If a business competes based on differentiated market positioning then it needs to focus on the customer perspective in the business strategy map, ie on the customer value chain.
Francis Buttle proposes this consists of customer portfolio analysis; customer intimacy; network development; value proposition development and managing the customer lifecycle. Basically this is about attracting and retaining customers and building more business from their custom.
You can see why this is important through a profitability analysis – a business can increase profits by increasing prices (or reducing fixed and/or variable costs - in blue), or by increasing turnover (i.e by shifting the calculation point – in green – over to the right.) It can do this either by increasing the number of its customers, or by increasing loyalty and encouraging each customer to spend more.
This makes good sense given that Frederick Reichheld’s analysis suggests a 10% increase in customer retention can count for a 125% increase in customer value.
So as well as the products and services / financial value chain we also need to think about the customer value chain and to ensure that we're creating customer loyalty and retention as an outcome of this - also often expressed as relationship capital or brand capital etc.
Francis Buttle proposes this consists of customer portfolio analysis; customer intimacy; network development; value proposition development and managing the customer lifecycle. Basically this is about attracting and retaining customers and building more business from their custom.
You can see why this is important through a profitability analysis – a business can increase profits by increasing prices (or reducing fixed and/or variable costs - in blue), or by increasing turnover (i.e by shifting the calculation point – in green – over to the right.) It can do this either by increasing the number of its customers, or by increasing loyalty and encouraging each customer to spend more.
This makes good sense given that Frederick Reichheld’s analysis suggests a 10% increase in customer retention can count for a 125% increase in customer value.
So as well as the products and services / financial value chain we also need to think about the customer value chain and to ensure that we're creating customer loyalty and retention as an outcome of this - also often expressed as relationship capital or brand capital etc.
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