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This article is an extract from Performance, Volume 7, Issue 2, May 2015. The full journal is available at<br />

ey.com/performance<br />

<strong>Cus<strong>to</strong>mer</strong> <strong>lifetime</strong><br />

<strong>profitability</strong>: <strong>how</strong> <strong>to</strong> <strong>grow</strong><br />

<strong>and</strong> <strong>manage</strong> <strong>your</strong> <strong>best</strong><br />

cus<strong>to</strong>mers<br />

Investing in cus<strong>to</strong>mer<br />

relationships is the key <strong>to</strong> longterm,<br />

sustained <strong>profitability</strong>. A<br />

cus<strong>to</strong>mer strategy focused on<br />

optimizing the cus<strong>to</strong>mer life<br />

cycle <strong>and</strong> cus<strong>to</strong>mer <strong>lifetime</strong><br />

<strong>profitability</strong> (CLP) can deliver<br />

this.<br />

10<br />

Volume 7 │ Issue 2


This article is an extract from Performance, Volume 7, Issue 2, February 2015. The full journal is available at<br />

ey.com/performance<br />

Author<br />

Jenny Young<br />

Partner, Advisory, EY, Australia<br />

11


This article is an extract from Performance, Volume 7, Issue 2, May 2015. The full journal is available at<br />

ey.com/performance<br />

<strong>Cus<strong>to</strong>mer</strong> <strong>lifetime</strong> <strong>profitability</strong>: <strong>how</strong> <strong>to</strong> <strong>grow</strong> <strong>and</strong> <strong>manage</strong> <strong>your</strong> <strong>best</strong> cus<strong>to</strong>mers<br />

The core idea behind<br />

CLP is that companies<br />

can improve their<br />

<strong>profitability</strong> <strong>and</strong><br />

lower their costs by<br />

being more cus<strong>to</strong>mer<br />

focused.<br />

T<br />

he development of longterm<br />

profitable relationships<br />

should be a major focus<br />

for all businesses. Markets<br />

are increasingly becoming<br />

competitive, with consumers<br />

actively seeking br<strong>and</strong>s <strong>and</strong> providers they<br />

can rely on <strong>and</strong> keep purchasing from over<br />

many years.<br />

How those relationships are <strong>manage</strong>d<br />

<strong>and</strong> nurtured is the foundation for CLP,<br />

which offers a measure of the underlying<br />

profit for an organization’s cus<strong>to</strong>mer base,<br />

<strong>and</strong> considers the future revenues <strong>and</strong> costs<br />

for the <strong>lifetime</strong> of the cus<strong>to</strong>mer.<br />

Many organizations do not have an<br />

accurate underst<strong>and</strong>ing of which cus<strong>to</strong>mers<br />

are profitable <strong>and</strong> which are unprofitable.<br />

Companies that do are able <strong>to</strong> deploy<br />

strategies <strong>to</strong> acquire <strong>and</strong> retain more<br />

profitable cus<strong>to</strong>mers, <strong>and</strong> increase the<br />

<strong>profitability</strong> of cus<strong>to</strong>mers that are low or<br />

loss-making. These organizations achieve<br />

profit <strong>grow</strong>th more efficiently, retain more<br />

cus<strong>to</strong>mers <strong>and</strong> spend more effectively.<br />

By taking a cus<strong>to</strong>mer-centric view<br />

<strong>to</strong> managing the revenue <strong>and</strong> cost<br />

base, organizations can make decisions<br />

founded on cus<strong>to</strong>mer need <strong>and</strong> deliver<br />

“good profits” derived from improving<br />

cus<strong>to</strong>mer experience <strong>and</strong> advocacy. This<br />

means investing in what matters most <strong>to</strong><br />

cus<strong>to</strong>mers <strong>and</strong>, at the same time, removing<br />

or improving processes that frustrate<br />

cus<strong>to</strong>mers <strong>and</strong> increase an organization’s<br />

costs. Enterprises that adopt this approach<br />

will be rewarded with better cus<strong>to</strong>mer<br />

outcomes as well as improved <strong>profitability</strong>.<br />

What does cus<strong>to</strong>mer value<br />

really mean?<br />

The concept of a cus<strong>to</strong>mer <strong>lifetime</strong><br />

value has been discussed for some time.<br />

What EY has found is that many of the<br />

businesses we work with don’t yet have a<br />

detailed underst<strong>and</strong>ing of the cost-<strong>to</strong>-serve<br />

component of their businesses. The core<br />

idea behind CLP is that companies can<br />

improve their <strong>profitability</strong> <strong>and</strong> lower their<br />

costs by being more cus<strong>to</strong>mer focused.<br />

Those of our clients that have a close<br />

eye on the future work with us <strong>to</strong> extend<br />

CLP <strong>and</strong> focus on acquiring <strong>and</strong> — more<br />

importantly — retaining high-value<br />

cus<strong>to</strong>mers. In the CLP model, gaining large<br />

numbers of cus<strong>to</strong>mers isn’t the focus, but<br />

gaining high-value, long-term cus<strong>to</strong>mer<br />

relationships is. What businesses then see<br />

is a strong positive financial outcome from<br />

CLP, <strong>and</strong> also a strong cus<strong>to</strong>mer services<br />

outcome, which feeds back in<strong>to</strong> CLP.<br />

The foundation of CLP is data. Until fairly<br />

recently, a clear <strong>and</strong> comprehensive insight<br />

in<strong>to</strong> cus<strong>to</strong>mer behavior was quite difficult<br />

<strong>to</strong> develop. Today, thanks <strong>to</strong> research, big<br />

data <strong>and</strong> social media, detailed cus<strong>to</strong>mer<br />

profiling has become possible. CLP, by<br />

extension, is a product of this new insight<br />

<strong>and</strong> the way massive datasets can be<br />

interrogated <strong>to</strong> reveal cus<strong>to</strong>mer behavior<br />

<strong>and</strong>, <strong>to</strong> a large degree, predict future<br />

cus<strong>to</strong>mer behavior.<br />

Yet the surge in big data brings its own<br />

challenges. In particular, the information<br />

crisis that is now facing a significant<br />

proportion of organizations. There are<br />

opportunities for the taking but only for<br />

those businesses that can successfully <strong>and</strong><br />

consistently identify what information is<br />

the most relevant <strong>and</strong> generates the most<br />

value. For those that are unable <strong>to</strong> make big<br />

data work for them, the future will bring a<br />

lack of control.<br />

The vast quantity of data now pouring<br />

in<strong>to</strong> the businesses we work with has<br />

delivered an unprecedented level of<br />

granular insight in<strong>to</strong> cus<strong>to</strong>mer behavior.<br />

This insight is also in real time, which means<br />

companies need <strong>to</strong> be more agile if they are<br />

<strong>to</strong> leverage effectively the information they<br />

have.<br />

More organizations are now focusing<br />

on one-<strong>to</strong>-one cus<strong>to</strong>mer marketing rather<br />

than a model based around mass-market<br />

broadcasts. These are delivered through<br />

analytics, incorporating insights that focus<br />

on personalized solutions <strong>and</strong> the “next<strong>best</strong><br />

action” for the cus<strong>to</strong>mer using triggerbased<br />

scenarios. Pre-empting cus<strong>to</strong>mer<br />

needs improves their experience <strong>and</strong> is a<br />

powerful <strong>to</strong>ol for engagement.<br />

What we are finding is that many of<br />

our clients are beginning <strong>to</strong> realize that<br />

12 Volume 7 │ Issue 2


This article is an extract from Performance, Volume 7, Issue 2, February 2015. The full journal is available at<br />

ey.com/performance<br />

Figure 1. Managing CLP <strong>to</strong> improve performance<br />

Measure,<br />

review <strong>and</strong><br />

continuously<br />

improve<br />

6<br />

Segment the<br />

cus<strong>to</strong>mer base<br />

1<br />

5<br />

Determine the<br />

<strong>profitability</strong> of<br />

each segment<br />

Using CLP<br />

<strong>to</strong> improve<br />

performance<br />

CLP is a measure of the underlying<br />

profit of an organization’s cus<strong>to</strong>mer<br />

base, taking in<strong>to</strong> account the future<br />

revenues <strong>and</strong> costs for the <strong>lifetime</strong><br />

of each cus<strong>to</strong>mer. By implementing<br />

a CLP model, an organization can<br />

focus its spend <strong>and</strong> effort <strong>to</strong>ward<br />

<strong>grow</strong>ing <strong>and</strong> managing the most<br />

profitable cus<strong>to</strong>mer segments <strong>and</strong><br />

cus<strong>to</strong>mers.<br />

The benefits of adopting a CLP<br />

approach include:<br />

► Maximizing profit return on the<br />

cus<strong>to</strong>mer base<br />

► Improving market performance<br />

► Improving productivity <strong>and</strong><br />

profit performance<br />

► Increasing cus<strong>to</strong>mer<br />

satisfaction<br />

► Optimizing sales <strong>and</strong> marketing<br />

► Improving infrastructure<br />

decisions<br />

Implementation<br />

US$<br />

−<br />

4<br />

Develop<br />

strategies for<br />

maximizing<br />

<strong>profitability</strong> of<br />

the cus<strong>to</strong>mer base<br />

CLP distribution<br />

Improve<br />

the profit<br />

profile<br />

Bot<strong>to</strong>m<br />

30% of cus<strong>to</strong>mers<br />

deliver negative profit<br />

3<br />

2<br />

Analyze the<br />

cus<strong>to</strong>mer base<br />

on <strong>profitability</strong><br />

Top<br />

23% of cus<strong>to</strong>mers<br />

drive 90% of the profit<br />

+<br />

Costs<br />

13


This article is an extract from Performance, Volume 7, Issue 2, May 2015. The full journal is available at<br />

ey.com/performance<br />

<strong>Cus<strong>to</strong>mer</strong> <strong>lifetime</strong> <strong>profitability</strong>: <strong>how</strong> <strong>to</strong> <strong>grow</strong> <strong>and</strong> <strong>manage</strong> <strong>your</strong> <strong>best</strong> cus<strong>to</strong>mers<br />

Many organizations<br />

still don’t appreciate<br />

<strong>how</strong> significant social<br />

networks have become<br />

<strong>to</strong> their cus<strong>to</strong>mers <strong>and</strong><br />

their businesses.<br />

Figure 2. <strong>Cus<strong>to</strong>mer</strong> <strong>profitability</strong> maturity model<br />

Stage 5<br />

Stage 1<br />

Extract data<br />

<strong>and</strong> create<br />

cus<strong>to</strong>mer<br />

datamart<br />

Identify data sources<br />

<strong>and</strong> relevant feeds,<br />

<strong>and</strong> build datamart for<br />

ongoing data collection<br />

<strong>and</strong> cleansing<br />

1. Revenue<br />

aggregated at<br />

business unit<br />

level<br />

Stage 2<br />

Underst<strong>and</strong><br />

cus<strong>to</strong>mer<br />

revenue<br />

Define the cus<strong>to</strong>mer<br />

across all product<br />

categories <strong>and</strong><br />

summarize revenue<br />

2. Detailed<br />

revenue at<br />

cus<strong>to</strong>mer level<br />

Stage 3<br />

Attribute<br />

costs<br />

Attribute cost elements<br />

<strong>to</strong> cus<strong>to</strong>mers<br />

Enable proactive<br />

<strong>manage</strong>ment <strong>and</strong><br />

identification of cost<br />

elements via the<br />

process <strong>and</strong> controls<br />

that are now in place<br />

3. Costs<br />

aggregated at<br />

business unit<br />

level<br />

Stage 4<br />

Define<br />

cus<strong>to</strong>mer<br />

<strong>profitability</strong><br />

Calculate cus<strong>to</strong>mer<br />

<strong>profitability</strong> <strong>and</strong> analyze<br />

data inputs<br />

Coordinate activity <strong>to</strong><br />

report on cus<strong>to</strong>mer<br />

revenue <strong>and</strong> cost<br />

drivers<br />

4. Costs <strong>and</strong><br />

revenue<br />

attributed <strong>to</strong><br />

cus<strong>to</strong>mer level<br />

Optimizing<br />

cus<strong>to</strong>mer<br />

<strong>profitability</strong><br />

Proactively moni<strong>to</strong>r <strong>and</strong><br />

<strong>manage</strong> performance<br />

Use cost <strong>and</strong> revenue<br />

drivers <strong>to</strong> improve<br />

cus<strong>to</strong>mer <strong>profitability</strong><br />

Leverage cus<strong>to</strong>mer data<br />

as a strategic asset for<br />

up-sell <strong>and</strong> cross-sell<br />

opportunities<br />

Leverage cus<strong>to</strong>mer data<br />

as a strategic asset<br />

for better acquisition<br />

opportunities<br />

5. Profitability<br />

<strong>manage</strong>ment<br />

1. Preparing the Enterprise for a New Social <strong>Cus<strong>to</strong>mer</strong> Service<br />

Model: Adapting Operations <strong>and</strong> Technology, Conversocial,<br />

2015, http://www.conversocial.com/resources/<br />

white-papers, accessed April 2015.<br />

14 Volume 7 │ Issue 2


This article is an extract from Performance, Volume 7, Issue 2, February 2015. The full journal is available at<br />

ey.com/performance<br />

investing in CLP offers them a chance not<br />

only <strong>to</strong> underst<strong>and</strong> their cus<strong>to</strong>mers better,<br />

but also predict what they will need in the<br />

future. That future-facing capability is a<br />

powerful paradigm that CLP is delivering <strong>to</strong><br />

many of the businesses with which we work.<br />

What is clear, <strong>how</strong>ever, is that companies<br />

need <strong>to</strong> evolve their existing systems <strong>to</strong><br />

make the most of what CLP has <strong>to</strong> offer.<br />

Typically, this means improvements in their<br />

cus<strong>to</strong>mer relationship <strong>manage</strong>ment (CRM)<br />

systems, the ability <strong>to</strong> collect <strong>and</strong> analyze<br />

cus<strong>to</strong>mer data, <strong>and</strong>, importantly, a strong<br />

focus on the goals that a CLP approach<br />

will help them achieve. The disciplines of<br />

knowing who <strong>your</strong> cus<strong>to</strong>mers are at a very<br />

detailed level, <strong>and</strong> underst<strong>and</strong>ing which of<br />

those cus<strong>to</strong>mer segments <strong>your</strong> proposition<br />

is aimed at, must be approached<br />

collaboratively across the organization.<br />

It’s also important <strong>to</strong> recognize that<br />

the ultimate goal of CLP may not, in some<br />

scenarios, mean selling a product or<br />

service, but providing a positive cus<strong>to</strong>mer<br />

experience. It is an important component of<br />

CLP <strong>to</strong> realize that great cus<strong>to</strong>mer service<br />

also has a commercial value, even if it<br />

doesn’t deliver an immediate commercial<br />

benefit.<br />

Embracing a culture of social<br />

commerce<br />

According <strong>to</strong> the latest statistics from<br />

Conversocial, 1 Facebook now boasts<br />

1.35 billion active users, YouTube has<br />

1 billion, Google+ has 540 million, Twitter<br />

has 284 million, Instagram has 200 million<br />

<strong>and</strong> LinkedIn has 187 million.<br />

Conversocial concluded: “Companies<br />

must find new strategies <strong>to</strong> turn this chaotic<br />

high-octane multi-lane superhighway in<strong>to</strong><br />

a well <strong>manage</strong>d service channel. Culture<br />

is what guides the behavior of everyone<br />

within the organization, perhaps even more<br />

so than governance <strong>and</strong> policy. Now that<br />

social media has conferred control of the<br />

terms of engagement upon cus<strong>to</strong>mers, it’s<br />

incumbent on companies <strong>to</strong> adapt their<br />

cultures — <strong>and</strong>, perhaps, create entirely new<br />

cultures — <strong>to</strong> these new realities.”<br />

Social media has become an incredibly<br />

important channel. Many organizations<br />

still don’t appreciate <strong>how</strong> significant social<br />

networks have become <strong>to</strong> their cus<strong>to</strong>mers<br />

<strong>and</strong> their businesses. As more cus<strong>to</strong>mers<br />

move <strong>to</strong> social media for cus<strong>to</strong>mer service<br />

queries, these interactions must be<br />

comprehensively supported, as this aspect<br />

of cus<strong>to</strong>mer service has a fundamental<br />

impact on the success of CLP.<br />

The more successful businesses we<br />

work with have a shared focus on their<br />

cus<strong>to</strong>mers. By this, we mean that they<br />

discourage siloed interactions; instead,<br />

they take a comprehensive <strong>and</strong> holistic<br />

view. There is a strong drive <strong>to</strong> ensure that<br />

their cus<strong>to</strong>mer strategy is comprehensive<br />

<strong>and</strong> business-wide. In addition, the support<br />

they deliver <strong>to</strong> cus<strong>to</strong>mers is deployed over<br />

multiple channels, driven by a unified<br />

cus<strong>to</strong>mer strategy <strong>and</strong> approach.<br />

For many organizations we work with,<br />

gaining a comprehensive view of their<br />

cus<strong>to</strong>mers is challenging. For CLP <strong>to</strong> deliver<br />

on its promise, most businesses will have<br />

<strong>to</strong> make an investment <strong>to</strong> gain the <strong>to</strong>ols<br />

they need. However, the changes that are<br />

The message is clear:<br />

for businesses <strong>to</strong><br />

obtain the greatest<br />

commercial advantage<br />

from CLP, they have<br />

<strong>to</strong> transform not only<br />

their <strong>manage</strong>ment<br />

systems, but also their<br />

attitude <strong>to</strong>ward their<br />

cus<strong>to</strong>mers.<br />

often needed are organizational. One of the<br />

key components here is <strong>to</strong> have the ability<br />

<strong>to</strong> accurately attribute cost at a cus<strong>to</strong>mer<br />

level. Ideally, that requires activity-based<br />

costing.<br />

How businesses approach the <strong>to</strong>ols they<br />

use <strong>to</strong> interrogate the cus<strong>to</strong>mer data they<br />

have will vary. Many begin with specific<br />

reports <strong>and</strong> exp<strong>and</strong> their actions based on<br />

that. A dashboard approach <strong>to</strong> viewing <strong>and</strong><br />

interrogating data is also useful. But the key<br />

aspect <strong>to</strong> focus on here is regular reporting,<br />

as this will influence the planning <strong>and</strong><br />

execution of business strategy that has CLP<br />

as an important component.<br />

CLP is an evolving journey<br />

The multichannel approach that many<br />

businesses are now taking is, in part,<br />

15


This article is an extract from Performance, Volume 7, Issue 2, May 2015. The full journal is available at<br />

ey.com/performance<br />

<strong>Cus<strong>to</strong>mer</strong> <strong>lifetime</strong> <strong>profitability</strong>: <strong>how</strong> <strong>to</strong> <strong>grow</strong> <strong>and</strong> <strong>manage</strong> <strong>your</strong> <strong>best</strong> cus<strong>to</strong>mers<br />

Figure 3. <strong>Cus<strong>to</strong>mer</strong> <strong>lifetime</strong> value: the present value of the future cash flows<br />

attributed <strong>to</strong> the cus<strong>to</strong>mer relationship<br />

1Costs Revenue<br />

Retention<br />

2 3 rate*<br />

► Acquisition costs:<br />

those incurred at the point of<br />

acquisition; <strong>and</strong> acquisition<br />

terms <strong>and</strong> incentives <strong>to</strong><br />

encourage cus<strong>to</strong>mers <strong>to</strong><br />

behave in ways that drive<br />

profitable <strong>grow</strong>th<br />

► Cost <strong>to</strong> serve:<br />

cus<strong>to</strong>mer level across the<br />

supply chain, e.g., from plant<br />

warehouse <strong>to</strong> cus<strong>to</strong>mer s<strong>to</strong>re,<br />

or the call center or branch<br />

cost <strong>to</strong> service the cus<strong>to</strong>mer<br />

► Basic revenue:<br />

recurring cus<strong>to</strong>mer billings<br />

► Up-selling <strong>and</strong> crossselling:<br />

selling of the same product<br />

<strong>and</strong> additional products as<br />

a consequence of increased<br />

purchase frequency <strong>and</strong><br />

intensity in relationships<br />

► Referred revenue:<br />

new cus<strong>to</strong>mers won through<br />

the referral behavior of existing<br />

cus<strong>to</strong>mers<br />

► Retention rate (can be<br />

estimated with empirically<br />

validated determinants):<br />

loyalty, such as cus<strong>to</strong>mer<br />

satisfaction, switching barriers,<br />

value-seeking behavior <strong>and</strong><br />

attractiveness of alternatives<br />

* The probability that a cus<strong>to</strong>mer<br />

remains loyal <strong>and</strong> keeps<br />

yielding expected revenue <strong>and</strong><br />

costs within a period of time<br />

a product of <strong>how</strong> their cus<strong>to</strong>mers are<br />

increasingly adopting internet <strong>and</strong> mobile<br />

technologies. The omnichannel approach<br />

is a result of businesses having <strong>to</strong> deliver<br />

multiple <strong>to</strong>uch points for their cus<strong>to</strong>mers.<br />

Mindful of this trend, Whole Foods<br />

recently launched a cus<strong>to</strong>mer loyalty mobile<br />

app <strong>and</strong> a groceries delivery service. 2 Both<br />

launches are part of the US supermarket<br />

chain’s strategy <strong>to</strong> keep its loyal cus<strong>to</strong>mers<br />

connected across multiple selling channels.<br />

“<strong>Cus<strong>to</strong>mer</strong>s now expect <strong>to</strong> connect with<br />

the br<strong>and</strong> whenever, wherever <strong>and</strong> <strong>how</strong>ever<br />

they choose,” says Whole Foods Co-CEO<br />

Walter Robb. “And it’s part of our broader<br />

digital road map; we are rapidly building out<br />

an extended cus<strong>to</strong>mer experience beyond<br />

the four walls of our s<strong>to</strong>res.”<br />

Such a coordinated approach is<br />

essential so that a business “continually<br />

exceeds cus<strong>to</strong>mer expectations with all<br />

interactions, winning loyal advocates with<br />

its cus<strong>to</strong>mer-centric culture,” emphasizes<br />

Mike Richardson, Managing Direc<strong>to</strong>r EMEA<br />

at cus<strong>to</strong>mer relationship <strong>manage</strong>ment<br />

software provider Maximizer CRM. 3 The<br />

omnichannel environment, he adds,<br />

presents businesses with an unprecedented<br />

opportunity <strong>to</strong> <strong>grow</strong> revenues.<br />

“In the digitally driven marketplace of<br />

<strong>to</strong>day, br<strong>and</strong> evangelists can spread the<br />

word <strong>to</strong> hundreds, if not thous<strong>and</strong>s — <strong>and</strong><br />

in certain magical instances, millions — of<br />

2. “The omni-retailer’s future,” PYMNTS, 2015, http://www.<br />

pymnts.com/in-depth/2015/the-omni-retailers-future/#.<br />

VR0j6k10zcs, accessed April 2015.<br />

3. M. Richardson, “Tracking <strong>and</strong> extending cus<strong>to</strong>mer <strong>lifetime</strong><br />

value can be a huge boon <strong>to</strong> <strong>profitability</strong> in the digital age,”<br />

Fourth Source, 2015, http://www.fourthsource.com/<br />

ecommerce/tracking-extending-cus<strong>to</strong>mer-<strong>lifetime</strong>-value-canhuge-boon-<strong>profitability</strong>-digital-age-18335,<br />

accessed<br />

April 2015.<br />

16 Volume 7 │ Issue 2


This article is an extract from Performance, Volume 7, Issue 2, February 2015. The full journal is available at<br />

ey.com/performance<br />

prospects,” says Richardson. “Up-selling<br />

<strong>and</strong> cross-selling opportunities are also far<br />

more likely when cus<strong>to</strong>mers are happy.”<br />

The message is clear: for businesses <strong>to</strong><br />

obtain the greatest commercial advantage<br />

from CLP, they have <strong>to</strong> transform not<br />

only their <strong>manage</strong>ment systems, but also<br />

their attitude <strong>to</strong>ward their cus<strong>to</strong>mers. Are<br />

businesses still in the transformational<br />

stage of their development? Or are some<br />

already reaping the rewards that CLP<br />

offers?<br />

We find that the businesses that are<br />

taking cus<strong>to</strong>mer strategy <strong>and</strong> cus<strong>to</strong>mer<br />

targeting seriously are the ones that are<br />

rapidly developing <strong>and</strong> implementing<br />

CLP. Because CLP requires a business<br />

<strong>to</strong> transform many of these functions,<br />

it can take several months or years <strong>to</strong><br />

move that business <strong>to</strong> the point where<br />

it can see tangible benefits from a CLP<br />

implementation. What is important is that<br />

CLP isn’t adopted by just one department —<br />

cus<strong>to</strong>mer service, for instance — as this<br />

will not deliver the required levels of<br />

cost reduction <strong>and</strong> profit increases. An<br />

organization must have a holistic approach<br />

<strong>to</strong> <strong>how</strong> it changes in order <strong>to</strong> adopt CLP.<br />

The area that tends <strong>to</strong> take the most<br />

time <strong>to</strong> implement is organizational change<br />

<strong>manage</strong>ment. Improving the service<br />

experience that cus<strong>to</strong>mers have means<br />

changing <strong>how</strong> these relationships are<br />

<strong>manage</strong>d. The business philosophy <strong>and</strong><br />

br<strong>and</strong> values of the company have <strong>to</strong> be<br />

clearly communicated — something that<br />

is often overlooked. CLP dem<strong>and</strong>s that<br />

the cus<strong>to</strong>mer-facing aspects of a business<br />

must be clearly defined <strong>and</strong> focused on<br />

high levels of cus<strong>to</strong>mer service, as this is<br />

the foundation for long, lucrative cus<strong>to</strong>mer<br />

relationships.<br />

It is vital <strong>to</strong> ensure that CLP is developed<br />

with all cus<strong>to</strong>mer <strong>to</strong>uch points <strong>and</strong> business<br />

strategies implemented <strong>to</strong>gether. CLP will<br />

fail if there is a disconnect between its<br />

stated goals within a business <strong>and</strong> the way<br />

this is actually delivered <strong>to</strong> the cus<strong>to</strong>mer.<br />

Again, a holistic approach is critical <strong>to</strong> the<br />

success of CLP <strong>and</strong> the business strategy<br />

that underpins it.<br />

When businesses underst<strong>and</strong> their<br />

cus<strong>to</strong>mers at an attitudinal, functional <strong>and</strong><br />

geographic level, they can start <strong>to</strong> develop<br />

new products <strong>and</strong> services that will speak<br />

directly <strong>to</strong> these cus<strong>to</strong>mer groups. This<br />

is the essence of CLP <strong>and</strong> the tangible<br />

delivery of improved levels of profit with<br />

reduced costs. And, of course, businesses<br />

can begin <strong>to</strong> get ahead of the market with<br />

What is important<br />

is that CLP isn’t<br />

adopted by just<br />

one department —<br />

cus<strong>to</strong>mer service,<br />

for instance — as this<br />

will not deliver the<br />

required levels of cost<br />

reduction <strong>and</strong> profit<br />

increases.<br />

new products <strong>and</strong> services, which then<br />

deliver a massive commercial advantage in<br />

their sec<strong>to</strong>rs.<br />

CLP is a measure of <strong>how</strong> effective a<br />

business is at delivering cus<strong>to</strong>mer needs.<br />

All businesses want <strong>to</strong> be cus<strong>to</strong>mer-centric.<br />

CLP enables a business <strong>to</strong> measure <strong>how</strong> it is<br />

delivering its services, what this means for<br />

cost <strong>and</strong>, of course, the level of profit it is<br />

gaining from individual cus<strong>to</strong>mers. •<br />

17

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