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Rising competition and introduction of new ways of capturing large amounts of customer data has necessitated advancement in capabilities of organizations to foresee and fulfill customer needs and wants.
Ever more B2C concerns are going all-out to Design Customer-centric organizations. Organizations pursuing Customer-centricity depend on some type of Market Segmentation. Market Segmentations assist in understanding the customer more intimately.
This understanding has to be based on solid data. Even though the collection of customer data is at its highest of all time, organizations are still finding it difficult to apply the insights being offered by Customer Segmentation to propel Change and enhance Performance. This is the Customer Data Paradox. With more customer data, it has ironically become more difficult to derive useful insights from the data.
Data-driven enterprises are sensing that their Segmentation endeavors have been unable to provide anything near the extent of benefit they should. Cause for such failure is development of Segmentations founded on contradictory Business Purpose; purposes that are not widely comprehended or communicated or cannot be immediately acted upon.
Segmentation is indispensable to the process of dealing with the intricacies of constantly evolving and dividing customer clusters and their diverse demands. Need for developing a company-wide Operating Model that is able to transform this extensive data into valuable information so as to enable improved Go-to-Market decisions is essential.
This intricate Segmentation process can be handled more effectively by following the 4-phase approach to Customer-centric Segmentation:
- Delineate Purpose
- Plan around Purpose
- Functionalize Segmentation
- Control Implementation
Segmentation offers clarity and insights regarding customer behavior, tendencies, and proclivities.
Customer Segmentation also amplifies the chances of effectiveness of Marketing and Customer Experience management campaigns, and impelling Brand Positioning and Product Development.
Let us look at the 4 phases in detail.
Delineate Purpose
Clearly defining and understanding the Purpose of Segmentation is necessary to set the base for the type of Segmentation effort that is required to be undertaken—i.e., Strategic or Tactical or both.
Strategic Segmentation is applied for all-embracing, enterprise-wide purposes. Tactical Segmentation is adopted for a far more precise purpose.
Goal is to guarantee that Segmentation results in distinct processes and actions that augment Performance.
Plan around Purpose
Segmentation research needs to be meticulously planned to manifest the Purpose decided, and to make certain that the outcomes are insightful, practicable, and discernable.
Segmentation research has to encompass several dimensions such as behaviors, outlooks, demographics, channel use, inclinations, and profitability.
Functionalize Segmentation
This phase involves determining changes that will take place in the decision processes and communicating them to the concerned business partners so as to deliberate on and devise adjusted metrics that reflect the new capabilities.
Control Implementation
Means for administering change—directed and customized communications arranged to stimulate understanding, interaction, and approval—are required to be utilized completely.
Interested in learning more about Customer-centric Segmentation? You can download an editable PowerPoint on Customer-centric Segmentation here on the Flevy documents marketplace.
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“Strategy without Tactics is the slowest route to victory. Tactics without Strategy is the noise before defeat.” – Sun Tzu
For effective Strategy Development and Strategic Planning, we must master both Strategy and Tactics. Our frameworks cover all phases of Strategy, from Strategy Design and Formulation to Strategy Deployment and Execution; as well as all levels of Strategy, from Corporate Strategy to Business Strategy to “Tactical” Strategy. Many of these methodologies are authored by global strategy consulting firms and have been successfully implemented at their Fortune 100 client organizations.
These frameworks include Porter’s Five Forces, BCG Growth-Share Matrix, Greiner’s Growth Model, Capabilities-driven Strategy (CDS), Business Model Innovation (BMI), Value Chain Analysis (VCA), Endgame Niche Strategies, Value Patterns, Integrated Strategy Model for Value Creation, Scenario Planning, to name a few.
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Most organizations aren’t ready to deliver great Customer Experiences across all channels. Many of them have invested heavily in conventional methods of doing business, backed by in person or over-the-phone customer experience. This has led to creation of siloed operational structures within companies, where each silo operates individually.
With the advent of digital channels, these organizations set out to use and proffer their services via digital channels. They did this by creating discrete digital-product groups in their existing operational infrastructure. However, their siloed infrastructure falls short of meeting customers’ requirements in terms of seamless communication and interaction across all channels. The reason being:
- Customers’ utilization of multiple channels and touchpoints across Customer Journeys.
- Requirements of personalized services / products by the customers.
- Anticipation of impeccable coordination and communication by the customers no matter how they interact with the business.
This necessitates the businesses to not only provide great Customer Experiences at each channel, but also make the transitions across these channels simple to improve the overall Customer Experience (CX). However, improving the overall Customer Experience isn’t that simple a feat, especially with silo-based operational infrastructures. Providing consistent amazing Customer Experience warrants:
- Creation of a robust operational ecosystem through Transformation of internal operations, to respond quickly to customers’ expectations.
- Meticulous design and delivery of Customer Experiences.
Most organizations understand the significance of Transforming their Customer Experience—however, they lack the direction and support required to realize this goal. Organizational leadership can make use of the Customer Experience Pyramid to guide their CX Transformation.
The Customer Experience Pyramid is an empirical research based framework, which is quite effective in not only improving individual touchpoints but streamlining the entire Customer Journeys. The CX Pyramid entails 2 core dimensions:
- Focus Areas – the organizational spheres that must change to enable provision of amazing digital Customer Experiences.
- Strategic Building Blocks – the strategies that define how this change can take place and made part of the organizational processes to deliver exceptional Customer Experiences.
The 4 Focus Areas crucial in a business to change in order to deliver top-quality Digital Customer Experiences at scale are:
- Vision and Strategy
- Talent Management
- Operations
- Technology
Let’s discuss the first 2 individual Focus Areas of the CX Pyramid in detail for now.
Vision and Strategy
Redirecting focus on making Customer Experience a part of the Organizational DNA necessitates creating a Vision statement and Strategy to depict, clarify, and plan out the purpose and objectives of serving the customers. The senior leadership needs to come up with a short and crisp Vision statement. The Vision sets out the foundation that reflects the leadership’s focus, importance the organization gives to Customer Experience, and the high-level objectives associated with the provision of quality Customer Experiences.
Next, the leadership should work on developing strategies to build fundamental competencies within the 4 CX Building Blocks—i.e., CX operations, metrics, CX-centric culture, systems and governance protocols.
Talent Management
Once the Vision statement has been agreed upon, it’s time to work towards carrying out the required actions to produce customer-centric outcomes. The first step in that direction involves linking all employees who work in discrete silos (in conventional structures). To align all employees, there is a need to create a Transformation team and define new roles / CX groups. The Transformation team should train and direct teams responsible for the different stages of the Customer Journey, instill new ideas, and foster desired behaviors in them.
Senior Leadership need to also assign a CX Team to run the CX program. The CX Team has to lay out processes and yardsticks to foster cross-functional collaboration and coach functional units to adopt customer-centric design practices in their operations.
Interested in learning more about the other focus areas of the CX Pyramid Framework? You can download an editable PowerPoint presentation on Customer Experience Pyramid here on the Flevy documents marketplace.
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You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library. FlevyPro is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:
“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”
– Bill Branson, Founder at Strategic Business Architects
“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”
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Digital-savvy startups are disrupting markets and threatening conventional businesses. They are doing this by utilizing technology to offer new products and services and providing tailored yet uncomplicated experiences for their customers.
Likewise, large traditionally-run firms will have to keep evolving their Customer Experience approaches to secure additional avenues of revenue and to stay competitive. To accomplish this, they will need to develop capabilities to effectively utilize insights on customer preferences and design offerings as per the customers’ preferences.
Many organizations, today, are undertaking Digital Transformation programs to improve their Customer Experiences. However, a majority of these Digital Transformation initiatives fall short of securing their maximum value potential due to focusing only on improving specific touchpoints instead of confronting the entire customer journeys—spanning across several departments and channels.
To make their Customer Experience sustainable and to become Customer-centric Organizations need to clearly transform their ways of doing business, operations, and employee behaviors. It is critical to improve these fundamental support processes before embarking on initiating any Customer Experience optimization initiatives.
Customer Experience optimization facilitates in gaining more satisfied/paying customers, additional value, and better retention rates. Research reveals that the companies that have higher Customer Satisfaction levels can achieve four times growth in value compare to those that rank lower in Customer Satisfaction.
Customer Experience (CX) Approach to Value Creation
The following pragmatic 5-phase approach to Customer Experience Management and Value Creation is of great benefit to organizations aspiring to enrich their Customer Experience, achieve clear-cut differentiation, and capture the most potential value:
- Understand What Customers Value
- Simplify and Streamline Offerings
- Link Customer Value to Operational Drivers
- Focus on Most Important Customer Journeys
- Adopt Continuous Improvement (CI) Thinking
Let’s now delve deeper into the first 3 phases of the approach.
Understand What Customers Value
Ascertaining the key drivers of Customer Satisfaction is the foremost step in improving Customer Experience. A flawed approach—that many companies still employ—at the onset of a Customer Experience optimization initiative is to reduce costs associated with internal processes and exploring customer pain points. This doesn’t assist in maximizing Value Creation.
Customer-centric organizations, on the other hand, devote their time in developing a clear understanding of what really matters to their customers. This helps in deciding where to focus, rationalizing their processes, and creating new experiences for the customers to generate additional value.
Great Customer Experience necessitates much more than just satisfactory interactions. Customer Satisfaction should be mapped along the entire customer journey—spanning multiple functions and channels—as customers use various channels to communicate with companies before making a transaction.
Simplify and Streamline Offerings
Alongside rationalizing the processes, it is equally important to carry out a detailed analysis of the brands, offerings, and price structures is essential to tap value from Customer Experience. After all, even the most pleasing Customer Experience cannot offset an unpredictable or exorbitantly expensive product.
Once these fundamentals are in order, organizations should investigate which interactions and Customer Journeys carry the most significance in a Customer Experience; evaluate how the organization is rated in each journey; identify and focus on the operations that need to be overhauled to improve the overall Customer Experience.
Link Customer Value to Operational Drivers
Technology and customer input provides the stimulus to streamline offerings and Customer Experience. However, the real value comes from linking the Customer Experience to core operational processes. Seeing journeys from the customer perspective aids in focusing on what they need and linking internal processes, structures, and KPIs to customer facilitation.
This necessitates deeper insights on elements that are of most value to the customer across a journey, pinpointing drivers of business costs and revenues, and—most importantly—inculcating the right mindsets across the organization. This detailed evaluation of customer journeys facilitates in determining operational improvements that bear the most positive effect on Customer Experience.
Interested in learning more about the other phases of the approach to managing Customer Experience? You can download an editable PowerPoint on the Customer Experience (CX) Approach to Create Value here on the Flevy documents marketplace.
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