chapter  9
21 Pages

Customer-Led Strategies

Overview 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. A key task for marketing finance therefore is to identify those customers from which the company can generate shareholder value. In any customer-led strategy, the marketing strategy is based on a market segmentation, but this can be done in a variety of ways. The objective is to identify financially viable groups of similar customers for whom tailored differential positionings can be developed. Marketing finance needs to be involved in the financial evaluation of the identified segments and in the prioritisation of those with the greatest potential to generate super profits. The financial analysis of these customer groupings is a critical element in

customer-led strategies; thus a relevant customer-account profitability analysis process is essential. This should only include attributable costs to the customer groupings, which results in the need to do a tiered financial analysis; as the groupings get broader, more of the costs become directly attributable. The fundamental idea behind customer-led strategies is that customers can

be regarded as long-term valuable assets; thus the relationship with the customer should be invested in, developed to its full potential, and then maintained for the duration of its economic life. The concepts of development and maintenance marketing expenditure are therefore once again important. A long-term relationship should be mutually beneficial and the company

must therefore also create value for the customer; the balance between the value created for the customer and the value created from the customer should be carefully managed. Companies that are serious about relationship marketing should be evaluating

the life cycle profitability of their customers as this should assist in focusing investment resources on the most financially attractive segments. There are techniques that link the different key strategic thrusts at each stage to the tailored financial evaluation and control process that should be used. However longterm customers can also provide indirect benefits and these should also be valued. Referrals and referencability, together with innovation and learning, can mean that certain relationships are financially worthwhile despite generating

apparently less than required direct returns. These contingent benefits should be valued using the conditional probability, simulation and real options techniques discussed in Chapter 7.