Strategy from the Outside In: Profiting from Customer Value Write-Up - Part II
In Strategy from the Outside In: Profiting from Customer Value, George S. Day and Christine Moorman use research to determine business strategies that separate successful from unsuccessful firms. This write-up shall have a section, titled § II. Brief Summary, which outlines each chapter in Chapters 7 through 13, including the conclusion. This write-up shall also have a section, titled III. Application, which shall apply the material from § II. Brief Summary to a firm (hereinafter "Firm A") with which I worked as a business consultant. Firm A is a multi-national holding company that specializes in acquiring, supporting, and growing its subsidiary companies through accelerated organic growth as well as through acquisitions and/or strategic joint ventures and divestitures.
II. Brief Summary
Chapter 7. The Third Imperative: Capitalize on the Customer as an Asset
For a firm, the profitability of the customer asset - the sum of the discounted long-term profits associated with the customer's purchases and referrals - is based on three principles. First, that a firm must distinguish between behavioral loyalty – the frequency of customer purchases from a firm when a need arises – and attitudinal loyalty – an attachment to the firm and/or its specific products or services. Second, that a firm must manage customers to engage in behaviors that directly result in increased economic profits for the firm. These include giving the firm a greater share of wallet, purchasing new products and services, and lowering price sensitivity, etc. And third, that a firm must be capable of capitalizing on the customer asset, which will be addressed in Chapter 8.
Chapter 8. Capitalizing on the Customer as an Asset
To be capable of capitalizing on the customer asset, a firm must use strategies to select, develop, protect, and leverage customers. First, to select customer assets, a firm may use customer lifetime value (CLV) models to value current and potential customers. Second, to develop customer assets, a firm may: (1) Create a learning relationship with customers; (2) Treat different customers differently; (3) Reward valuable customer behavior; and (4) Engage customers in communities. Third, to protect customer assets, a firm may: (1) Act proactively to differentiate value, rebuff competitors' challenges, and raise customer switching costs, etc; and (2) Increase customer engagement by fostering customer co-creation and creating multiple relationships. And fourth, to leverage customers, a firm may activate customers across current categories, migrate customers to a higher-value segment, and create complementary sources of value, etc.
Chapter 9. The Fourth Imperative: Capitalize on the Brand as an Asset
A firm, in order to capitalize on the brand asset, must do three things that emphasize the value-creating pathways – purchase and non-purchase – associated with brands. First, it must satisfy the first imperative of customer value leadership. Second, it must use brand-building activities to maximize the value proposition and strengthen brand reputation; brand-protecting activities to protect the brand and anticipate counter threats; and brand-leveraging activities. And third, it must support these actions with a comprehensive dashboard of brand metrics on customer recognition and recall, customer attitudinal loyalty, and ongoing customer purchases, etc.
Chapter 10. Capitalizing on the Brand as an Asset
A firm, in order to effectuate brand-leveraging activities, must use pathways to generate growth, such as adjacencies and global markets, and the internet to manage these activities. First, to enter adjacent markets, a firm may use an emerging growth strategy, as opposed to a dilution strategy; this provides that a firm identifies and communicates unique customer benefits to distinct...
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