Customer-Led

Strategies

Overview
1. What is a customer led strategy?
A customer-led strategy is built around the existing customers, and growth is generated by identifying new products which can be
successfully sold to these customers.
2. which customers should form the basis for future growth
base the strategy around those customer groupings from which the company can generate sustainable super profits.
This requires a strategically oriented, long-term customer account profitability (CAP) analysis to be carried out. This CAP
analysis should indicate the relative profitability of different groups of customers, but it should not be used as an attempt to
apportion the net profit of the total business among the different customers.
The analysis should support important strategic decisions regarding which customer segments should be invested in, etc.

The idea is to evaluate which types of customers are worth investing in because, over their economic life cycle, the business
expects to be able to generate a positive net present value from the investment. This type of marketing strategy is commonly
referred to as relationship marketing, because the business tries to develop (i.e. invests in) a long-term relationship with the
customer. If this type of marketing strategy is in use, the company needs to tailor its marketing finance system to treat these
customer relationships as a long-term asset of the business.
in a relationship marketing-based strategy, attention shifts towards customer retention and development rather than being
exclusively focused on customer acquisition.
However, in order to attract and retain these valuable long-term customers, the company must create more value for these
customers than the competition; any sustainable long-term relationship must be mutually beneficial. the balance between the
value created for the customer and the value created from the customer should be carefully managed. Customer value can be
defined as the perceived benefit obtained by the customer less the price paid and other costs (e.g. time, inconvenience) incurred
in order to own the good or service.
Longterm customers can also provide indirect benefits and these should also be valued. Referrals and referencability, together

Market Segmentation
In any customer-led strategy, the marketing strategy process starts with carrying out a market segmentation exercise. The appropriate differential
advantages for each of these market segments are identified and the business defines its positioning strategy for those attractive segments that it
decides to target.

Ex. Dell Computers

For most industries, mass customisation equals over-fragmentation of the market and would be financially disastrous. Therefore market
segmentation is really an aggregation process of grouping together similar customers.
Marketing finance has an important role in ensuring that each of these redefined market segmentations is financially attractive, and to highlight
those that have the greatest potential for generating super profits.
Segmentations can be objective or subjective.
Objective-demographics, geographic, size etc. , do not help in future strategic planning| Subjective- buying methods, distribution requirements, level
of importance of the product to the customer
Softer and more judgemental criteria for segmentation criteria: level and importance of innovation and flexibility, style of key decision-makers (e.g.
risk-taking professional or risk averse family member), degree of loyalty, stage of development (e.g. high growth versus mature or declining), degree
of systems compatibility.
True market segmentation seeks to identify what customers really want and then matches the companys products to these specific requirements.

 For business to consumer industries the range is even greater.

Objective segmentations clearly include age, gender, socio-demographics (the normal a, b, c1, c2, d, e classifications) but these
have now been developed into geo-demographics and biographics. Geo-demographics analyses clusters of similar people and
families living in particular localised areas, so that consumer-focused companies can tailor their distribution of specific products
to the particular needs of the consumers that are likely to use the shops in the area.
The more rapidly growing method of segmenting consumer markets is based around psychographics; these relate to life styles,
personality types and self-concepts.
There are also still other forms of segmentation that are particularly relevant to certain industries; these include: occasions for
purchase or use (known as situational context), where some consumers will drink different brands when they are at home than
they do when out with friends or work colleagues; buying/usage intensity, where some high usage consumers will use more than
one brand (possibly in distinct situations) so that share of usage may be an important piece of marketing information.

Introduction
What is a customer led strategy?
A customer-led strategy is built around the existing customers, and growth is generated by
identifying new products which can be successfully sold to these customers.

Which customers should form the basis for future growth?

Customer groupings from which the company can generate sustainable super profits
Long-term customer account profitability (CAP) analysis to be carried out to
- Indicate the relative profitability of different groups of customers
- Support strategic decisions regarding which customer segments should be invested in, etc.
(Should not be used as an attempt to apportion the net profit of the total business among the
different customers.)

Relationship Marketing
Develop a long-term relationship with the customers
The relationships must be considered as long-term assets by the company
A shift from customer acquisition to retention and development

How to attract and retain these valuable long-term customer?

The company must create more value for these customers than the competition
The balance between the value created for the customer and from the customer should be
carefully managed
Customer value can be defined as the perceived benefit obtained by the customer less the
price paid and other costs (e.g. time, inconvenience) incurred in order to own the good or
service
Long term customers also provide indirect benefits like referrals and referencability thus being
financially worthwhile despite generating apparently less than required direct returns

Market segmentation
In any customer-led strategy, the marketing strategy process starts with carrying out a market
segmentation exercise
The positioning strategy is based on the differential advantages of the defined attractive
Trends
in marketing
segments
it decides to target
strategies
From
One size fits all
Mass Production
Through

Inside out planning

Product
Differentiation

To

Outside in planning

Market segmentation

And Possibly
Mass customisation
Individual
segmentation
Product differentiation is still not really market
segmentation as it is bending demand to the
will of supply in that it is still production-oriented
True market segmentation seeks to identify what customers really want and then matches
the companys products to these specific requirements (mass customisation)
Role of Marketing finance:
- To ensure these redefined market segments are financially attractive
- To highlight those that have the greatest potential for generating super profits

Segmentation can objective or

subjective
Objective
Geographic (eg. regionally)
Size (eg. Total Sales revenue)
Organisation type (eg.
International, national)
age, gender, sociodemographics

Subjective
Buying methods
Distribution requirements
Level of importance of the product to the customer
Level and importance of innovation and flexibility
Style of key decision-makers (e.g. risk-taking professional
or risk averse family member)
Degree of loyalty, stage of development (e.g. high growth
versus mature or declining)
Degree of systems compatibility.

The more rapidly growing method of segmenting consumer markets is based around
psychographics; these relate to life styles, personality types and self-concepts
There are also segmentations that are particularly relevant to certain industries:
Occasions for purchase or use (known as situational context)
Buying/usage intensity
True market segmentation seeks to identify what customers really want and then
matches the companys products to these specific requirements