At Forge we spend a lot of time and energy helping our clients to build out their customer strategies. Our business was founded on the premise that through the process of forging better insight, we could help our clients more easily understand where to play and, ultimately, how to win with customers.
Our work across a large number of sectors has helped us develop and refine what we believe is a definitive approach for any individual (or team) charged with developing a customer- or consumer-led strategy. In view of the current commercial context, we’ve decided to embrace the generosity principle and have taken the decision to share that approach here. We’ve also decided to share a few extra tips and observations that we think are important when approaching this task.
Customer behaviour is evolving at an increasing velocity and it looks as though Covid-19 will further accelerate previously nascent trends. This will present risk but also enormous opportunity for those businesses able to react quickly enough. There has never been a better time to have clarity around who your customers are and the different ways in which you can bring distinctive value to meet their needs.
A customer strategy also comes with an added advantage in that it brings into sharper relief how a business actually creates value for its customers, and for that reason alone it should be the starting point for anyone looking to grow and/or increase profitability.
Just a point to note: throughout this document you will see we that we frequently refer to both ‘customers’ and ‘consumers’. These words can be read interchangeably depending on the sector you are working in. If you work in FMCG where your end users are ‘consumers’, read consumer. Likewise, if you work in hospitality, leisure or services, or your clients are other businesses, read customer. Ultimately, a good customer strategy should influence whoever it is that is spending their money on your products or services, so in this document we use them both.
We hope you find this a useful guide.
Introduction & Tips
Building an effective customer strategy should be high on the priority list for any business. Fundamentally, a customer strategy helps an organisation understand who its customers actually are.
It also reveals which of its customers are of most value, how those customers can be better served, and importantly, what a business needs to do in order to either: i) attract more target customers (thereby increasing penetration), or ii) get existing customers to use their products or services more frequently (thereby increasing frequency).
Effective customer strategy is really about understanding how to facilitate a change in customer behaviour – it’s about getting to grips with solutions and motivations.
Before we start exploring the specific steps required to develop a customer strategy, we think it’s important to share a few tips that will help the practitioner avoid some common pitfalls.
TIP 1: Start any customer strategy project by first considering what it is that you already know
We are constantly surprised by the tendency for businesses to leap straight to the quest for new information without first considering what it is they already know. We’ve frequently been able to devise substantive elements of a customer strategy simply by taking a fresh look at what is already known. You can move much faster if you know at the outset where you have specific gaps in your understanding.
TIP 2: The best customer strategies are achieved by forging together multiple sources of information
Once you are clear about what you don’t know, you can start using the appropriate research techniques to fill in the gaps in your understanding.
We see the available research techniques mapping across four quadrants:
Be open to the value of all these approaches but use them for the right situation. ‘System 2’ thinking / responses for example can be readily accessed via ASK methods, while ‘System 1’ investigation lends itself more readily to WATCH and DIG. We’d also argue that the newly emergent ‘System 3’ is integral to PREDICT – the melding of different sources of information to highlight a range of possible futures.
As a new strategy is being developed, it’s especially important to make sure that you are not being overly influenced by System 2 thinking. Be on the lookout for confirmation bias. Take the time to understand what is really going on and seek new ways of accessing customers’ emotional responses
TIP 3: Be clear about the precise behaviour you are seeking to change
A problem that is particularly acute in FMCG, but prevalent in almost any developed category, is the fact that most consumers already enjoy a high level of consumer satisfaction – or to put it another way – low levels of consumer dissatisfaction. To change behaviour, we first have to have a forensic understanding of what they are currently doing and why. Then we need to understand, with total clarity, the level of satisfaction and dissatisfaction associated with that behaviour.
You could be planning to offer customers something better than they currently have, but if they are happy with their existing behaviour, why should they care? Don’t rely simply on what customers say they do. Look at what they actually do.
TIP 4: Move beyond the functional
There is an increasing body of data that suggests people tend to buy emotionally and then justify rationally. Any effective customer strategy will take this into account. In your quest for additional insight, try as hard as you can to access irrational desire. It will provide you with a much more accurate representation of what really drives choice.
The pharma sector used to assume that prescribing medicine was a largely rational exercise. More recent research however has revealed this assumption to be largely untrue. In fact, for specific therapeutic areas like mental health, prescribing is actually disproportionately influenced by a range of more emotive factors.
These are some of the tips that we think are especially helpful when approaching this challenge – but now we’ll explore the specific 8 steps that we think are necessary for the development of an effective customer strategy.
1. Define the right competitive space
Start the development of your customer strategy by thinking carefully about the competitive space in which you operate and avoid being unnecessarily restrictive in your thinking. We start many projects by helping our clients re-evaluate their competitive context.
We recently helped a global brewery come to the realisation that their competitors weren’t just other conventional beer brands. The rapid evolution of the drinks category meant they now had a new set of competitors to consider – the emerging ‘No & Low’ alcohol brands as well as fruit juices and other naturally infused beverages.
It was a similar situation with a leading global personal care brand, where a traditional focus on products labelled ‘for men’ had effectively obscured the brand from the rapid evolution of the male grooming category. By highlighting that the true competitive space should actually be defined as ‘products that men were using’, we were able to show that the true global value of the category was three times larger.
A narrow interpretation of the competitive space had held the business back from understanding the full extent and value of the overall battleground.
When defining your competitive space, consider the category or brand from the perspective of the customer actually buying your product or service. Does Camelot (National Lottery) see its competition as other scratch card operators? Or is it actually competing for attention with other products also promising small moments of escapism e.g. cigarettes, chocolate and alcohol?
Take the time to think carefully about:
- Who your competitors really are
- The behaviour of the customers that impact your business or brand
- The choices or trade-offs being made around the services you offer
- How a consumer would define the category you operate in
2. Be clear about what your category does for people
To develop an effective customer strategy, you need to be clear about what your category actually does for your customers. You need to understand both the motivations / needs of your customers today as well as how you think they will evolve in the near and mid-term.
If you have a solid understanding of what your category has always done for people, it provides you with a solid base from which to evolve. Fever-Tree, Heineken 0.0, Nivea Black & White and Monzo are all examples of product and service innovations that have simply found better ways to deliver against current category motivations. Fever-Tree simply brought enhanced quality and botanicals to a previously moribund category and went on to build a billion-dollar brand.
It’s also important to understand how your category is evolving, to have a clear sense of how category motivations are likely to change. Delivering against new motivations can help drive penetration, frequency and trade-up. The iMac is perhaps the most celebrated example of a product delivering against a previously nascent desire for better-designed more colourful devices. Similarly, the apparel manufacturer Rapha built its brand by recognising the emerging need for stylish, high-quality cycle clothing in what had previously been a functional or largely utilitarian category.
Understanding how motivations are changing is particularly important as we emerge from the Covid-19 crisis. It will allow brands to tap into new demands and provide opportunities to build additional saliency and growth.
It’s also worth paying attention to how different motivations combine. Customers may not always behave as you expect. For example with Tesla, customers like the ecological benefits, but the primary motivation – as with the rest of the luxury car market – remains performance and its high-tech associations.
Key questions when considering how your category is evolving, include:
- What is happening at the fringes of the category?
- What is emergent? What might the category do next?
- What are the category adjacencies?
- What is the whole category competing with?
- Where is the dissatisfaction in the category?
3. Understand what solutions are available to people
Solutions matter because businesses crystallise money at the point a customer or consumer chooses their specific solution.
In any given category it makes sense to build a good understanding of the full range of available and emerging solutions – including taking a good look at what is happening in adjacent categories.
Business is strewn with examples of seemingly unassailable brands that quickly lost their ascendancy amidst the failure to understand the significance of a new type of solution. Blockbuster and HMV both had hugely successful brands and yet in just a few short years they were eviscerated by the arrival of streaming services like Netflix and Spotify.
Fast forward to today and we can see the next generation of plant-based foods being used by the likes of Impossible, to disrupt the traditional fast-food industry – just as BrewDog has already done in the beer market. To build an effective customer strategy, you have to understand solutions (methods) as well as motivations. The agile banking service Monzo we mentioned in the previous section is delivering against an established motivation – the need for decent banking services – but technology is enabling it to deliver a much more agile and effective solution.
The toothpaste Zendium is delivering against an established need for an effective toothpaste, but it is using a new enzyme which boosts your oral microbiome – an area consumers are increasingly interested in – to deliver it. Being aware of the solution set is critical to staying relevant and future-proofing your business.
And keep in mind that in most categories, solutions tend to evolve faster than motivations. Agile competitors will constantly look for what they can take and repurpose in order to deliver better solutions.
In order to build an understanding of the solution set you should:
- Understand the types of proposition available for people to choose
- Map the solutions that are established vs. those that are emergent
- Understand how solutions partition i.e. think about what the consumer sees, seek to understand the real decision drivers that influence choice
- Use AI solutions to size future opportunities based on real emergent conversations
- Analyse the category SKUs to find solutions that are growing quickly
4. Map motivations against solutions in order to find the opportunities
By mapping motivations against solutions (both current and future) it is possible to break down the customer challenge into discrete quadrants and use this as a platform from which to identify and size future battlegrounds. We’ve created a proprietary tool called the Big Framework for Growth (BFG) to assist us with this process (see below).
The BFG has been used to help a number of clients:
- Profit from change by linking current and future behaviour with commercial value
- Identify, size and prioritise current and future opportunity spaces
- Focus and sharpen the innovation challenge
- Strengthen demand spaces
- Manage business and brand transition from today to the future
The Big Framework for Growth
The BFG is a proprietary tool, developed by Forge that maps current and future consumer motivations against current and future solutions (products or services).
It is a useful tool when thinking about how to grow a category or brand. We can also map competitor brands, products and services onto it to show how they have realised success.
When overlaid with commercial value, satisfaction/dissatisfaction levels, growth trends, and brand heartlands it helps brands to identify where to focus.
With an opportunity identified, we can drill down into the points of parity needed to enter the consideration set, and the points of difference needed to change behaviour.
If you would like to find out more about how to create your own version of the BFG to use in your organisation, we have instructional videos and presentations we would be more than happy to share with you. You can reach us on our contact details at the end of this article
5. Know how the money is moving
Knowing how the money is moving is central to any effective customer strategy, because when behaviour changes, money moves.
Start this step by building your foundations. Size your overall category and then seek to determine where the money sits and how it relates to specific motivations and solutions. Understanding the size of any potential prize allows a business to target fewer, bigger opportunities which have the real potential to scale.
When businesses are not clear about the size of a category or even an important trend exerting influence upon a category, it can have real commercial impact. A client of ours working in personal care initially underestimated the importance of the Naturals trend and had to spend significant time and resources playing catching-up.
Following the 2009 financial crisis Tesco suffered significant share loss, simply because it didn’t recognise quickly enough the permanent change in shopper behaviour i.e. the demise of the fortnightly shop and the shift towards the discount retailers. It took considerable time and effort and the melding of different data for us to prove to them unequivocally that shopping had changed for good.
It’s always important to understand where the money is moving as it can often give you a clear view on what is actually happening. Similarly, sizing opportunity spaces is vital when seeking to prioritise future investment.
Knowing how money is moving, tells you how behaviour is changing.
Key factors to consider:
- Size of the current category, and what information exists to help determine your current share and any available headroom
- How money is moving within a category, and where is the money actually being spent. What is declining and what is growing rapidly (even from a relatively low base
- Size of the category that flows from any new or extended definition
- Size of future opportunity spaces, factoring in things like forecasted growth rates, the impact of new solutions
6. Understand what the critical success factors are for usage
Having identified where to play and gained an understanding of how the money is moving, it is just as important to understand how to win with customers. This requires you to have clarity on what matters most to your customers i.e. what is perceived as critical, what is a nice to have and what has the potential to act as a real driver of choice?
A famous deodorant brand was spending considerable resources each year reinforcing its overall product efficacy (sweat and odour protection) and yet once we started looking at what consumers actually thought about the brand, we discovered that they were not dissatisfied with efficacy at all.
For a long time, Mars continued to periodically increase the size of its Mars Bars before eventually realising that consumers weren’t actually frustrated with the size of its existing bars.
By contrast, our work for Pladis on Mini Cheddars, revealed that Mini Cheddars’ ‘real cheese’ credentials were a hugely important driver with customers (who were often buying for children) and yet when we looked at the packaging this wasn’t being highlighted anywhere. We were able to help them significantly increase sales simply by better signposting the real-cheese credentials on-pack.
What matters in any category is to build a firm understanding of what constitutes a Point of Parity (POP) – those attributes that allow you to enter a consideration set – vs. Point of Difference (POD) – those attributes that help your particular product or service to be chosen. These can be tricky things to understand as customers typically find it difficult to articulate or discriminate against a list of factors. That’s where we’ve found MaxDiff and Conjoint analysis really helpful, both techniques make it easier for consumers to discriminate and ascribe value to specific attributes, thereby helping the practitioner to really understand how the category operates.
Key questions to consider:
- What is needed to get us into the consideration set and how do we impact consumer choice?
- POP and POD for each segment?
- What is perceived as a table-stake?
- And in terms of difference, who is best in class?
- Is this a category where customer penetration is key? If so, do we understand how to achieve mental and physical availability via the key category entry points?
7. Be clear on where difference is meaningful
Resist the temptation to over-segment your customers or create too many demand spaces.
There is little point having a segmentation you can’t service or unwittingly turning your newly conceived demand spaces into a series of strait jackets. We’ve seen really sophisticated clients be occasionally stymied by having too many demand spaces cut by too many consumers, with the result that they’ve been unable to identify the bigger commonalities that present real opportunities to scale.
Look at volume and value as the two key determinants of difference e.g. a smaller segment in terms of occasions might be disproportionately large in value terms. Really try to understand what drives consumer choice and behaviour in your category.
8. Clarify what will have the greatest impact on influencing behaviour
The final step on the journey towards developing an effective customer strategy is making sure that we are clear not just about what we could do, but what we should do.
We recently completed a piece of important work for a major high-street retailer.
The work was focused on unpacking the concept of convenience and we explored the potential commercial impact of a number of different expressions of convenience against a series of discrete shopper missions.
As well as sizing each expression of convenience and providing a steer on the most valuable we decided to go further and deployed some additional modelling in order to illustrate the most efficient combinations of the various expressions. This enabled the client to understand not only where the greatest value resided but importantly how it could be most efficiently accessed.
We’ve done similar things with other retailers, helping them understand where they can make the greatest commercial impact across key aspects of their customer journey, removing the tendency to want to make everything just a bit better.
Understanding what it will take to win, means you can make clear decisions about where to invest your resources. Revolut decided to invest in a Bitcoin trading platform because they knew it would appeal to the customers they particularly wanted to attract. Despite the recent bad press, Boohoo has taken fast fashion to a new level, turning catwalk shows into clothes you can buy in just a few days – and in the process spawning a whole category of copycats – because they know this matters disproportionately to their customers.
This will also be very important as we emerge from Covid-19. How significant will changes in behaviour be and what level of investment should be made to address them?
Make sure your customer strategy is commercial and clear on the specifics of where to play and how to win.
Closing Remarks
We hope you have found this paper an interesting read and an instructive guide to anyone tasked with developing all (or part) of a new or revised customer strategy. We’ve made a series of points in this document, but if we wanted you to remember one thing it would be this – an effective customer strategy depends ultimately on your ability to influence your customers’ behaviour, and to do that you need a really good view on the motivations and solutions that underpin your category.
