From a strategy perspective the implications for each customer segment are clear:Sovereign Accounts: Formulate effective retention and recovery strategiesBargain Hunter Accounts: Formulate effective and efficient cost-to-serve

strategiesScavenger Accounts: Formulate effective exit strategiesNew Accounts: Develop effective targeted selling strategies

1.2 Isolate satisfaction elements driving valuable customer purchase decisionsIt is important to note that the product and service attributes that drive perceived customer value/satisfaction will often differ between the lower and higher-value customers. Management’s challenge is to identify the critical value drivers for the most valuable customersin the marketplace.

1.3 Deliver satisfaction levels beyond customer expectationsHaving determined the most important product and service attributes for high value-customers, the next challenge is to determine the key points in product design/functionality or service levels where customer purchase decisions are affected. Management savvy comes in identifying and conforming to positions marginally above expectations for the value driving attributes while saving resources by performing to the customer’s minimum expectations on the lower valued attributes.

2. Build a Customer-centric OrganizationArmed with a clear customer value driven strategy designed to attract and retain high-value customers, management teams are faced with having to build an organization that can effectively and efficiently deliver to meet heightened customer value expectations.

Best-in-class customer-centric organizations adhere to four principles to ensure their ability to deliver:

2.1 Drive customer focus into business and strategic objectivesLeading companies continually reinforce the concept of “customer first” in all their internal and external communications. Most importantly the actions of senior management on a day-to-day basis reinforce this philosophy. It is critical that the management team not only talk-the-talk but also walk-the-walk every day. Further, they must effectively motivate and challenge employees to follow their lead.

Drive Shareholder Value ThroughCustomer Focused StrategiesBusiness experts have always stressed that any successful company must choose a dimension of differentiation whether it be product quality, service quality, cost leadership, cycle time, or innovation. Faced with significantly increased pressures created by the reduced strength of the U.S. dollar, the predatory behavior of Wal-Mart, and/or the sizeable discrepancy in operating costs offered by those sourcing and supplying through China, many North American companies are turning an eye towards developing strategies focused on providing impeccable customer service.

Today, the companies that are most successful in driving shareholder value are notably the most passionate about having a strategic approach to customer value creation. Thesecompanies make the required process and technology investments to deliver increased value to their “preferred customers” and in return they accrue heightened levels of customer retention, revenue growth, and increased profitability.

Leading customer satisfaction economic studies show that companies that engage in the following activities are best able to realize significant economic gains by turning customer satisfaction into increased shareholder value:

1. Focus to get value out of customer satisfaction- Identify the most valuable customer segments.- Isolate satisfaction elements that drive their purchase decisions.- Deliver satisfaction levels beyond customer expectations.

2. Build a customer-centric organization- Drive customer focus into business and strategic objectives.- Redesign customer interactions and supporting processes to serve high-value customers.- Train, motivate, and organize human resources to support the customer-centric strategy.- Apply rigorous “end-to-end” performance measurement.

How do leading “Best Practice” Companies Increase Customer Satisfaction and Grow Profitability?“Successful companies define a clear strategy to drive greater satisfaction into higher sales from their most valuable customers. Their executives build a customer-centric organization that can execute the satisfaction strategy. They then use their technology investments to become more effective inidentifying high-value customers and satisfaction drivers, created tailored solutions to improve satisfaction, and continuously measure the results to ensure they capture value.” - Rob Yanker, Director McKinsey Marketing

Solutions

1. Focus to Get Value Out of Customer SatisfactionMost companies achieving moderate to low levels of customer satisfaction operate with a one-solution-fits-all approach to delivering value. This strategy inherently assumes that all customers desire the same products; the same services and service levels; and that eachcustomer provides the same level of economic return to the shareholders. To capture the value provided by improving customer satisfaction, an organization should consider executing on three important principles:

1.1 Identify the most valuable customer segmentsTo understand which customer segments are the most valuable and which customers are in each segment, one needs to know: the cost of acquiring a customer, their purchasing profile, the cost-to-serve that customer, the conditions under which they will buy more or differentproducts, and the estimated life-cycle of that customer.

In John McKean’s most recent book titled Information Masters,, he discloses the empiricalfinding that the 80/20 Rule does not hold true in relation to the distribution of customer profitability. In fact, the distribution of profitability in most business-to-consumer industries is closer to a 90/10 ratio - with 10% of customers generating 100% of the profits.

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