Customer Strategist Orkun Oguz: Place Customers at the Forefront of 2011 Strategic Planning
Many executives are in the throes of the budget season, so their discussions with other decision-makers will invariably turn to strategy setting for the coming year. Given the current backdrop - a sluggish economy, the need to manage growing complexity in the multichannel environment, and increased opportunities for using customer data and analytics - executives should be thinking about growing their businesses through customer-centricity.
As companies set their revenue targets and other financial goals, executives can chart their strategies in a couple of different ways. They can choose to apply a short-term, product-centric approach that might enable them to meet their quarterly earnings targets. But in doing so, senior management runs the risk of alienating loyal customers by applying aggressive sales tactics in the drive to meet their numbers.
By comparison, a customer-centric method of strategy setting is a more balanced approach to engendering long-term customer value while driving greater loyalty and consistent revenue growth in the near term. In addition, a customer-centric approach will help companies to foster gains in customer lifetime value and customer profitability over the long haul.
Linking Budgeting with Customer Strategies
Historically, the budgeting process within most enterprises is focused on resource allocation, while budget planning itself is typically based on budgets and expenditures from the prior fiscal year along with projected revenues, market share figures, and the anticipated costs of producing goods and services for the coming year.
A growing number of companies are attempting to implement customer-centric strategies, but rarely are these efforts linked in any way to the budgeting process. They should be.
Budget planning has traditionally been rooted in product-centric financial targets (profits, revenues, costs) while customer-focused strategies are usually conceptualized and executed on a parallel plane. Forward-thinking companies have succeeded in blending the two approaches in order to provide decision-makers with a more holistic view of a company's operations. This includes how the anticipated behaviors and needs of segmented customer groups such as private banking clients or small to medium-size businesses (SMBs) can be expected to shape future profits and revenues.
As corporate decision-makers evaluate revenue and profit targets as part of the budget-planning process, they should also include customer-focused metrics such as:
-Share of wallet
-Profit and revenue targets versus actual for segmented customer groups
-Cross-sell ratios
-Customer retention figures
Getting Started
Before the next fiscal year begins, decision-makers should continue their budget-planning efforts and establish targets for revenues, product margins, and the like. From there, executives can apportion anticipated revenues, profits, etc. by segmented customer groups.
For instance, let's say a national electronics retailer establishes a goal to sell 1 million high-definition TV monitors for the coming year. By analyzing targeted customer groups (e.g. high-value customers and prospects who are deemed most likely to purchase 50-inch screens or home theatre systems, mid-level customers, etc.), executives can then plot the steps needed to achieve each of the goals they set for segmented customer groups. By refining financial targets based on the buying power, characteristics, and needs of specific customer groups, executives will greatly enhance their chances for meeting those goals.
Each of the targets should be classified for specific customer segments that segment managers should be required to track and achieve. All of the financial targets should be aligned with budget figures and be consistent with customer performance targets, such as cross-sell or upsell ratios, for each segment.
In short, budget planning shouldn't be business as usual or based on arbitrary objectives (i.e. grow revenues next year by X percent). In order to maximize the likelihood for hitting budget targets, decision-makers should plan to incorporate customer segmentation and needs analysis into their planning efforts. Ideally, the entire process should apply a bottom-up approach, starting with such questions as "What products should we sell to X segment" instead of "How much should we plan to sell overall?"
About the Author: Orkun Oguz is a Partner of Peppers & Rogers Group. Contact him at ooguz@1to1.com.
As companies set their revenue targets and other financial goals, executives can chart their strategies in a couple of different ways. They can choose to apply a short-term, product-centric approach that might enable them to meet their quarterly earnings targets. But in doing so, senior management runs the risk of alienating loyal customers by applying aggressive sales tactics in the drive to meet their numbers.
By comparison, a customer-centric method of strategy setting is a more balanced approach to engendering long-term customer value while driving greater loyalty and consistent revenue growth in the near term. In addition, a customer-centric approach will help companies to foster gains in customer lifetime value and customer profitability over the long haul.
Linking Budgeting with Customer Strategies
Historically, the budgeting process within most enterprises is focused on resource allocation, while budget planning itself is typically based on budgets and expenditures from the prior fiscal year along with projected revenues, market share figures, and the anticipated costs of producing goods and services for the coming year.
A growing number of companies are attempting to implement customer-centric strategies, but rarely are these efforts linked in any way to the budgeting process. They should be.
Budget planning has traditionally been rooted in product-centric financial targets (profits, revenues, costs) while customer-focused strategies are usually conceptualized and executed on a parallel plane. Forward-thinking companies have succeeded in blending the two approaches in order to provide decision-makers with a more holistic view of a company's operations. This includes how the anticipated behaviors and needs of segmented customer groups such as private banking clients or small to medium-size businesses (SMBs) can be expected to shape future profits and revenues.
As corporate decision-makers evaluate revenue and profit targets as part of the budget-planning process, they should also include customer-focused metrics such as:
-Share of wallet
-Profit and revenue targets versus actual for segmented customer groups
-Cross-sell ratios
-Customer retention figures
Getting Started
Before the next fiscal year begins, decision-makers should continue their budget-planning efforts and establish targets for revenues, product margins, and the like. From there, executives can apportion anticipated revenues, profits, etc. by segmented customer groups.
For instance, let's say a national electronics retailer establishes a goal to sell 1 million high-definition TV monitors for the coming year. By analyzing targeted customer groups (e.g. high-value customers and prospects who are deemed most likely to purchase 50-inch screens or home theatre systems, mid-level customers, etc.), executives can then plot the steps needed to achieve each of the goals they set for segmented customer groups. By refining financial targets based on the buying power, characteristics, and needs of specific customer groups, executives will greatly enhance their chances for meeting those goals.
Each of the targets should be classified for specific customer segments that segment managers should be required to track and achieve. All of the financial targets should be aligned with budget figures and be consistent with customer performance targets, such as cross-sell or upsell ratios, for each segment.
In short, budget planning shouldn't be business as usual or based on arbitrary objectives (i.e. grow revenues next year by X percent). In order to maximize the likelihood for hitting budget targets, decision-makers should plan to incorporate customer segmentation and needs analysis into their planning efforts. Ideally, the entire process should apply a bottom-up approach, starting with such questions as "What products should we sell to X segment" instead of "How much should we plan to sell overall?"
About the Author: Orkun Oguz is a Partner of Peppers & Rogers Group. Contact him at ooguz@1to1.com.
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