In focus growth through targeted customer experience

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Follow the money: growth through targeted customer experience
Opinion LeaderFinding faster growth: Loyalty and new spend

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No business that fails to
deliver positive customer
experiences can hope to
grow for long.

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The value of knowing your customer has been a maxim
of good business almost since businesses first began –
and focusing on the most valuable customers a priority.
Identifying a business’s most valuable current customers
is straightforward enough.
A new perspective on customer value
Traditional approaches to customer experience
management (CEM) value customers on the
amount they currently spend with a business.
Those who spend more are ‘high-value’ customers;
those that spend less are ‘low-value’. The problem
is that customers don’t buy products from just
one company. Most consumers have repertories
of brands within any given category. Only by
understanding its share of their overall spend in
a category can a business understand the true
future value of each customer – and the risks or
opportunities that they represent.
An understanding of customers in context becomes
all the more important as consumer choice increases
and competition for each customer intensifies.
At TNS, we have championed respondent-level
understanding of market dynamics that reveal strong
fluctuations in the share of wallet that consumers
give to different brands. A company’s customers
have varying propensity to churn completely or shift
spend to and from rivals. Only by seeing them in
the context of the market can CEM strategists react
effectively, identify the customer segments of most
The challenge comes
in focusing on the
customers who
have the greatest
potential for driving
future growth, and
identifying the best
ways to grow these
relationships.
six
16,000people in
Our customer growth survey is based on conversations
with over
countries for fast food, retail banking
and mobile handsets
importance to future growth, and manage touchpoints
to deliver the experiences those customers demand.
Fast food, one of several categories featured in our
customer growth survey of 16,000 people across
six countries, demonstrates the importance of
a respondent-level view.

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Low growth potential High growth potential
LowbusinessrelevanceHighbusinessrelevance
Manage
efficiency
Incremental
opportunities
Growth driversAnchors
Manage
efficiency
Incremental
opportunities
14% 20%
49% 18%
At risk Ambivalents Secure
28%
Pinpointing the growth opportunity
By recognising such distinctions, we are able to divide,
‘high-value’ customers that would once have been
grouped together, into ‘anchors’ and ‘growth drivers’.
‘Anchors’ already give a high proportion of their
overall category spend to a company and show limited
potential for additional growth in this category. In
contrast, ‘growth drivers’ have a higher category spend,
with scope for the company to increase its share and
could still represent further potential through cross-
selling or up-sell potential.
CEM strategists must focus on potential churn threats
for both groups, but whereas their approach to
‘anchors’ rests on understanding loyalty drivers and
seeking to retain spend profitably; the strategy for
‘growth drivers’ must rest on analysing their use of
competitors and investing to grow share.
The traditional approach to customer segmentation
treats two men who each spend $10 on their weekly
visit to a fast food restaurant as equally valuable. A
respondent-level approach might identify one as a
father taking small children to the restaurant as a
much-valued weekly treat, and the other as a student
who spends a lot on fast food, most which is with a
competitor chain. Each has very different needs – and
offers very different growth potential.
Focusing on the individual, and their total category
spend, takes CEM to a new dimension when it comes
to assessing customer value and managing customer
experiences. Whereas traditional measures segment
customers based solely on their current value or
business relevance, this approach adds a respondent-
level view of future growth potential, based around
category spend and projected behaviour.
Identifying growth opportunities and how
to leverage them

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The US fast food market: a case study
The US fast food market has seen growth stagnate
since consumers began cutting back on discretionary
dining at the start of the recession – and competition
for a reduced pool of customers is creating clear
winners and losers in the CEM battle. The market
challenges are shown by the fact that around half of
all fast food customers fall into the ‘manage efficiency’
segment, loyal to particular brands or restaurants but
rarely visiting them. The relatively small number of
‘anchors’ (loyal, high-value customers who visit the
same chain regularly) shows the dynamic nature of
the market. Competition revolves around the fifth
of customers who are ‘growth drivers’, with high
potential value that no single brand has been able to
lock up entirely, and who currently spread their weekly
visits across several restaurants.
Within this challenging environment, we find stark
differences in performance when it comes to managing
the experiences of the most important customers – and
see these differences reflected in the changing fortunes
of rival brands.
Manage
efficiency
Incremental
opportunities
14% 20%
49% 18%
28%
Similarly, we are able to establish vital distinctions
between currently low-spending customers with
a company. These are divided into the ‘manage
efficiency’ segment, with low growth potential, where
the focus is likely to be on managing experiences as
efficiently as possible and avoiding over-servicing;
and ‘incremental opportunities’, a potentially valuable
source of future growth given their high spend on the
category as a whole. CEM strategies for ‘incremental
opportunities’ must focus on the question of why they
currently prefer competitive offerings, and whether
investment can realistically increase a business’s share
of their spend. Previously, this group would have been
dismissed as simply ‘low value’.
Besides fast food, the global survey applied this
segmentation approach to the retail banking and
mobile handset markets. In all three cases, the results
demonstrate how seeing customers in context provides
far greater insight into their true value. And as the
following example from the US fast food category
shows, these insights enable precise recommendations
about the CEM measures that will help to drive growth
most efficiently.
The US fast food market

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Brand one: positioned for growth
The most successful brand achieves a customer loyalty
score of 86, significantly above the category average.
However, the real key to this organisation’s success is its
ability to deliver strong positive customer experiences
for its most valuable segments. It scores 101 amongst
‘growth drivers’ and 104 amongst ‘anchors’, securing
current revenues and maximising potential for growth.
With a score of 81, the ‘incremental opportunities’
segment also provides a healthy channel for increasing
revenues – and as with growth drivers, that increase
in revenues will come at the expense of rival fast food
brands in these customers’ repertoires.
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
each year.
The strength of customer relationships
Loyalty Growth Segments Percentageof entire customerbase
70 80 90 100
86
Total
80 81 101 104
High customer
retention
Low customer
retention
Growth drivers Anchors
Total
Manage
efficiency
Incremental
opportunities
62
70 80 90 100
86
Total
80 81 101 104
High customer
retention
Low customer
retention
Total
Manage
efficiency
Incremental
opportunities
62

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Total
Manage
efficiency
Incremental
opportunities
40 60 80 100
62
41 60 65 80
High customer
retention
Low customer
retention
Brand two: revenues at risk
In contrast, brand two demonstrates the danger of
failing to satisfy the customers who are best-placed to
deliver forward momentum for a business. Not only
does its overall loyalty score of 62 lag behind that of its
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
41 amongst ‘incremental opportunities’ provides the
brand with few opportunities to increase its share of
promiscuous customers’ fast food spend.
Companies should be scoring 70 and above amongst
target segments to be in a position to retain existing
customers and drive growth.
The strength of customer relationships
70 80 90 100
86
Total
80 81 101 104
High customer
retention
Low customer
retention
Total
Manage
efficiency
Incremental
opportunities
62

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When we overlay an understanding of the business
volume generated by brand two’s different segments,
the picture becomes more worrying. ‘Growth drivers’
account for the largest share of its current revenues,
however fewer than half of the revenues from this
segment are classed as ‘secure’ and over a quarter
are classified as ‘at risk’ from rival brands. Brand two
urgently needs to improve customer loyalty amongst its
most important customers or it risks losing out to rivals
who are more effective at delivering the experiences
those customers demand.
From precise insight to actionable strategy
In developing an actionable strategy to manage those
experiences, it is again important to go beyond the
traditional average view of customer needs. Only by
looking at the key drivers of satisfaction for specific
customer segments, can we identify the measures
that will deliver most value in terms of securing
revenues and driving growth. In our fast food
example, a close look at the touchpoints of greatest
importance to brand two’s ‘growth drivers’ shows
how competitive strength on several key areas has
been undermined by weaknesses in a few critical
touchpoints – and how remedying these can deliver
significant and immediate returns.
‘Growth drivers’ actually rate brand two’s taste and
value for money (two of the most important factors
for customer satisfaction) very highly. They like its
Growth drivers
45%
27%
28%
range of food and drinks and they come across its
restaurant locations often enough to make them
easy to visit. Service is quick and efficient enough and
there are no major problems on the atmosphere of
the restaurants or their child-friendliness.
Yet these strengths are being undermined by under-
performance in other vital areas. ‘Growth drivers’
may like the taste of the food but they don’t rate the
cleanliness and tidiness of the restaurants they eat it
in – and they don’t find the staff particularly friendly
or helpful. They harbour some serious doubts about
the quality and freshness of ingredients as well.
So, in this scenario, there are clear and immediate
measures that brand two can take to stabilise its
revenues amongst its most important customer
segment, and start leveraging its advantages on taste
and value to take share from rival restaurants on its
customers’ menus. Staff education and employee
engagement is the number one priority, likely to reward
any investment in training and communication with
strong returns in customer satisfaction and increased
spend. On the quality and freshness of ingredients,
brand two can choose to invest in fresher produce,
Poor retention leads to insecure business

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guided by clear insight as to the additional revenues
this is likely to generate. Alternatively, if the problem is
that consumer perception of the quality of ingredients
lags behind the reality, then it can focus marketing on
addressing this issue.
CEM as a growth channel
The analysis of the two rival brands’ positions
illuminates how customer-centric strategies can
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.
Once customers’ true potential to a business is revealed,
the key to realising it lies in aligning business strategy
and KPIs around the key drivers for the most valuable
segments. Only by investing in the touchpoints that will
deliver increased satisfaction for these groups can CEM
help to secure and grow revenues efficiently. Doing so
requires engaged employees (as our fast food example
shows) and touchpoints that are carefully aligned to
both customer expectations and internal processes.
Above all, though, it requires a clear understanding
of the true current and future value of each customer
to the business – and the importance that should be
attached to meeting their needs.

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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 TNS
TNS advises clients on specific growth strategies around new market entry, innovation, brand switching and
stakeholder management, based on long-established expertise and market-leading solutions. With a presence
in over 80 countries, TNS has more conversations with the world’s consumers than anyone else and understands
individual human behaviours and attitudes across every cultural, economic and political region of the world.
TNS is part of Kantar, one of the world’s largest insight, information and consultancy groups.
Please visit www.tnsglobal.com for more information.
Get in touch
If you would like to talk to us about anything you have read in this report, please get in touch via
enquiries@tnsglobal.com or via Twitter @tns_global
About the authors
Susanne O’Gorman, Global Director, Stakeholder
Management, is responsible for building stakeholder
management expertise, best practice and knowledge
and portfolio management at TNS. With over 12 years
experience in stakeholder research, she joined TNS in 1998
as Account Director for a large multinational client, then
the Stakeholder Management team in 2004 focussing on
customer experience management and employee research.
Susanne has a PhD in Sociology from Regensburg University
and a postgraduate scholarship at the London School
of Economics.
Charlotte Nau joined TNS as a consultant in the Stakeholder
Management team in 2012. She specialises in strategic
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.

In focus growth through targeted customer experience

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In focus growth through targeted customer experience