Not all prospective customers will support your revenue and profitable growth or find your offerings worthwhile. Because of this, many organizations face the challenge of determining which factions represent the best market for their particular products and services and focusing their strategy map objectives on that group of customers. Although many organizations profess to serve a subset of core customers, in reality, they are following “same-for-all” approach, attempting to serve a broad landscape of customers. As a result, they end up doing little for anyone.
When developing objectives for the customer perspective of the strategy map, it is important to ask two questions:
- Who are your target customers?
- What is your value proposition in serving them?
To answer the first question, it is necessary to conduct a customer profitability analysis of existing and potential customers. Some customers might appear profitable on face value, whereas in reality they are resource suckers and are not aligned with your strategy. Thus you need to come up with a strategy that enables you identify particular customer segments that have greater growth and profitability potential.
The second question helps you express how you will differentiate yourself and, subsequently, what markets you will serve. In other words, your organization’s value proposition helps you define your customer strategy by describing the distinctive blend of product, price, service, relationship and image that your organization offers its target customers. The value proposition should communicate what the organization expects to do for its customers better or differently than its rivals.
The value proposition you select will greatly influence the objectives you choose since each will entail a different emphasis. It is also important to note that the objectives and measures for a specific value proposition define the organization’s strategy. By developing objectives and measures that are explicit to its value proposition, the organization will be able to convert its strategy into tangible measures that are easily understood by all employees and capable of being improved.
Depending on your organization’s mission, vision and strategy, below are four customer value propositions you can choose to follow:
- Operational excellence: Following this value proposition means your focus is on lowest total cost, convenience and often ‘”no extras”. Your objectives for operational excellence should underscore attractive prices, excellent and consistent quality, short lead times, ease of purchase and good selection. Possible objectives under this value proposition include:
- Attractive prices – Ensure lowest prices, Offer lower prices than competitors and Offer best value to the consumer.
- Excellent and consistent quality – Reduce manufacturing defect rates and Eliminate service errors.
- Convenience – Reduce customer complaints relating to service or delivery.
- Good selection – Maximise inventory turns, Ensure product availability and Minimize stockouts.
- Product innovation and leadership: For you to be able to deliver on this value proposition, your products must offer superior functionalities that leading-edge customers value and are prepared to pay more for them. Being a product leader means you should be prepared to promote your organization’s brand image and build strong brand awareness to ensure the market recognizes your innovative new products. The objectives you may include in your customer perspective are:
- Monitor help line calls per product. This will help you determine the level of interest in your latest products or services.
- Increase number of customer needs satisfied. This enables you ensure expectations are being met.
- Customer intimacy: The organization must completely understand its customers and be able to provide them with customized products and services bespoke to their needs. Thus you must strive to offer a complete solution that ensures the customer receives the greatest benefit from the products offered. Should you follow the customer-intimate approach, below are some of the customer-intimate attributes and objectives you might use:
- Customer knowledge– You need to possess a deep and detailed knowledge of your customers. Using an objective such as “Increase training hours on products and services offered” enables you to determine staff knowledge and see if more training is required.
- Solutions offered – It is important to note that customers turn to you because you are offering them an unmatched total solution. You may therefore include as an objective within the customer perspective”Increase total number of solutions offered per client”.
- Customer data – In order to deliver complete customer total solutions, organizations require abundant and insightful data on their customers. “Increase % of employees with access to customer information” may be stated as an objective to ensure this key differentiator of success will be monitored.
- Customer relationships – As a customer-intimate organization, your goal should be to build long-lasting relationships with your customers. “Provide staff at client locations” could be an objective illustrating the deep relationships your organization maintains with its clients.
- Lock-in: This arises when companies create high switching costs for their customers by making their products the standard of the industry. “Create barriers to entry and high switching costs” may be stated as an objective to ensure the organization remains as one of the dominant suppliers.
Watch out for my next post on developing objectives for the strategy map internal process perspective.