This is a Darden case study.This technical note defines, describes, and illustrates the most common metrics marketers used to monitor and manage customer relationships. Among the metrics covered are customer counts, recency, retention rates, customer profitability and customer lifetime value.
Authors :: Paul W. Farris, Phillip E. Pfeifer, Neil Bendle
Swot Analysis of "Customer Profitability" written by Paul W. Farris, Phillip E. Pfeifer, Neil Bendle includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Customer Metrics facing as an external strategic factors. Some of the topics covered in Customer Profitability case study are - Strategic Management Strategies, Customers, Financial management, Sales and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Customer Profitability casestudy better are - – digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels,
competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, etc
Introduction to SWOT Analysis of Customer Profitability
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Customer Profitability case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Customer Metrics, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Customer Metrics operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Customer Profitability can be done for the following purposes –
1. Strategic planning using facts provided in Customer Profitability case study
2. Improving business portfolio management of Customer Metrics
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Customer Metrics
Strengths Customer Profitability | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Customer Metrics in Customer Profitability Harvard Business Review case study are -
Learning organization
- Customer Metrics is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Customer Metrics is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Customer Profitability Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Customer Metrics
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Customer Metrics does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Customer Metrics are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Customer Metrics is one of the most innovative firm in sector. Manager in Customer Profitability Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Customer Metrics in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Customer Metrics is present in almost all the verticals within the industry. This has provided firm in Customer Profitability case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Sales & Marketing industry
– Customer Profitability firm has clearly differentiated products in the market place. This has enabled Customer Metrics to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Customer Metrics to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Customer Profitability Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Customer Metrics has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Customer Profitability Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Customer Metrics has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Customer Metrics to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Customer Metrics has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Customer Profitability - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Sales & Marketing field
– Customer Metrics is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Customer Metrics in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Customer Profitability | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Customer Profitability are -
Slow decision making process
– As mentioned earlier in the report, Customer Metrics has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Customer Metrics even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Customer Profitability, in the dynamic environment Customer Metrics has struggled to respond to the nimble upstart competition. Customer Metrics has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Customer Metrics is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Customer Metrics needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Customer Metrics to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study Customer Profitability has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Customer Metrics 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Customer Metrics, firm in the HBR case study Customer Profitability needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Customer Metrics has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to strategic competitive environment developments
– As Customer Profitability HBR case study mentions - Customer Metrics takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Lack of clear differentiation of Customer Metrics products
– To increase the profitability and margins on the products, Customer Metrics needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Customer Metrics has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Skills based hiring
– The stress on hiring functional specialists at Customer Metrics has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Customer Profitability HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Customer Metrics has relatively successful track record of launching new products.
Opportunities Customer Profitability | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Customer Profitability are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Customer Metrics to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Customer Metrics to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Customer Metrics has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Customer Profitability - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Customer Metrics to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Customer Metrics can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Customer Metrics in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Customer Metrics is facing challenges because of the dominance of functional experts in the organization. Customer Profitability case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Customer Metrics can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Customer Metrics can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Customer Metrics can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Manufacturing automation
– Customer Metrics can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Customer Metrics can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Customer Metrics to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Buying journey improvements
– Customer Metrics can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Customer Profitability suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Creating value in data economy
– The success of analytics program of Customer Metrics has opened avenues for new revenue streams for the organization in the industry. This can help Customer Metrics to build a more holistic ecosystem as suggested in the Customer Profitability case study. Customer Metrics can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Customer Metrics can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Threats Customer Profitability External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Customer Profitability are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Customer Metrics with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Customer Metrics high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Customer Metrics needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Customer Metrics can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Customer Metrics.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Customer Metrics needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Customer Profitability, Customer Metrics may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Customer Metrics can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Customer Metrics demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Customer Metrics has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Customer Metrics needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Shortening product life cycle
– it is one of the major threat that Customer Metrics is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Customer Metrics can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Customer Profitability .
Regulatory challenges
– Customer Metrics needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Weighted SWOT Analysis of Customer Profitability Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Customer Profitability needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Customer Profitability is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Customer Profitability is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Customer Profitability is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Customer Metrics needs to make to build a sustainable competitive advantage.