Consumer Strategy IS Business Strategy, Part II
In today’s highly competitive market, businesses are constantly seeking ways to differentiate themselves and drive growth. Yet, despite the clear advantages of a consumer-centric approach, many companies still treat consumer focus as a secondary consideration, often relegating it to the marketing department or customer service teams. This oversight is a critical mistake. To truly succeed and build a sustainable competitive edge, companies must embed consumer strategy at the core of their overall business strategy. By doing so, they can ensure that every decision, from product development to customer interactions, is aligned with the true needs and desires of their consumers.
This two-part article explores (1) why integrating consumer strategy into the heart of your business strategy is not just beneficial, but essential for long-term success and (2) what it looks like.
The Solution
The true solution to aligning business strategy with consumer needs is simple, cost-effective, and time-tested. It requires a commitment of time and focus, rather than large financial investments or groundbreaking innovations. Our straightforward approach yields long-term results that are sustainable and impactful.
Where to Start
Basing strategy on the consumer assumes a detailed understanding of the consumer. You should be aware of both the actual and desired groups and their strategic levers. Ideally, you have even mapped their optimal journeys to be able to address their specific needs and preferences.
Check out our article, Understanding Consumer Centricity, to read more about this.
Determine Who to Prioritize
You don’t have to focus on all of your consumer groups all of the time. Decide which ones to prioritize based on factors like profitability, growth potential, required investment, and alignment with your brand's core values.
Prioritizing the right consumer groups ensures that your efforts and resources are focused on areas that will yield the highest returns.
Identify Where to Intervene
Each group will have different areas of opportunity within their lifecycle phases. Knowing whether you need to work on acquisition, retention, development, or reactivation highly influences the work to be done and investments to make in the coming months.
Outline the Executional Pillars
This is where top down meets bottom up.
While business strategy is not the place for too much detail, it should provide guideposts to ensure that the entire organization is working in the same direction toward the same goals. By creating simple pillars for actioning the identified strategic areas, it is possible to do so without stunting departmental creativity and efficiency.
Taking this step together with senior leadership will ensure the feasibility when it comes time for them to define the functional strategy as well as their budgets. It will also create buy-in and alignment prior to the creation of the functional strategies, ensuring a more cohesive execution.
What It Looks Like
Let’s take a look at what the consumer strategy could look like for a premium fashion brand. This example is broad but could be further honed by geography or other typical differentiator.
In the Long-Term Strategy Document
Our current consumer universe consists of Sensible Girl, Modern Girl, and Fashion Girl, all falling within our traditional market.
Market Direction
For each of the groups, we must adapt to her newfound fluidity around work, play, and me time. In addition, macroeconomic situations are further compounding this all-purpose approach, meaning fewer purchases at lower values as more casual pieces increase in share. Both are especially true within certain demographic segments. We expect a natural decrease in spend driven by AUR and frequency.
To combat this, we must ensure that we adapt to:
An easier, more comfortable fit and style amenable to changing location and task throughout the day.
Expand our focus on “treat without guilt”, providing frequent newness, and easy or lower-cost buys.
In addition, we will add Modest Girl to our universe. This will broaden existing markets and unlock new ones in geographies that we are currently either nominally participating in or have yet to enter.
In the Annual Planning and Strategy Document
Of our 4 consumer groups, we will be focusing on Group 1 and Group 2 for growth over the next 18-24 months in order to protect existing sales and drive incremental growth with limited investment.
Group 1: Sensible Girl
Given their significant share and profitability, this group contributes significantly to overall company performance. As such, it is important that we protect it while seek to grow where possible with minimal investment, focusing on retention rates to drive LTV amongst the lost segment.
Prospects are not a focus at present given our dominance compared to other players, owning xx% of this consumer group.
Active customers, new and returning, demonstrate positive performance in terms of retention and spend - xx% and €xxx, respectively - with the existing product, distribution, communications, and service. As such, we will maintain the status quo with them.
Lost customers impacted by past directional changes and deviations from the brand’s core values, on the other hand, are a big opportunity. We expect to be able to reactivate xx% of a pool of XX,XXX former customers with minimal investment. We will focus on communications and clienteling across relevant platforms to entice their return (mass, one to many, one to few, and one to one messaging through PPC, direct mail, and CRM)
Group 2: Modern Girl
Given their second-ranked share and profitability together with the low share of wallet we currently have of their notable spending power, this group has much growth potential both in terms of annual spending and retention rate to quickly drive LTV.
Prospects are not a focus at present given that our new clients constitute xx% of the total group.
Active customers, require our attention, especially
New customers. considering their soft retention rate at xx%. To do so, we must present the assortment that respond to their needs in a way that appeals to their fact-based nature, communicating the problems solved and product benefits in both service and communications. This must be notable on our online channels given the sizeable opportunity in online sales that we are currently leaving on the table with this group, selling exclusively offline to a cohort which prefers the opposite.
Returning customers have healthy retention rates but are a small share of the overall group. While there is no direct focus necessary, we expect a halo benefit given the improvements to the lower-funnel communications directed at the new customer segment.
Lost customers do not show great promise at the present time, with a total pool of only x,xxx and an overall weak loyalty level. They should be revisited after understanding how to successfully retain the new customers, as noted above, to evaluate the relevancy of actioning them.
Notice that there were high-level indications for Marketing, Product, and Retail. These require effort from much of the organization.
Then What?
Once you have a clear understanding of what you need to do for the consumer - and ultimately the business, the next steps involve turning this insight into action across the organization. This approach ensures that each department is aligned in serving the consumer while also addressing other strategic initiatives such as process improvements and productivity enhancements.
Functional Strategy Development: with their newfound clarity, each department should then develop its own functional strategy that supports the consumer strategy. This involves outlining specific actions, resources, and timelines needed to achieve departmental goals that align with the broader consumer objectives.
Executional Strategy and Action Plans: The functional strategies of each department come together to form the executional strategy. This strategy should include detailed action plans, specifying who does what, when, and how. These plans should be actionable, measurable, and adaptable to ensure flexibility in response to changing consumer needs and market conditions.
For even greater alignment and effectiveness, consider journey mapping and creating a company-wide roadmap to guide a consumer centricity transformation that aligns not only the strategy but the entire organization and operations with the consumers’ needs.
Conclusion
The consumer strategy should not live within a single department but rather serve as the foundational base for the entire organization. When every department works to serve the consumer while also delivering on other strategic initiatives like process improvement and productivity enhancements, the organization becomes more efficient and effective.
Integrating business strategy with consumer strategy is not just a tactical move; it's a strategic imperative. Companies that succeed in this integration are not only able to attract and retain customers but also to achieve higher profitability and market differentiation. The key lies in understanding that every business decision, from product development to marketing, must be made with the consumer in mind. This consumer-centric approach is what separates the leaders from the followers in today's competitive business environment.
By focusing on the consumer as the common denominator, ensuring clear and aligned goals, and creating actionable plans across all departments, businesses can achieve sustainable growth and long-term success. It’s not about the latest trends or the biggest investments; it’s about consistently and genuinely putting the consumer at the heart of everything you do.
