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 - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, central banks are concerned over increasing inflation, increasing energy prices,
increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
Low bargaining power of suppliers
– Suppliers of Customer Metrics in the sector have low bargaining power. Customer Profitability has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Customer Metrics to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Customer Metrics has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Customer Profitability HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Customer Metrics digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Customer Metrics has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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.
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.
Ability to recruit top talent
– Customer Metrics is one of the leading recruiters in the industry. Managers in the Customer Profitability are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Customer Metrics has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
Analytics focus
– Customer Metrics is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Paul W. Farris, Phillip E. Pfeifer, Neil Bendle can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses Customer Profitability | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Customer Profitability are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Customer Profitability, it seems that the employees of Customer Metrics don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Workers concerns about automation
– As automation is fast increasing in the segment, Customer Metrics needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
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.
Need for greater diversity
– Customer Metrics has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
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.
No frontier risks strategy
– After analyzing the HBR case study Customer Profitability, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
Customer Metrics has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High bargaining power of channel partners
– Because of the regulatory requirements, Paul W. Farris, Phillip E. Pfeifer, Neil Bendle suggests that, Customer Metrics is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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.
Products dominated business model
– Even though Customer Metrics has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Customer Profitability should strive to include more intangible value offerings along with its core products and services.
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 -
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Customer Metrics can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Customer Metrics can use these opportunities to build new business models that can help the communities that Customer Metrics operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Customer Metrics can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Customer Metrics has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
Better consumer reach
– The expansion of the 5G network will help Customer Metrics to increase its market reach. Customer Metrics will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
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.
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.
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 -
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 .
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.
Stagnating economy with rate increase
– Customer Metrics can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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 .
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Customer Metrics will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Customer Metrics business can come under increasing regulations regarding data privacy, data security, etc.
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.
Increasing wage structure of Customer Metrics
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Customer Metrics.
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.
