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Taking small steps towards Customer 4.0

By Roger Magill, PA business design expert

We know organisations today have much less influence over their customers' buying behaviours. And the customer-led revolution, what we call 'Customer 4.0', calls for businesses to really get to grips with the end outcomes customers seek.

While it's clear becoming a Customer 4.0 organisation will reap significant benefits, it often requires a fundamental redesign of the operating model – something that many organisations see as too costly and disruptive. The good news? It doesn't have to be that way.

By adopting an entrepreneurial, startup mindset, you can develop a minimum viable product (MVP). This will allow you to test the application of Customer 4.0 as a low-risk, low-cost and rapid experiment. You can see this in action in our 'start small' step in our model below. This is the step that ultimately allows you to postpone costly and disruptive redesign.

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Think Big Graphic for Blog
Our 'Think big, start small, scale fast' approach

Let's take a look at how 'starting small' can work in practice

Imagine a national chain of natural food supermarkets throughout the UK (with 30 shops) is suffering declining sales among its 20 to 30 year olds. It's surviving – but not thriving – and a wholesale redesign is off the cards. Here's what it does to respond to the Customer 4.0 world.

Outcome-based segmentation

  • The supermarket looks at the customer segment that's currently suffering the most; 20 to 30 year olds.  

  • The chain currently views this segment as the young, tech-savvy convenience shoppers who value: 
          • discounts and offers
          • multi-channel experience
          • short checkout queues. 

  • The retailer considers this group more carefully to understand them based on their desired outcomes – not their demographics.   

  • The chain researches and interviews this group to understand the ultimate outcomes they want to achieve. It realises the original group is made up of two distinct outcome-based segments:    
      • The aspiring foodie – the ultimate outcome being recognition and a sense of belonging among peers – is a breed of hipster who wants to be seen consuming natural, sustainably-sourced and independently-produced foods. They desire recognition as being distinct from mainstream modern society. They relish traditional experiences – worlds apart from the largely online consumer world of today. 
      • The occasional indulger – the ultimate outcome being relaxation and socialising – is a busy young professional with disposable income. They tend to be married or in long-term relationships, and like to indulge in fine foods (especially mid-week or at weekends) as a reward or break from their busy jobs. They want quality, but not necessarily healthy, foods and often eat socially.

Customer universe mapping

Armed with this knowledge, the supermarket begins to understand how these groups navigate their universes to achieve their goals. They forget about their own interests (temporarily) and consider this objectively. The chain develops customer universe maps for each segment and discovers the following.

The aspiring foodie

Aspiring foodie
  • starts their journey in a more planned way – they know the types of food they want to stock up on
  • researches new and exciting foods, attends food markets and participates in reading and creating blogs
  • looks for ways to reduce their carbon footprint and use sustainable sources
  • is affected by specialist media on topics of health and sustainability
  • considers street markets or farmers markets as alternatives when trying to achieve their outcomes – and they like to be seen in these places
  • is active online and shares videos and content, but also relies on their in-store and on-street interactions to guide their food choice.

The occasional indulger

Occasional indulger
  • is much more erratic and impulsive about addressing their desires – they tend to associate the experience as a 'treat' and when the desire to 'unwind' strikes
  • considers a much wider range of alternatives given their goal is broader, eg restaurants, food delivery or even going to the cinema can be a way to reward themselves
  • they're influenced by friends and family on social media when it comes to leisure, food, wine and entertainment
  • they often end up entertaining or eating with others.

Value proposition development

With a greater understanding of the desired outcomes of these groups, and the landscapes they navigate, the supermarket develops more relevant value propositions.

For the aspiring foodie:

  • a greater range of rare, independent, natural ingredients
  • an authentic, traditional and unique in-shop experience
  • easy access to trusted information on sustainable, healthy produce.

For the occasional indulger:

  • more luxury products and fine wines
  • a greater range of products catered for groups, eg platters
  • later opening times for shops and deliveries available later on in the evening.

'Outside-in' journey mapping

For each group, the retailer conducts outside-in journey mapping to understand the broad range of touchpoints where the customer might be influenced. They look at how they can use the actors in the customer's universe to draw the customer towards them.

Proposition testing

The supermarket devises an MVP that could help them test this. To keep small, they initially:

  • focus on the aspiring foodie only
  • consider just one of their shops
  • develop changes to selected pages on their website
  • use low-cost, highly-targeted marketing.

To test this MVP, they make temporary changes to their operations. These require small configurations to their operating model or short-term projects, but don't require any redesign of the target operating model. Here's what they do:

  • establish a stall at a local food market and provide free samples
  • stock a modest range of new and more exotic products – found through researching independent producers locally, nationally and overseas
  • arrange for a popular food blogger to talk about their most recent range of products
  • remove promotions and any garish signs from one of their shops, give their staff aprons and train them to engage with the customers more closely
  • provide recipe cards in the store and clearly display the nutritional benefits and sourcing details of the foods on the shelves
  • allow customers to shop in-store and then arrange for their shopping to be delivered by bicycle later in the day – with the carbon impact in grams of CO2 quoted
  • partner with a local gym and yoga centre to offer rewards programmes
  • ensure they don't ostensibly encourage the customer segment to share or publish – as this would damage the exclusivity element they seek
  • increase their prices to cover the additional costs they incurred
  • update their website to reduce promotions and feature more detail on the sourcing of the food (including videos).

So what's the result?

Their MVP generates a significant rise in profit, so the supermarket decides to step into the 'scale fast' phase (see our model for more detail). With the exception of a few small adjustments based on their findings, they design changes in their target operating model and transition to this model in two of their shops. They monitor performance in the market and use this to generate more customer insight.

The retailer uses these new insights to revisit 'start small' – devising further outcome-based segments and testing more MVPs. They iterate the approach, organically developing their nationwide target operating model around a total of four new outcome-based customer segments over the next year.

By thinking big, starting small and scaling fast, you can unlock huge potential in your operating model. The organisations who will thrive in a Customer 4.0 world will be those who help their customers achieve their ultimate goals. They will be clear on their purpose and be led by people who understand that customer value is a core driver of future growth.

Find out more about our work in business design.

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