improvements and outpacing competitors continues to be a challenge. The types of strategic questions to focus on include:

• What is the link between improving customer experience and value creation? What investment in CX does this support and how do we prioritise that investment?
• What are the most critical end-to-end customer journeys to get right; what are the moments of truth?
• Where are the biggest pain points to address in terms of customer impact and volume?
• How do we creatively envision the future customer experience?
• How do we leverage digital to create seamless experiences?
• How might we harness the power of AI to deliver the personalised experiences and move from reactive service to predictive service?

Ultimately, the heart of any business is its customers. Having the customer front and centre of an organisation’s strategy development and planning is key to success – whether that is who to target, how to differentiate your offering or how to deliver a superior customer experience. If you are thinking about your customer strategy and would like to discuss, please contact:

Shane McEwen | shane.mcewen@mainsheet.com.au