In part four of a five-part series looking at the fundamentals of business strategy, Julian Wells discusses how you can better understand your customers.
Understanding the environment you operate in is a key component of any firm’s strategy and it is the point where most of our assignments at Whitecap begin.
It is critical to determine how you fit into your market, to monitor how it is changing and evolving over time and to decide when and how you can best respond. It is also important to know the different markets, sectors and segments available to you, to choose which ones to target and then identify how to compete effectively and profitably.
Building market awareness includes understanding customers, competition and market trends, and understanding how your own competences and capabilities align to these. Gathering data and insight across these areas helps build depth and confidence into the decisions you make, whether they are strategic or tactical.
Understanding your customers
First and foremost, who are your customers? How many of them are there (or could there be), and what trends can be observed? Mapping your market and understanding the segments that exist is a fundamental task. You also need to be clear what your customers want from you and how this might evolve over time.
In the mortgage market, customer segments are usually targeted by lenders in cycles, sometimes spurred on by political pressure, so the opportunity to service different segments changes regularly. A change of government will likely precipitate a change in housing policy and opportunities for agile brokerages.
One obvious increasing trend is consumers increasingly favouring online – meaning social, mobile and tablet will feature in what many of your customers want from you. It is not just about whether your website looks good on mobile phones or whether you tweet occasionally, it is about recreating a consistent customer experience throughout your touchpoints.
Your customers will also have a perception of your brand, which is vital for you to gauge. More often than not they will not hold the opinion you would like them to and that is a clear indication of where you need to take some action.
Who else is serving your customers? You need to be able to answer that question today but also to have an informed view of how the competitive landscape is likely to look in the future. Alarms bells should be ringing if you perceive their offering to be a closer fit with your target customer’s needs, but it is important not to jump to conclusions – you should perform an objective metric assessment.
A trend across several industries is for online review services, like Trustpilot. A double-edged sword of course, but finding out what your competitors’ customers are saying about them is easily done through this channel. What aspect of the service pleased them and how does yours compare?
What does your industry market place look like? Identify the key social, regulatory, economic, political, and technological changes and trends. If you are in mortgages and are reading this on the Mortgage Strategy website, you are in a good place to start to identify many of those. Once you have done that you can establish how you will respond. You may choose not to respond at all, but that is a decision that can only be made once you have evaluated the risks.
Having understood the external environment, it is important to also understand your internal capabilities and how these help/hinder your strategy. The best-known tool for this is the SWOT analysis, which is one of the most valuable yet under-utilised management tools available. It can be useful to complete this exercise with a third party to avoid your own unintentional bias clouding the results.
Once you have an understanding of your market across these four areas, then you can feed this knowledge into your strategy and proposition. One of the most powerful outputs is the data you gather, and the insight that can subsequently be gleaned from it.
But do not just sit on it… If you have read this and thought “we might have a problem there”, chances are it will not heal naturally and requires your intervention.
To help you, here are 6 key market awareness questions Whitecap Consulting asks the business leaders we work with:
- Do you have a deep understanding of your market and how it might develop in the next 2-4 years?
- Do you have a clear understanding of major external trends and know how they may impact your organisation?
- Do you understand your current and future competitors, and know how you’ll outperform them?
- Do you have a good understanding of customer needs and how they might develop in future years?
- Do you regularly solicit customer and partner feedback to improve products and services?
- Do you know what the biggest opportunities and threats facing your organisation are?