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New Paradigms, New Challenges. South America
A Case for Change

July 2009

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A Case for Change

Today, customers are knowledgeable, demanding and have limited loyalty. In a difficult economy, it is especially important to understand the customer. Who are they? Where do they live? Where do they work? What do they want or need? Many companies have vast unused customer data. Unlocking this knowledge is critical. Success begins with gaining a deep insight into the customer, their problems and desires. Strategies must be developed by putting everything that is known about existing solutions or those that can be created. An important element for this is gaining insights and ideas from employees, vendors, business partners and financial institutions. Those who do a better job in providing their customers with the “right” solutions will grow their business and profits. Growing the base of loyal customers is critical to success. Increasing the base of loyal customers provides many benefits. Loyal customers produce most of the profitability for the company. Building a lasting relationship with your best customers will help maintain business even during a difficult economy. There are five questions that must be answered to help assess your customer loyalty:

• Is the customer aware of your brand and value propositions?
• Do your customers consider buying your products and services?
• Did your customers buy from your company?
• Did your customers return to your company to make another purchase?
• Will your customers recommend your company to friends?

As the bottom of the recession is reached, it is urgent that a broad evaluation of all operational processes, procedures and systems be initiated. Problems must be assessed to determine root causes and strategies developed to exit as a stronger, more efficient and more competitive company. Over time, most companies have developed to do almost everything. These should all be reviewed to determine if there is a better way to do something that saves money or time and improves the employee experience. Also, it is critical to understand the efficiency and profitability of products and inventory. Analysis of inventory needs to include in-stocks. Is the product in-stock for the customer? How fast is the inventory turnover? Is there an at-risk inventory reduction strategy? Is there an effective assortment planning process that reduces product duplication? Rigor around inventory analysis will pay off in the future with leaner inventory levels and focused assortments of products that are important to the customer.

Increasingly, business today is shifting from product centricity to customer centricity. While price is important, providing value added services is critical to success. Offering needed services to your customers can provide differentiation, a competitive advantage and increased profitability. Increasing the times a customer can be touched, is important. Strategies should be built to provide services where the customer needs them: in a store, in the customer’s office or in the customer’s home. Quality and consistency are critical to any services offering.

Finally, the key differentiator and competitive advantage will always be an outstanding customer experience. Having the right product in-stock at competitive prices, providing an exciting shopping environment, having exceptional service offerings and employing attentive and customer centric employees will assure that a company has a chance to win the game. As labor is cut, inventories reduced, and capital expenses put on hold – now is not the time to destroy the customer experience.

Adaptable companies should be able to use the slowdown to strengthen their long-term franchise. A challenging economic environment should be regarded by the most progressive companies as an opportunity to refocus on maximizing the efficiency of their operations, holding on to their most talented employees and selectively expanding their operations.

The winners in today’s challenging environment will be those who can adapt most quickly to changes that are taking place at lightning speed. Most importantly, long term survival is dependent on leadership’s openness to responsiveness to change.


References:

[1] The Economist, May 5, 2009, “Outlook for 2009-2010, Country Briefings, Brazil


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