We define customer strategy as the articulation of the distinctive value and experience your company will deliver to a chosen set of customers over three to five years, along with the offerings, channels, operating model, and capabilities you will need to implement it. In early 2016, a team of researchers and advisors from the customer strategy practice of Strategy&, PwC’s strategy consulting group, conducted a global survey of 161 executives to examine their companies’ customer strategy objectives and approaches.
The results of the survey highlight a fundamental disconnect. Although 84 percent of companies plan to invest at least as much in customer strategy in response to changing market dynamics in the years ahead as they’ve spent in the recent past, and some plan to spend more, few businesses have a clearly articulated idea of what their customer strategy should be.
Our respondents identified three major trends that are driving the need for a well-designed customer strategy: the pace of technological innovation, more informed and more sophisticated customers, and increasingly disruptive competition. However, although 51 percent of respondents commonly use the term customer strategy and are driving different steps for wooing customers, they aren’t weaving these elements together in a way that reflects an understanding of their company or customers.
Based on the lessons from leading companies and Strategy&’s experience, our consulting teams pinpointed 10 principles at the heart of customer strategy and the best practices for implementing these principles. At its core, a customer strategy must define the distinctive value and experiences a company provides to its targeted customers and coordinate the various functions, skills, and channels needed to deliver on that promise.
Customer strategy is now more critical than ever to a company’s success. Faced with rapidly changing market forces, a business can no longer follow the traditional approach of targeting a set of chosen customers. A successful customer strategy needs to articulate the distinctive value and experience your organization will deliver to those customers over three to five years, along with the offerings, channels, operating models, and capabilities you will need.
In early 2016, Strategy& set out to examine how well companies understood customer strategy and identify the best practices across industries. With the participation of 161 executives globally, our PwC Strategy& Customer Strategy survey examined the trends that are disrupting markets and the customer strategies companies are adopting to tackle the risks and opportunities created by these forces. To pinpoint best practices and common pitfalls, we conducted an in-depth analysis of more than 30 companies. Digging further, we conducted interviews with select executives across industries.
We found that respondents are aware of the importance of customer strategy, and believe that with powerful trends affecting the customer experience, investing in it is critical. Our survey results indicate that companies are committing more resources to customer strategy: Some 84 percent of companies expect to invest more or the same on it over the next year, compared with only 7 percent that expect to spend less. Respondents said that historically, the greatest incremental impact from these investments has been on sales and customer loyalty, with 37 percent seeing an increase in sales and 27 percent in higher customer loyalty.
The companies we surveyed are responding to the trends that are reshaping customer expectations and creating new market opportunities. We asked companies to rank those trends in order of importance. The top three, according to respondents, are (1) technological breakthroughs, (2) changing customer preferences and expectations, and (3) increasing competition and speed of change (see Exhibit 1).
About 51 percent of respondents commonly use the actual term customer strategy, compared with 15 percent of companies that seldom use it and 9 percent that never do. But our analysis found that although companies are investing in gaining and retaining customers, they aren’t necessarily building a coherent customer strategy. The companies we surveyed define customer strategy in a broad variety of ways, indicating that businesses may do an insufficient job of looking at all of the factors that drive customer success (see Exhibit 2). As the most important elements of strategy, our survey respondents listed segmenting and targeting (72 percent), followed by customer experience (61 percent), channel strategy (57 percent), go-to-market strategy (56 percent), and product strategy (53 percent). As to where companies in different markets are investing, 86 percent of Asian companies have invested heavily in product development, while the majority of European companies surveyed — 67 percent — have focused investment toward customer segmentation. North and South American companies surveyed split investment more evenly among the various areas. Just as telling, two-thirds of companies don’t measure the return on investment (ROI) for the assets they put toward customer strategy, though the companies that do this find that they achieve a 5 to 15 percent return. Clearly, businesses are driving elements of customer strategy, but not in an integrated way.
What is most important to a successful customer strategy is that the company pull all of its resources together in a way that reflects the company’s unique capabilities and its customers’ needs. The strategy is integrated across the entire organization, coordinating many different functions, skills, and practices. These elements range from customer analytics to go-to-market and channel choices to the delivery of products, services, and experiences (see Exhibit 3).
In building a cohesive customer strategy, however, companies will need to overcome a series of key hurdles (see Exhibit 4).
The 10 principles help you develop a comprehensive approach to engaging and understanding customers based on your distinctive capabilities and organizational strengths. These principles should be addressed as part of any customer strategy development effort. A customer strategy built to adapt to changing customer expectations, to anticipate clients’ needs, and to stay ahead of disruptive rivals is made up of all of these elements, not just some of them. Above all, focus on being clear about who you are. As you craft a successful customer strategy, this understanding will help you build a business that thrives.