2019 ended with the US economy still riding an unprecedented high despite being 10 years into an expansion period. While many economists predicted a recession was just beyond the horizon, companies continued to plan for growth into 2020 and beyond.
The pandemic brought everything to a screeching halt. Plans for growing and sustaining revenues and profits were replaced by safety and wellness initiatives, cost cutting, layoffs, furloughs, and working capital preservation plans. Businesses moved from playing offense to defense, pivoting almost overnight in response to an environmental change that took the world by storm. And its unpredictable nature has made it difficult to predict when and how businesses can play offense again.
Management consulting luminary Peter Drucker said, “The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.” Smart executives need to follow Drucker’s thinking: A massive shift in the economic conditions of your market provides an opportunity to change and respond to the “new reality” by earning new value streams that were previously unavailable.
Learn From Previous Slowdowns to Get Ahead
The Great Recession can teach us how to prioritize efforts today by looking at companies that balanced defense with offense to respond to their industry’s market forces. A 2010 Harvard Business Review article analyzed the strategies that companies executed during the previous recessions to understand which companies came out of it more successfully than others.
Their findings? Successful companies did not focus solely on cost cutting or boldly investing in new initiatives. Rather, they understood and executed on defensive initiatives around operational efficiency, but balanced those defensive tactics with a strategy of shifting to offense through new investments in technology, marketing, and R&D.
As markets reopen, most executives will be focused on safety and capital preservation techniques. However, they must rethink and relearn customer-centricity in order to adapt to the new normal.
Understanding that the economic conditions created by the pandemic create opportunities for your business might seem counter-intuitive given the obvious negatives.
As a leader, how do you break through this cycle to move toward retaining key customers while growing new profitable ones? How do you refocus efforts on expanding your share of wallet? How do you help your organization get out of its own way to better compete?
A laser focus on your customers and the new reality value proposition is the key to increasing share of wallet, gaining higher margins, and building market share. This requires that your restart plan sharpens your focus, speed, and adaptability to profitably regain momentum.
Differentiation begins by understanding the hierarchy of value creation. It begins with a strong foundation focused on understanding your customers. As the economy moves toward a restart, executives must take time to optimize their customer strategy and integrate changes dictated by new marketplace rules. Here are three customer-centric steps to take today.
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1. Build Your Restart Plan Around Profitable Customers
To begin, ensure your purpose and guiding principles continue to set the course for your brand and promise to customers. Remember, your North Star remains your navigational guide to success.
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Use these two foundational tactics to gain the understanding needed to strengthen your focus on profitable growth:
- Refine segmentation to identify your highest-value customers: It’s no longer feasible to rely on segments built on traditional demographic attributes or revenue levels alone. Segments should now include attitude and behavioral attributes to identify profitable growing customers who need you. Understand not just who your best segment is today, but how to move the next-level-lower segment into the best segment using a targeted, data-driven approach.
- Revisit your cost-to-serve model to understand which customers to engage: Not all customers are profitable. By understanding the cost-to-serve model and applying it to the segments identified above, you gain the opportunity to further stratify your customer base and uncover more value. Your strategy then can focus on maintaining loyalty for the most profitable customers in each segment, while developing tactics to improve profitability for the next-level grouping of customers.
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2. Optimize Your Teams and Their Technology
It’s important to understand how CX delivery is either accelerated or hindered by the current state of your company’s people, processes and technology. Customer journey and value stream mapping techniques help identify breakpoints. But even with those tools, the conversation can get political. These initiatives can improve your ability to execute:
- Assess technology value to stop leakage: Your team should be able to clearly state the ROI of the platforms they use. Consider the company that recently put in a new platform for configure, price, quote (CPQ). Are employees more efficient with the tool? Are more sales closing? By focusing on adoption, upskilling, employee engagement and process optimization, value can be recaptured from your technology investments.
- Reorganize your teams based on customer needs: Many companies defensively shed workers to cut costs early in a crisis and the natural response of the remaining teams is to hunker down and focus on what they have done well in the past. However, agility comes from organizing around a specific mission. Pulling together cross-functional team to serve new customer needs will bring a host of new competencies, skills, and perspectives — ultimately reducing the friction caused by past departmental silos and improving customer success.
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3. Take Advantage of New Opportunities
Firms that strengthen their foundation and optimize their internal operations to compete in the restart will uncover multiple opportunities to grow while maintaining strong relationships with their existing customer base. However, leaders will need to refine their overall customer strategies to continue to create customer value. Understanding the most profitable segments allows firms to capture market share while their competitors play catch-up.
Opportunistic organizations can now craft a new strategy to increase demand for their products and services at a profitable margin while taking revenues higher as the economy begins to stabilize.
- Create more customer value by meeting new needs: Your new customer strategy should be rooted in engaging existing customers with specific, personalized offers that meet their evolved needs. Applying the tactics above will allow you to update your demand generation strategy and focus on acquisition of profitable customers. A focus on meeting customer needs in a data-driven, differentiated way brings new opportunities for engaging customers with your firm.
The opportunity to refresh your customer understanding is here. Create sustainable competitive advantage today by focusing on the needs of your highest-value customers, organizing your teams to deliver exceptional, personalized experiences, and accelerate through this turn in history.
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