June 3 - 6, 2024
Commentary
The Most Important Decisions Are The Ones Your Customers Make
- by Chuck Densinger , February 25, 2020
The answers seem obvious enough. Your customers are all those people visiting your stores, browsing your website, following your company on Facebook or Instagram.
But what about people who have visited your website or joined your loyalty program without ever pulling out a credit card? And those people who bought a single item one time four years ago, but you haven’t heard from since?
Many executives will tell you how their organizations have become much more “customer-centric.” They have multiple forms of segmentation that they apply to targeted marketing and personalization. Or they’ve started using machine learning and predictive models to adjust their prices. And yet — they still don’t really have a definition of their customer.
To be fair, most companies have come a long way from treating every customer the same. True customer-centricity, though, requires running your business from the customer dimension, just as you do from the product or geography dimensions.
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This isn’t to suggest you throw out your product and geo-based P&Ls or organizational structures. But companies who manage by the additional dimension of customer will realize a step-change in revenue, profit, and customer loyalty from the insights and operational changes generated.
Businesses optimize what they’re measured on and what they build operations around. This organizes your business around the most important decisions affecting your sales and profits: those made by your customers. You can’t ask a product or store why its sales were subpar — but you can ask customers why they didn’t buy.
Operating on the customer dimension means you create a customer portfolio that collectively represents 100% of your revenue. Then, you can build business measurement and management systems around that portfolio — things like revenue targets, P&Ls, operating strategies, and organizational structures.
The first part isn’t hard. The sum of your customers’ spend with you equals 100% of your revenue. We just have to group customers in a way that’s structured and meaningful to your business, by creating behavioral segments that capture their patterns of responses to your overall value proposition in the marketplace.
Things typically get more challenging from here. Businesses have long-held, refined ways of managing product portfolios, regional operations, and channel touch points. Managing a customer portfolio requires developing a whole new set of metrics, operating structures, and functional expertise.
Historical disciplines will help. You don’t abandon product, geo, and channel management; you augment them with customer management. The traditional foundational questions are the same: We sell what goods, at what price, through what channels, in what locations, with what brand experience? Now, simply add a “to whom” at the front of those questions.
Make your customer portfolio the starting point: Who is buying what, at what price, through what channel? If you want to raise revenue and profit: Who is going to spend that incremental revenue, and how will you deliver in such a way as to realize that incremental profit?
Don’t try to do everything at once. Start with your definition of customer. Make sure your definition captures 100% your revenue and is in language your people and your customers understand. Becoming truly customer-centric starts with clarity on what a customer actually is for your business.
3 comments about "The Most Important Decisions Are The Ones Your Customers Make".
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It constantly amazes me, but the author is correct that many (if not most) marketers cannot provide a good description ot the profile of their customers. I experience this often when discussing a potential consumer survey and when I ask people who are seeking a mailing list to define their target audience.
It should be obvious that a comprehensive and accurate definition of the customer profile is the essential starting point for any business and its marketing plan.
Ron, the people seeking those mailing lists may not really know what the target audience of the campaign is---or they may be low level folks at the advertising companies. In my experience,most national advertisers---and, I assume, many of their local counterparts, know perfectly well what types of consumers are curently using their brands and certainly, who the general product category users are---assuming that there is a difference. Moreover, many branding campaigns are into mindsets, not just product users. Often, the purpose of advertising is not only to woo people from rival brands but to reinforce the already favorable convictions of current brand buyers --motivating them to stock up so they don't need rival brand products and/or as protection against the blandishments of competitive brands. In addition, many campaigns bore in on one or several mindsets---like image, price, health benfits, active lifestyles,convenience, brand trust, etc. and their ads are geared to use these as their primary appeals. Needless to say, someone buying a mailing list for some form of sales promotion is hard pressed to define consumers in such a fashion---or is so far out of the loop that it never enters his/her mind.
Thanks Ed, you make some good points but my feeling is that anyone making decisions on how to reach a certain audience should know how to define that target pretty well, and that is often not the case.
I disagree that defining a target (mindsets) for a direct mail promotion may be more difficult than using other media and communications channels. Direct mail is often the most efficient and effective way to define and address the most important attributes of the target, especially a niche market segment.