Customer Targeting and Value Proposition
L.E.K. Consulting helps clients identify the highest-priority customer segments to target and define value propositions tailored to the needs of the prioritized customer segments, while optimizing the economics from both a provider and customer perspective. Many companies struggle with how to best understand, segment and prioritize customers, leading to a “one size fits all” approach for allocating resources and investment. We rely on rigorous quantitative analysis of sales data, as well as external research, to inform customer groupings and determine the appropriate segments to pursue with the right value proposition. Our customer targeting capability provides clients with a clear focus on the “best fit” segments where the business can drive revenue and profit growth.
For both new and established businesses, focusing on the right customers can dramatically improve the performance of the business by optimizing sales and marketing investment. For businesses entering new markets the benefits are obvious: They can target the right customer segments where the business’s value proposition is most effective and where the new business can rapidly drive profitable growth. Established businesses, on the other hand, can use customer targeting to better understand the profitability of different segments in the customer portfolio, find new opportunities to differentiate their proposition, pursue new pockets of growth and decide on the right strategy to serve (or not) less profitable segments. Clear customer targeting is particularly important in B2B markets, because requirements and value to the business may vary significantly across customers.
Many companies struggle with how to best understand, segment and prioritize customers, fully delegating those decisions to their sales teams without clear guidance or structure. A poor understanding of the unique needs of different customer segments often leads to a “one size fits all” approach for allocating resources and investment. An inability of the organization to tailor its message to unique customer segments can lead to missed business opportunities or segments of the customer portfolio delivering low profitability.
How we help
Reviewing a business’s choices around customer targeting and value proposition is the first key step in our Commercial Excellence interventions:
L.E.K.’s Commercial Excellence Framework: Customer Targeting
We help our clients target the right customers with the right value propositions by:
- Conducting customer segmentation based on different criteria (demographic, need-based, behavioral or attitudinal), utilizing primary research methods (surveys or interviews) and analytical and statistical tools to manipulate large data sets
- Analyzing the economics of different customer segments to accurately estimate customer cost-to-serve and identify levers to improve profitability
- Effectively prioritizing customer segments for targeting based on their objective attractiveness (size, profitability, growth potential) and a company’s subjective right to win in each segment (e.g., fit of value proposition with customer requirements)
- Bringing experience in reviewing all elements of the customer proposition, including profit and service offer, pricing, and relationship management model
- New customer segmentation to create a new, common frame of reference across commercial functions to coordinate and optimize sales and marketing activities
- Clear focus on the “best fit” customer segments where the business can drive revenue and profit growth
- Deep insight into the economics of different customer segments, including the levers available to improve the financial contribution of customer relationships
- Understanding of how the business’s value proposition needs to be tailored and implemented to better serve the needs of each segment