Customer Value and Profitability related Tips and Actions  

Customer Value and Profitability

Its finally the shareholder who rules. Customer value and profitability is fine-tuned to maximize the value out of a customer.

Customer Value and Profitability related Tips and Actions

As you design your actions to enhance customer value and profitability, you need to balance the extent to which you will stratify and differentiate your products and services. Too much differentiation can be counter-productive. One also needs to have end-to-end strategy spanning your products, delivery, sales, post-sales etc, instead of taking independent actions.

Here is the list of typical actions you may take to enhance and manage customer value and profitability. One can take million different actions for million different value proposition customers.

Tips on actions related to customer value and profitability:

Have an open stratification of your products & offerings:

Our opinion is that companies gain, by letting a customer choose the level of product sophistication and services, instead of having unwritten rules on how to treat a high value vs. low value customer. One needs to be very up-front, and customers appreciate it.

Avoid too many stratifications and business rules on structural aspects:

Too much differentiation on products, order fulfillment and Services, can drain the resource and can become counter productive. The differentiations which have an impact on your IT systems, supply chain, product and financial models, should be managed with care. You can be more liberal on differentiations which are more related to positioning instead of actual differences. For example, I would like to position the same credit card with higher credit limit for HNI customers OR/AND organize special events for them, instead of launching a new card for them.

Try for an ‘end-to-end’ Customer Value strategy:

You should look at your actions from holistic point of view, instead of taking them independently. For example, if I have low value customer segment, I would like to have end-to-end strategy for them in terms of low cost product, low cost delivery mechanism and low-cost service offerings. Having low cost product riding on high cost service channel will not be sustainable.

Differentiate between getting ‘more customers’ vs. getting ‘more from the customers’

The above two are different subjects. When you say getting more from the customers, it includes increasing revenue from the customer as well as reducing cost associated with the customer. Therefore as you devise your actions, you can categorically tag them as for 'existing customers' OR 'new customers' OR both.

The list of functional domains and example of actions for customer value

Product Management

  • Product Specifications-
    • You can create stripped version of your premium products and promote them to your low value customers.
    • You can enhance the specifications of your premium products to make them more suitable for your high value customers (and therefore may be less suitable for your low value customers). For example you can introduce free business class lounge facilities on your gold credit card.
    • You can change your product specifications to get more value from your low value, but high potential customers. Sometimes you product design does not provide enough value to your high potential customers.
    • You can reduce the features which cost you, but don’t add value to the customers.
    • You can increase the ‘minimum usage level’ for your product. It’s just like cover charges for an eating place. For example- You can increase ‘minimum balance’ requirement in your banking products.
  • Product pricing-
    • You may fine tune your product price to maintain a better balance on the profitability. By reducing the price OR by giving special discount, you may increase overall revenue and value with a customer.
    • Provide add-on services additional prices, with higher margins.
  • Product packaging and positioning:
    • You can position your existing products to maximize your customer value. It’s to encourage more spending by a customer, instead of getting more customers. For example, one can give higher credit limit to high potential customers.
  • Rewarding customer loyalty: The whole concept of loyalty bonus, points and rewards is fairly popular.

Sales Management

  • Leads Management: Prioritize leads from high potential and high value existing customers...
  • Existing customer sales focus: Some organizations have special teams which monitor the sales focus on the existing customers, in terms of our relationship effort.
  • Up-sell and cross-sell: With the help of a single customer view, Up-sell and cross sell products. There are two ways in which this can be done:

Order Fulfillment

  • Order delivery: This is more to do with the cost of managing order delivery. You may have a different order delivery channel for low ticket orders from existing customers, to reduce your order level cost.

Post Sales

  • Customer Service: You can use your customer service channel (the main touch point with the existing customers post sales). Customer Service Channel, can be trained to cross-sell and up-sell and also generate the leads.
  • Product support and maintenance: Provide add-on services to your support packages (like on-site, 24 X 7 support- Platinum package), to get more post sales service revenue.