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What Customers Want (Abstract)

Selden, Larry and Geoffrey Colvin. What Customers Want (FORTUNE, 23 June 2003), Ideas + Innovations.

While the six steps covered are presented to increase stock value, they can improve your overall company profitability. Original article excerpted from Angel Customers & Demon Customers, published by Portfolio, a division of Penguin Group.

Step 1: Figure out the needs of your most profitable customers

• Look across the demographics of your customer base, Are there any customers who regularly spend more, or cost less to serve. Focus on marketing these customers.
• Discover the needs of those more profitable customers. Is there anything in particular that makes their buying experience more enjoyable. Do they have special needs that make them more profitable?

Step 2: Get creative

• Develop a few hypotheses to test in your marketing and service methods. Look at how you can make it easier for profitable customers to get what they desire out of your service.
• What new products could you create to enhance the value of existing services? How can you test market these items, and what is the desired results? Test each of your hypotheses about profitable customers.

Step 3: Test and verify your hypotheses

• Find out what is working and what isn't by executing your tests and comparing the results against baseline measures. Do you actions increase customer profitability? Are customers more satisfied with your company?
• When you have specific hypotheses you can more easily test them. Use real numbers and always measure a baseline before any implementation efforts.

Step 4: Tell customers how great your value propositions are

• Make sure others who haven't tried your product or service know exactly what you're doing to improve their experience. Get the word out, it's not enough to create the best customers experience if no one is enjoying it.
• Show what you are providing is synonymous with your company identity. Train your people how to execute the actions that tested well to improve customer profitability.

Step 5: Apply the best value propositions on a large scale

• Make the actions that increase value part of your business process. Create means of segmenting customers according to the hypotheses and improvements in that segments experience.
• Collect customer data that enhances your ability to create more customers who are profitable from those who haven't yet used your service. Make this part of your business process, make people responsible for real results.

Step 6: Begin anew

• Over time your profile of a profitable customers will change, it is important to continually gather data about the needs of your customers so your products can adjust to that change.
• Follow the process of gathering data, analyzing it, forming hypotheses, testing them, and scaling the winners. Spend some time taking action, then periodically enhance the knowledge you have about the whole cycle.

The original article mentions "customer-segment chiefs", while the concept makes sense, it is more important to have experts who understand and study each market segment. They don't necessarily have to be the same people in charge of producing results with that segment.

Consultant Michael J Lanning is also recommended (mentioned in step one of original article), he is the author of "Delivering Profitable Value" and teaches methods very similar to my own.

See Also: 101 Strategies for more Profitable Customers, Classifying Customers and Identify Profit Centers for your Business, How to Cultivate your 'Top Ten Percent' Customers for Greater Profits

By Justin Hitt at July 9, 2003 1:16 PM  Subscribe in a reader