How a segmented customer base can lead to new opportunities.

1. Finding Leader
Opinionfaster growth: Loyalty and new spend
Follow the money: growth through targeted customer experience
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2. Follow the money: growth through targeted customer experience
No business that fails to
deliver positive customer
experiences can hope to
grow for long.
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3. Follow the money: growth through targeted customer experience
The value of knowing your customer has been a maxim A new perspective on customer value
Our customer growth survey is based on conversations
of good business almost since businesses first began – Traditional approaches to customer experience
with over
and focusing on the most valuable customers a priority. management (CEM) value customers on the
Identifying a business’s most valuable current customers amount they currently spend with a business.
16,000
is straightforward enough. Those who spend more are ‘high-value’ customers;
those that spend less are ‘low-value’. The problem
The challenge comes is that customers don’t buy products from just
one company. Most consumers have repertories
in focusing on the of brands within any given category. Only by
understanding its share of their overall spend in
people in
customers who a category can a business understand the true
six
future value of each customer – and the risks or
have the greatest opportunities that they represent.
potential for driving
An understanding of customers in context becomes
all the more important as consumer choice increases countries for fast food, retail banking
and competition for each customer intensifies. and mobile handsets
future growth, and At TNS, we have championed respondent-level
understanding of market dynamics that reveal strong
identifying the best fluctuations in the share of wallet that consumers
give to different brands. A company’s customers
importance to future growth, and manage touchpoints
to deliver the experiences those customers demand.
ways to grow these have varying propensity to churn completely or shift
spend to and from rivals. Only by seeing them in
Fast food, one of several categories featured in our
customer growth survey of 16,000 people across
relationships. the context of the market can CEM strategists react
effectively, identify the customer segments of most
six countries, demonstrates the importance of
a respondent-level view.
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4. 28%
Follow the money: growth through targeted customer experience
At risk Ambivalents Secure
The traditional approach to customer segmentation Pinpointing the growth opportunity
treats two men who each spend $10 on their weekly By recognising such distinctions, we are able to divide, Identifying growth opportunities and how
visit to a fast food restaurant as equally valuable. A ‘high-value’ customers that would once have been to leverage them
respondent-level approach might identify one as a grouped together, into ‘anchors’ and ‘growth drivers’.
High business relevance
High business relevance
father taking small children to the restaurant as a Anchors
‘Anchors’ already giveGrowth proportion of their
a high drivers Anchors Growth drivers
much-valued weekly treat, and the other as a student overall category spend to a company and show limited
who spends a lot on fast food, most which is with a potential for additional growth in this category. In
14% 20%
competitor chain. Each has very different needs – and contrast, ‘growth drivers’ have a higher category spend,
offers very different growth potential. with scope for the company to increase its share and
could still represent further potential through cross-
Focusing on the individual, and their total category selling or up-sell potential.
spend, takes CEM to a new dimension when it comes
Low business relevance
Low business relevance
to assessing customer value and managing customer CEM strategists must focus on potential churn threats
experiences. Whereas traditional measures segment 49% 18%
for both groups, but whereas their approach to
customers based solely on their current value or ‘anchors’ rests on understanding loyalty drivers and
business relevance, this approach adds a respondent-Manage seeking to retain spend profitably; the strategy for
Incremental Manage Incremental
level view of future growth potential, based around efficiency
‘growth drivers’ must rest on analysing their use of
opportunities efficiency opportunities
category spend and projected behaviour. competitors and investing to grow share.
Low growth potential High growth potential Low growth potential High growth potential
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5. 28%
Follow the money: growth through targeted customer experience
At risk Ambivalents Secure
Similarly, we are able to establish vital distinctions The US fast food market: a case study
between currently low-spending customers with The US fast food market has seen growth stagnate The US fast food market
a company. These are divided into the ‘manage since consumers began cutting back on discretionary
efficiency’ segment, with low growth potential, where dining at the start of the recession – and competition
High business relevance
the focus is likely to be on managing experiences as for a reduced pool of customers is creating clear Anchors Growth drivers
efficiently as possible and avoiding over-servicing; winners and losers in the CEM battle. The market
and ‘incremental opportunities’, a potentially valuable challenges are shown by the fact that around half of
14% 20%
source of future growth given their high spend on the all fast food customers fall into the ‘manage efficiency’
category as a whole. CEM strategies for ‘incremental segment, loyal to particular brands or restaurants but
opportunities’ must focus on the question of why they rarely visiting them. The relatively small number of
currently prefer competitive offerings, and whether ‘anchors’ (loyal, high-value customers who visit the
investment can realistically increase a business’s share same chain regularly) shows the dynamic nature of
Low business relevance
of their spend. Previously, this group would have been the market. Competition revolves around the fifth
dismissed as simply ‘low value’. of customers who are ‘growth drivers’, with high 49% 18%
potential value that no single brand has been able to
Besides fast food, the global survey applied this lock up entirely, and who currently spread their weekly Manage Incremental
segmentation approach to the retail banking and visits across several restaurants. efficiency opportunities
mobile handset markets. In all three cases, the results
Low growth potential High growth potential
demonstrate how seeing customers in context provides Within this challenging environment, we find stark
far greater insight into their true value. And as the differences in performance when it comes to managing
following example from the US fast food category the experiences of the most important customers – and
shows, these insights enable precise recommendations see these differences reflected in the changing fortunes
about the CEM measures that will help to drive growth of rival brands.
most efficiently.
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6. Follow the money: growth through targeted customer experience
Brand one: positioned for growth The strength of customer relationships
The most successful brand achieves a customer loyalty Total
score of 86, significantly above the category average.
86
Total
However, the real key to this organisation’s success is its
ability to deliver strong positive customer experiences
86
for its most valuable segments. It scores 101 amongst
‘growth drivers’ and 104 amongst ‘anchors’, securing
current revenues and maximising potential for growth. Low customer 70 80 90 100 High customer
retention retention
With a score of 81, the ‘incremental opportunities’
segment also provides a healthy channel for increasing Low customer 70 80 90 100 High customer
retention 80 81 101 104 retention
revenues – and as with growth drivers, that increase
in revenues will come at the expense of rival fast food Manage Incremental Growth drivers Anchors
80
efficiency 81
opportunities 101 104
brands in these customers’ repertoires.
Manage Incremental Growth drivers Anchors
efficiency opportunities
The strong position revealed by the loyalty score is
reflected in the fact that this brand has doubled its
number of outlets in the past 10 years, and currently
opens between 1,000 and 2,000 new restaurants Loyalty Growth Segments Percentage of entire customer base
each year.
Loyalty Growth Segments Percentage of entire customer base
Total
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62
Total
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62

7. Follow the money: growth through targeted customer experience
Loyalty Growth Segments Percentage of entire customer base
Brand two: revenues at risk The strength of customer relationships
In contrast, brand two demonstrates the danger of Total
failing to satisfy the customers who are best-placed to
Total 86
deliver forward momentum for a business. Not only
does its overall loyalty score of 62 lag behind that of its
62
rival, but its satisfied customers are largely restricted to
the ‘anchors’ category, with limited potential for future
growth. A score of 65 amongst ‘growth drivers’ and Low customer 70 80 90 100 High customer
retention retention
41 amongst ‘incremental opportunities’ provides the
brand with few opportunities to increase its share of Low customer 40 60 80 100 High customer
retention 80 81 101 104 retention
promiscuous customers’ fast food spend.
Manage Incremental Growth drivers Anchors
41 efficiency 60 opportunities 65 80
Companies should be scoring 70 and above amongst
target segments to be in a position to retain existing Incremental Manage Growth drivers Anchors
opportunities efficiency
customers and drive growth.
Loyalty Growth Segments Percentage of entire customer base
Loyalty Growth Segments Percentage of entire customer base
Total
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62
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8. Follow the money: growth through targeted customer experience
When we overlay an understanding of the business segment are classed as ‘secure’ and over a quarter range of food and drinks and they come across its
volume generated by brand two’s different segments, are classified as ‘at risk’ from rival brands. Brand two restaurant locations often enough to make them
the picture becomes more worrying. ‘Growth drivers’ urgently needs to improve customer loyalty amongst its easy to visit. Service is quick and efficient enough and
account for the largest share of its current revenues, most important customers or it risks losing out to rivals there are no major problems on the atmosphere of
however fewer than half of the revenues from this who are more effective at delivering the experiences the restaurants or their child-friendliness.
those customers demand.
Poor retention leads to insecure business Yet these strengths are being undermined by under-
From precise insight to actionable strategy performance in other vital areas. ‘Growth drivers’
Growth drivers In developing an actionable strategy to manage those may like the taste of the food but they don’t rate the
experiences, it is again important to go beyond the cleanliness and tidiness of the restaurants they eat it
traditional average view of customer needs. Only by in – and they don’t find the staff particularly friendly
looking at the key drivers of satisfaction for specific or helpful. They harbour some serious doubts about
customer segments, can we identify the measures the quality and freshness of ingredients as well.
45% that will deliver most value in terms of securing
revenues and driving growth. In our fast food So, in this scenario, there are clear and immediate
example, a close look at the touchpoints of greatest measures that brand two can take to stabilise its
27% importance to brand two’s ‘growth drivers’ shows revenues amongst its most important customer
how competitive strength on several key areas has segment, and start leveraging its advantages on taste
been undermined by weaknesses in a few critical and value to take share from rival restaurants on its
28% touchpoints – and how remedying these can deliver customers’ menus. Staff education and employee
significant and immediate returns. engagement is the number one priority, likely to reward
any investment in training and communication with
‘Growth drivers’ actually rate brand two’s taste and strong returns in customer satisfaction and increased
At risk Ambivalents Secure value for money (two of the most important factors spend. On the quality and freshness of ingredients,
for customer satisfaction) very highly. They like its brand two can choose to invest in fresher produce,
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9. Follow the money: growth through targeted customer experience
guided by clear insight as to the additional revenues Once customers’ true potential to a business is revealed, Above all, though, it requires a clear understanding
this is likely to generate. Alternatively, if the problem is the key to realising it lies in aligning business strategy of the true current and future value of each customer
that consumer perception of the quality of ingredients and KPIs around the key drivers for the most valuable to the business – and the importance that should be
lags behind the reality, then it can focus marketing on segments. Only by investing in the touchpoints that will attached to meeting their needs.
addressing this issue. deliver increased satisfaction for these groups can CEM
help to secure and grow revenues efficiently. Doing so
CEM as a growth channel requires engaged employees (as our fast food example
The analysis of the two rival brands’ positions shows) and touchpoints that are carefully aligned to
illuminates how customer-centric strategies can both customer expectations and internal processes.
contribute far more to a business than simply the
defence of existing revenues. Many of the customers
with the highest growth potential for any company are
also the customers of competitors, and part of their
definition as high-growth potential is that they currently
use that company’s products and services less than
those of others. Increasing share of wallet amongst
‘growth drivers’ and ‘incremental opportunities’ is one
of the most direct means available of taking share from
rivals. And when customer-centric strategies are geared
to the most important touchpoints for these groups,
they become powerful and immediate channels for
driving growth.
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10. About In Focus
In Focus is part of a regular series of articles that takes an in-depth look at a particular subject, region or
demographic in more detail. All articles are written by TNS consultants and based on their expertise gathered
through working on client assignments in over 80 markets globally, with additional insights gained through
TNS proprietary studies such as Digital Life, Mobile Life and The Commitment Economy. About the authors
Susanne O’Gorman, Global Director, Stakeholder
About TNS Management, is responsible for building stakeholder
TNS advises clients on specific growth strategies around new market entry, innovation, brand switching and management expertise, best practice and knowledge
stakeholder management, based on long-established expertise and market-leading solutions. With a presence and portfolio management at TNS. With over 12 years
experience in stakeholder research, she joined TNS in 1998
in over 80 countries, TNS has more conversations with the world’s consumers than anyone else and understands
as Account Director for a large multinational client, then
individual human behaviours and attitudes across every cultural, economic and political region of the world. the Stakeholder Management team in 2004 focussing on
TNS is part of Kantar, one of the world’s largest insight, information and consultancy groups. customer experience management and employee research.
Susanne has a PhD in Sociology from Regensburg University
Please visit www.tnsglobal.com for more information. and a postgraduate scholarship at the London School
of Economics.
Get in touch Charlotte Nau joined TNS as a consultant in the Stakeholder
If you would like to talk to us about anything you have read in this report, please get in touch via Management team in 2012. She specialises in strategic
enquiries@tnsglobal.com or via Twitter @tns_global and tactical customer experience and corporate reputation
management research. Charlotte is involved in the
development of TNS’s flagship solution TRI*M and provides
worldwide consultancy in designing and implementing
projects in this area.
She holds graduate degrees in Media and Communication
Studies from Johannes Gutenberg University Mainz,
Germany, and the University of Memphis, USA.
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