Monday, 14 March 2011

In Denial – My world is fine without any changes thank you. Iain Lovatt, Blue Sheep


 Iain Lovatt,Blue Sheep
We live in a world of denial. It’s a human mechanism – a weakness. We spend money and don’t worry about paying it back. We damage our environment and see it as the responsibility of others.
We pursue activities that may not be kind to our bodies but refuse to accept the potential consequences. Some might say that denial is born from naive optimism.
Sadly, reality is often too hard to face so we park the unpleasant bits or those tasks we just don’t want to face in the back of our minds – sometimes to our detriment. This mindset is evident across many of our private and business lives alike. When life is perceived to be running smoothly, everything is rosy in the garden. We don’t need to think about doing things differently or changing the way things run, we just keep sailing on a sea of denial that anything can possibly go wrong. What we need to consider is that denial can be crippling to a business if not nipped in the bud. Let me ponder a few thoughts on why I think this is so.

http://www.youtube.com/watch?v=ZjDUyyMe-IU

The changing face of business has altered the balance of power between the supplier and the customer. Response rates from direct marketing have collapsed, shifting focus and investment into lesser chartered waters. Blame the Internet – blame our fickle, ephemeral capitalist culture. The fact is, things are different – not necessarily better or worse – just different. More choice, greater protection against marketing approaches – by virtue of preference services for example – and an erosion of loyalty has pushed up the cost of customer acquisition.

As a result, customer affinity has become more important than ever. So, while recognising that holding on to your customers is paramount, the question arises, which ones do you really want to hold on to, which customers have the affinity you are looking for? Businesses that sit on their laurels are in danger of making the fatal mistake of thinking all’s OK at the moment – for whatever reason – and whilst it isn’t broke – let’s not fix it. It’s classic denial!

Others, on the other hand, take a more sober approach to ring-fencing their customers and align business activities. This is achieved partially through proportionate service and differentiation. The challenge is, where do you start to gather the insight you need to make these decisions and more importantly, to make them with confidence? And, how do you make sense of the data you collate from your customer relations? At Blue Sheep we have pioneered Money Mapping to answer these questions. It is by mapping relationships that we are able to determine customer worth and best value. Let me elaborate if I may.
Money Mapping unveils the inequalities in customer worth. What I mean by this is that some customers will have a greater intrinsic value than others. Customers can be dissected, using analytical tools, to establish their cost to your business and their profitability. All will sit at some point on a spectrum of value.
We broadly categorise customers into one of four groups which include Treasure Accounts, Sales Promotion, Market Development and Avoid. These are further subdivided for granularity. Customers are assigned to categories based on a detailed profiling analysis to which market penetration, revenue analysis and growth potential figures are further applied. This information then translates to factors such as ease of acquisition, profitability and growth sectors. So, what does this exercise have to do with staving off a bout of denial? Well, I believe a great deal.
Through a process of categorising customers based on factual data, you are then confident to make decisions about how you service customers, the allocation of resource and what investment you may need in the future to retain your best customers, develop those with potential – or conversely, help to determine actions for the dreaded Avoid customers. It puts you in control of the present and the future.
Service is key to this concept. Good customers will always be prepared to pay for good service and good service – whatever guise this takes – creates the differentiator that customers can recognise and appreciate. Money Mapping is an analytical process that generates insight that may ultimately lead to reducing the number of customers you have. It fosters a ‘more from less’ ethos and bangs denial on the head. It makes sense to retain relationships that offer a mutual benefit – but so many don’t.

Even during times of euphoric success the imbalance of customer relationship Avoid accounts are still there in background eating away at your profits and Treasure accounts not getting quite the attention they deserve. Don’t ignore this reality as it’s a real opportunity for many waiting to be leveraged. And this is something that I simply can’t deny!

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