Analyze
Turning customer data into strategic insight.
In the Analysis phase, a clear picture is developed of what customers look like and their current value and potential.
In a typical customer portfolio the best and worst customers will each account for about 10-15% of the total base. For those groups, the objectives are clear: retain or divest. The real challenge is managing the 60-70% of customers who are merely average performers - and whose supplier loyalties may in fact be divided.
So the first question to ask is, “What factors truly drive loyalty?” Once the answer is determined, it becomes far easier to develop new offers and strategies that will earn greater loyalty. However, the determinants of loyalty usually differ by segment: what appeals to one group of customers may be of no interest to another. That’s why it’s so critical to define those segments within the customer portfolio for whom differential treatment is warranted.
Customer segmentation delivers competitive advantage by clarifying how to create greater value for customers; thus, it gives them a reason to become more valuable and loyal over time.
What's also important to understand is the variability and velocity of the customer relationship through the lifecycle. By determining the intensity of the relationship and its trajectory, differential strategies can be designed for high value customers at risk to defect, for established customers whose growth has leveled out, for new customers whose growth is accelerating, and for advocates who account for a disproportionate share of revenue.
