Improvement that hits the Bottom Line

Increasing Revenue in a Customer Driven Economy

In the customer driven economy the rules are much different than they were in the past. We really are living in a global economy; just look at where the goods (products and services) you consume are coming from and you’ll quickly find them sketching out a world map for you.

That means reduced margins and pervasive competition for your customers.

But you need your customers... and you want more.

From the Porter’s value chain days (that was originally applied to manufacturing during its boom), much has changed. Everything we were doing to be successful under Porter’s guidance is still needed... but it’s just not enough.

Along with price, selection, quality and availability we now have to deal with a highly fluid customer base. The prevailing pattern now is for people to periodically switch to our competitors or adopt a generalized behavior of non-loyalty purchasing whereas ten years ago loyalty was where it was at. Certainly even in the best of circumstances, loyalty now is a much slimmer and unforgiving type of loyalty than what we had before.

That mean’s along with the other things we are doing we have to do something about:

• keeping our existing customer
• expanding our relationship with our customers
• attracting new customers to the fold

This is the new part of the 21st century value chain as captured in the CEM model here:

In the 21st century, we must manage our customers’ expectations. We must address elevating the expectation we “deliver” to our customers. We must provide uniformly satisfying customer interactions across our entire organization.

That is where the challenge and opportunity exists for controlling and growing our revenue.

Increasing our Market Share

If we are to attract new customers at a reasonable acquisition cost then we must have a compelling customer value proposition. The relationship of our customer value proposition to that of our competitors determines the amount of new customers we can potentially attract without resorting to high-cost marketing acquisition practices.

The Customer Pool/ Competitor Graph describes this market dynamic.

The more leading our value proposition is the more customers we attract while at the same time the fewer competitors we have vying for these same customers.

When seeking to increase revenues through new customer growth we must drive our customer value proposition as far out in the leading category as possible.

How do we put this characteristic of the 21st century economy to work for us?

There are several things we can do to increase our customer value proposition that ranges from moderate change to more extreme change. What we do depends on the size of our Revenue goal.

In many cases, the first step is to make the transition from inside-out thinking to outside-in thinking (the true perspective of the customer). Within the CEM Method the way we go about doing this is through the crafting of Successful Customer Outcomes using the SCO Mind Map technique.

Once we have the outside-in perspective with actionable statements for what we know the customer wants from us, and at least a selection of these we commit to delivering, process must be explicitly aligned to delivering just that to our customer. In the majority of situations, when we get the outside-in perspective into place the customer value proposition will immediately rise as we eliminate any non value-added or unaligned portions of the process behind the product.

But that often won’t take us out into the leading or leadership market position. For that we must innovate on the customer value proposition from the outside-in perspective of the customer. How hard is it to innovate on the customer value proposition? It’s easy and harder than you probably think.

Innovating for market position or leadership can best be achieved by challenging the Moments of Truth in a process. Not only do we need to challenge them, but we need to challenge them aggressively.

For innovation to occur we must create challenges that are not at all easy to deal with. The challenge question should be simple but the challenge itself must push us to approach the challenge from many different angles.

Identifying and challenging the Moments of Truth in the processes behind product is the key to unlocking the “landscape” of potential forms the process could take in driving market position and market leadership. Within the IPAPI CEM Method™ we use the innovation technique (Innovate) for just this purpose.

Who has succeeded in driving market position in this manner?

Virgin Mobile USA acquired 5 million customers in five years through their no-hassle, no-contract Pay As You Go cellular service.

Zara has become the world’s largest and most successful fashion retailer by standing the industry on its ear with new fashions from idea to store in 2 weeks.

Apple is putting a big crush on PC manufacturers, cellular phone manufacturers, music players and music resellers with elimination of people to product MOTs in their Mac books, iPhones, iTunes and iPods.

Discount Tire is an older story, but by selling only good quality tires, no up selling and free tire repair for life they dominate the retail automotive tire industry.

21st century business is all about the customer and to increase market share as part of increasing revenue we must understand, innovate on and then execute customer value propositions explicitly aligned with the outside-in perspective of our customers.

Customer Retention and Relationship Expansion

But we can’t just rely on our customer value proposition. In the customer-driven economy of the 21st century we must also deliver “success without exception” to our customers.

This is the customer experience and it determines three things:

1. If a new ucstomer becomes a "profitable" customer
2. The breadth and duration of the customer relationship
3. Any viral new customer growth from positive "word of mouth"

These effects are captured in the Customer Value Chain Effects graph. Here we can see that new customers start at a loss (financially) to the business.

The transition from loss to profit occurs when enough business has been transacted between the customer and the business – the Loss to Profit Transition.

Once past this transition the customer relationship becomes a profitable relationship for the business. From this point forward the breadth and duration of that relationship directly impacts both our Revenue and our Profitability.

What determines the breadth and duration of the relationship with the customer? More than everything else it is the experiences they have with us. When we do our job (what our customers want and expect from us) in the simplest and most reliable manner our customers stay our customers.

How do we create that successful and reliable customer experience?

We start with a clear understanding of what the customer wants, the Successful Customer Outcome.

From there we start challenging our existing processes. Is there anything in our existing processes that is not contributing to the SCO? Why is it there and can we eliminate it?

In the IPAPI CEM Method™ this is what we do when we “Align” our processes. We are challenging the existing nature of our processes to make sure everything in them serves the SCO of our customer. What is not aligned to delivering the SCO should be challenged and eliminated wherever possible.

This is the “secret sauce” of customer success. When our processes are aligned and optimized to the outside-in perspective of our customers the resulting process shape will consistently and reliable deliver what the customer wants – and that is what we must do if we are to grow and maintain the relationships we have with our customers!