Are your customer offerings properly aligned to segment value?

Once organisations have set up opportunity-based segmentation and gained a better understanding of the value and potential in their customer base, many realise their offerings (and cost to sell and serve) are not appropriately aligned to value in their customer segments. How can you ensure you service the complex needs of strategic customers without missing out on significant opportunities in lower value segments? The answer lies in customising offerings to segment value.

Through extensive experience working with organisations on their transformation programs, Blackdot has identified 5 key steps that leading enterprises take to reorganise around the changing customer and ensure go-to-market models will meet elevated customer expectations. Having already covered the first step of developing opportunity-based segmentation, this post explores the next step – customising offerings to segment value.

Blackdot’s-customer-strategy-approach_Diagram.jpgThe benefits of aligning offerings to value
Organisations that have focused on building a wide product range can struggle to be customer-centric, as it can take significant internal effort to determine the right solution, and the range can be hard to navigate and access as a buyer. With opportunity-based segmentation, each segment will require different value propositions, product offers and go-to-market approaches.
The top end of the spectrum requires the design of a bespoke offering to meet the complex and sophisticated needs of strategic customers. While lower value segments can often be overlooked due to the relatively smaller value of each transaction, in totality they can represent enormous value if sold to and serviced efficiently through mass customisation at scale. Customising offerings to segment values in this way leads to better business outcomes, greater speed to market, lower cost to serve and the ability to handle more volume, along with other benefits.
Case study – Reversing declining revenue in a growing market
A media company needed to address multiple organisational inefficiencies to reverse declining revenue in a growing market. The business lacked customer-centricity – it was overly-focused on its wide product range and a bespoke solution had been developed by a cross-functional team for every opportunity. This resulted in a high cost to sell and serve. The solution involved restructuring the customer base around potential value and aligning propositions to each segment.
Firstly, the focus was shifted away from one of product and geography with a new customer segmentation based on value and customer needs. This produced three customer segments of descending value: Key Accounts, Major Accounts and Small to Medium Enterprises (SME).
Secondly, a new product and service offering was developed for the low-value segment to deliver improved client outcomes and serve more marketing needs in a cost-effective manner. The new offering combined existing products into a variety of bundles designed to meet specific client needs (e.g. raising awareness, generating foot traffic, increasing sales) without having to design a bespoke solution. In a similar fashion to telecommunication product offerings, these bundles can be customised with add-ons to meet additional client needs. 
Restructuring-the-customer-base-aligning-propositions-to-segments_diagarm.jpgThis realignment resulted in better business outcomes, greater speed to market, ability to handle more volume, lower cost to serve, greater product and services take-up, and longer-term relationships through increased client stickiness as more of their needs were met.
Best practice tips for customising offerings to segment value
1. Rationalise & simplify product offerings with bundles
New offerings should combine existing products into a variety of bundles designed to meet specific client needs (e.g. raising awareness, generating foot traffic, increasing sales) without having to design a bespoke solution. This product bundling is a key component of simplifying the product set. Bundles can be combined with a ‘subscription’ offering to lock in customers to enable longer term engagement and stickiness and lower cost-to-serve. Bundles can be customised with standardised add-ons to meet additional client needs or lock-in contract lengths – essentially turning bundles into packages.

2. Shift to simple mass offers & bespoke high-value offers
Improve cost-to-serve by developing a product and service offering in the mass market segment that focuses on transactional delivery through templates and product support. This will deliver more effective client outcomes and serve more customer needs in a cost-effective manner. High-value segments will require more high-touch support from various functions in the business. To do this as cost-effectively as possible, robust processes and rules of engagement will need to be established.
3. Ensure ongoing portfolio optimisation
Monitor the performance of products and rationalise the less popular, inefficient or ineffective product sets, using revenue, staff engagement and NPS as metrics. Aim for ongoing optimisation by embedding accurate measures of performance in sales reporting, refining product (including bundles and packages) and increasing sales capability with relevant training.
What’s next?
Prioritising resources around high-value customer segments allows organisations to deliver an optimal customer experience in a cost-effective way, leading to an increase in both profitability and customer outcomes. It’s important to have a good channel strategy in place to support this segmentation, so we will explore prioritising channels based on value in an upcoming blog.  

Worded by Tim Rayner.

For further insights into segmentation and customer strategy, download our whitepaper "Reorganising Around the Changing Customer".