(6 min read) - Some of the big groceryplayers are changing the game by using Customer Management principles and theirloyalty data to leverage more complete and competitive customer programs.Target's Circle is one example.

What may surprise you, is that CustomerManagement is within reach of most organizations (including your own). It should be a topic of strategic planning forboth grocery retailers and manufacturers in 2020 because of its potential tounlock new sources of profitable growth.

Options - You can watch the video here or read the edited interview below

Here’s atopline summary.

1. Customer Managementgives retailers a way to define and execute different strategies for differentgroups of customers using a repeatable process which allows them to better targetthe needs of individual customers.
2. Customer Managementdrives sustainable growth by helping to identify ineffective promotionalspending that can be reinvested to deliver a greater return with the mostvaluable customers.
3. The most successfulorganizations layer Customer Management on top of their existing CategoryManagement framework so that customer insights are applied to the pricing,promotion and assortment decisions that are made for each item and store.
4. Senior managementtypically believes that their organizations are aligned with the customer,while the people lower in the organizations are frequently unclear about how todo that.
5. The biggest thingthat’s keeping retailers from doing Customer Management is not having a clear processand strong support from the top management.

Copy below has been edited for length and clarity.

In this Q&A, JimDippold and Jean-Marc Sallenave, co-authors of the new book CustomerManagement: How Retailers Must Change to Survive and Succeed , sat down with us to explain whatit is, how it improves business results, and the process and capabilitiesneeded to capture those benefits.

BMC: What iscustomer management?

Jean-Marc Sallenave: Customer Management is a process fororganizing and managing a retailer’s portfolio of customers as a strategicasset to achieve enhanced business results by attracting, keeping, and growingcustomers.

What it does isthis: It gives retailers a way to define and execute different strategies fordifferent groups of customers using a repeatable process that allows them totarget the needs of their most profitable customers and grow that business.

How does itdiffer from what retailers are currently doing?

JMS: The biggestdifference we’ve seen in our work is that the focus of the business changes. Insteadof selling one category to as many customers as possible – the focus becomesselling to targeted customers as many categories and services as possible overtheir lifetime, using all the touch points at the retailer's disposal. It’simportant to understand that customer management doesn’t do away with categorymanagement, it builds on it.

With customermanagement, personalization becomes more than just a way to deliver relevant productoffers (as it's often used today). Instead, it becomes the foundationfor a broader strategy to grow the customer’s value to the retailer.

"Organizingand managing a portfolio of customers" sounds very abstract. What does thismean?

JMS: It isn’t ascomplicated as it sounds. Organizing and managing a portfolio of customersbegins with understanding customer differences – and any retailer withcustomer-identified purchase data can capture these differences. Organizing customers intogroups according to how they behave allows the retailer to understand thecomposition of their customer base and where groups of customers fall across avariety of dimensions.

For example, take a customer called Emily – she:

• is relatively loyalto the retailer, which makes her a silver customer.
• falls in the deluxesegment, so she looks for quality in the food that she buys and favors premiumproducts.
• has children, basedon the products that she buys.
• responds todiscounts, and her purchases have been stable over time.

Emily is the typeof customer the retailer seeks to develop, because there's an opportunity toshift Emily – and customers like Emily – from silver to gold.

Jim, you’vebeen working on Customer Management with retailers such as Safeway andAlbertsons, Food Lion, and Delhaize. How does it improve business results?

Jim Dippold: We all knowthat these loyal and best customers dramatically affect the retailer's top andbottom line and that getting these customers to visit more often is whatpositively affects the top and bottom line. Once a retailer hasthe customer in the store, it's about getting them to buy larger baskets and toshop the store more broadly. This is what really differentiates successfulretailers.

We've repeatedlyseen Customer Management drive sustainable growth by helping to identifyineffective promotional spending that can be reinvested to deliver a greaterreturn. It does this by embeddingcustomer intelligence in day-to-day marketing and merchandising decisions thatget more loyal, best customers to visit the store more often, have largerbaskets, and shop the store more broadly.

What kindof business process is required to get the full value from Customer Management?

JD: It’s true thatwhat gets measured is what gets planned, managed, and resourced. Today, mostretailers view and manage their business primarily through the lens of products,so that’s what gets measured, planned, and managed through the structuredactivities of the Category Management process.

To grow your most valuablecustomers, you also need a process that allows you to measure, plan, manage,and resource. That’s why we developed the Customer Management process wediscuss in our book.

• The CustomerManagement business process has five steps (see top row in Diagram A below): 1) customerunderstanding, 2) strategy, 3) planning, 4) execution, and 5) monitoring.
• To implement theprocess, three fundamental capabilities are needed – information technology,customer segmentation and analytics, and organization capabilities. Theseorganizational capabilities include strong senior-level support and a clearunderstanding of what needs to happen.

Here’s how we’ve pictured it.

Do mostretailers have the fundamental capabilities to make Customer Management work?

JMS: Most retailershave the first capability – the information technology needed to collect customer-identifiedpurchase data.

For the secondcapability – customer segmentation metrics and analytics – it depends on theretailer. Some have more advanced capabilities, others not so much. Although mostretailers have gaps in these areas, the good news is that these are generallyavailable and increasingly affordable.

JD: The third fundamental– organizational capability – is the biggest thing that we see keepingretailers from implementing a successful, sustainable Customer Managementprocess. Unless you have strong support from the top level, you're not going tobe able to be customer-driven in the way we're discussing.

Why issenior-level support so critical to implementing Customer Management?

JMS : Making theshift to a customer culture that permeates the whole organization requiressenior support because you are asking people to change how they’ve typicallydone their jobs. Currently, there’s a gap where there’s no one responsible forcustomer performance the same way you have people responsible for categoryperformance.

The advocates forthe customer in the current organizational structure often reside in themarketing teams, but the decisions about the shelf are made by the categorymanagement teams, and when it comes to retailer/supplier collaboration,conversations are still very product and category focused rather than focusedon growing mutual best customers.

There’s a sort ofwall between the two, such that decisions that are made by marketing, or the insightsthat are generated by marketing, do not always percolate through into themerchandising teams and are not reflected in the pricing, promotion, andassortment decisions that are actually made in the store.

How can aretailer assess their readiness to implement Customer Management?

JMS: Here is an examplefrom a customer audit we did at a large U.S. retailer.

The statements ingreen are things that nearly everyone agreed on - having customer insights wasimportant, we know our best customers, and they represent a significant growthopportunity among existing customers.

The statements inred show that the organization was not yet set up to drive that customer growth.There's a lack of training, customer intelligence is not used to make decisions,and there are no organizational incentives to drive customer performance.

Also telling is thefact that there isn't always widespread consensus around these questions evenwithin the same retailer. The ratings can vary significantly depending on who youask.

Lastly, it'stypical for upper management to believe that the organization is aligned aroundthe customer, when the people lower in the organization are unclear about theirrole in executing against that goal, and the processes and reward systems don'tsupport customer performance.

Invitation: Moving towardsCustomer Management

Brick Meets Clickand Customer Management Partners are offering a Customer Management Readiness Assessment.

• This analysis will explain how retailers are using customer data to run theirbusinesses and assist in identifying opportunities for improvingcustomer-centric retailing efforts.
• By participating inthe analysis, you and your organization will gain access to the study findingsand be able to request a free, personalized report showing how yourcustomer-centric capabilities compare to your peers.

If you are a retailer, pleasetake this short, no-obligation survey tosee how you compare with the available benchmarks via this link .

FYI - It is fine ifmultiple people from the same organization participate in the survey. The more participants, the better theresults.

Related Posts

> How retailers & manufacturers work together in Customer Management to win the customer (blog)

Thanks to our contributors

Jim and Jean-Marcare the co-founders of Customer Management Partners , a consulting andprofessional services firm dedicated to helping retailers unlock profitablecustomer growth.

• Jim Dippold co-founded EYC and guided leading retailers in implementing shelf design,category management, inventory replenishment, and customer-centric retailingsolutions while at Nielsen and IRI.
• Jean-Marc Sallenave has over 20 years of management consulting experience developing growthstrategies and operational improvement plans for leading brands and retailersaround the globe.

Brick Meets Click is a strategic advisory firm with extensive experience, expertise, and perspective on the changes challenging the retail grocery industry. We work with organizations to create and evaluate the right path forward to growth in today’s integrated physical/digital ecosystem. Learn more about our services .