‘What is a ‘Spinach helpful tip’? – When a friend tells you what you don’t know – especially when you don’t know it!
In Part 1 – Hitting the Bull’s-eye every time we discussed Steven Coats’ article ‘Ready, Fire, Aim!’ in International Leadership Associates in 2005. We discussed the importance of not going to either extreme, from sticking your head in the sand or suffering from ‘analysis paralysis, to ‘damn the torpedoes full speed ahead’. Instead to become a Ready-Aim-Fire high performing Market-Driven Organization you need to be somewhere in the middle, Steven Coats shared in his article:
As you might suspect, the best answer lies somewhere in the middle. Even in our overworked, no time for anything world, it is unconscionable to take a position that there is no time to think. On the other hand, it is just as ruinous to get caught up in endless analysis, thus deferring or avoiding decisions that must be made quickly. The best decisions are made with an appropriate balance of thinking and action. So we begin by classifying our customers and discerning their perceived values relative to our offer.
No matter what type of organization you are leading, it doesn’t matter if you are focused on services, B2B, B2C or a nonprofit organization it’s critical to bring all sides of the organization together during the discussion, analogies and adopting and utilizing similar terminology helps breaks down barriers. How do we simplify the classification process, when there are so many different ways to go as a company?
For example, you may find key customers in a specific geography, revenue size (current and potential), a certain business model, a particular business orientation or other characteristics that your organization will take into consideration when developing specific contracting strategies and marketing programs to allocate resources towards.
How will you define non-users, key customers, potential customers and market sizes for market growth strategies? But, I’m getting ahead of myself first let’s talk about how a Market-Driven Process begins to classify their customers. In the organization the members of the Marketing Department have all sat through Marketing 101 where they learned to classify products as Stars, Cash Cows, Dogs and Question Marks/Problem Child regarding their perceived value and position in their life cycle.
So let’s keep this simple, let’s classifying our customers and see how they would align or fall if we used these same category titles. The Boston Consulting Group Matrix1
Star – Important Customer with high market share and whose business is growing. These customers fall in the upper right quadrant and represent the most potential for sales growth, margins and profits. Gaining their additional business may or may not require us to limit our margins and profits that is yet to be determined. These customers could include Key Opinion Leaders, they could be located in new geographical markets, they could be new or growing organizations, there are a number of reasons for customers to fall in this category. As a Market-Driven Organization these are the customers we feel our offering has value for and they’re capable once we have gained alignment of performing.
Cash Cows – Key Customers whose business represents the majority of our sales and profits, these customers are at the highest risk for competitive activity, these are the customers that keep our doors open, fund our research and should be top of mind for all new offerings. Remember, their feedback is critical to a Market-Driven Organizations success. These are the customers that everyone else wants to take away from us, they are our performing customers. As a Market-Driven Organization this is the sweet spot, these are the customers that perceive value in our offering, are aligned and as we say ‘make the cash register ring’.
Dogs – Customers whose business represents limited profits with very low margins, these customers are sometimes referred to as transactional customers. A customer that does not value our offering and the cost to gain more business will offer limited margins and profits for our business, their goals as organization do not align with our value offering. As a Market-Driven Organization these customers can still have value, we have to look at their effects on our economy of scale, what volumes they offer and what effect does their business have across the organization, manufacturing, purchasing, human resources (man power) and how their volume affects our ability to negotiate and price for Stars and Cash Cows.
Question Mark/Problem Child – these are sometime referred to as late adopters, or these can be low potential customers that have limited potential, or they can be customers that are under performing. These customers have low market share and low market growth. These customers can eat up resources including marketing funds, sales team attention; we have to understand how they discern the value of our offering.
In the last few Spinach Helpful Tips we’ve been discussing the first few steps in the Market-Driven Process, ‘information gathering’ then using our Marketing Technology stack to convert Information into Data, and Data into Insights. We touched upon testing those insights with war games and customer feedback then turning them into Action to fuel your Organizations Market-Driven Process.
We’ve gotten ‘Ready’ with research and information gathering, and now we are ready ‘Fire’. It’s almost time to take action and allocate resources, so let’s begin to analyze our information, compare and prioritize our different customer segments. It’s time to sit down discuss and decide where we’re focusing on strategy and taking ‘Aim’ at the right opportunities. The importance of targeting and segmentation and how we allocate resources will determine whether we’re optimizing our ROI and in today’s environment keeping your ‘jobs’. Steven Coats shared later in his article:
Breakthrough strategies seldom just show up on your desk. They come from a lot of thinking, debating and analyzing them from a number of different perspectives. And then they are validated and strengthened with testing, experimenting, prototyping and other necessary actions. As a leader, you must encourage both innovative thinking and hands-on experimentation if you expect to keep up with your competition.
Here’s where the proverbial rubber meets the road as we begin to align what we do with what our customers need and value. As an organization have we sat down and categorized our customers based upon their potential value and how do you accomplish that? Have we taken the time to determine the customers perceived values relative to what your organization offers?
Q: How does your organization’s classify customers?
Q: Have you selected your target segments as part of your Market-Driven Process?
As we go through the process please provide your insights and thoughts so we have a more robust dialogue and don’t walk around with spinach in our teeth.
What is a ‘Spinach helpful tip’?
Have you ever walked around with something in your teeth, and no one tells you. A real friend takes you to the side and tells you. It may be embarrassing at first but not as bad as finding out at the end of the day when it is too late to do anything about it. Especially if you are trying to create a positive brand image and lead your organization to success!
Chris A. Marshall