POSTED : October 12, 2015
BY : Clay Walton-House

The concepts of integrated customer loyalty and customer-centricity go hand-in-hand, as one begets the other. As organizations shift toward operating paradigms that more intentionally put the customer at the center of decision making (customer-centricity), they enable themselves to better leverage their available assets and customer touchpoints to influence customer behavior and loyalty (hence integrated loyalty strategy).  With customer-centricity being at the forefront of many brands’ strategic evolution, this is a hot topic.

Yet the move toward customer-centricity often meets a major roadblock in the form of required change in organizational structure. Executing “integrated” loyalty strategy relies upon broad organizational alignment around customer insights and objectives, in addition to cross-functional planning and execution. Companies must share a holistic view of customer behavioral drivers, and work in a connected fashion to build experiences that will lead to the desired customer outcome. Historically, this is just not how organizations have been optimized; rather, the focus has been on functional specialization with an eye toward product or service development and delivery (born out of our industrial roots and built to delivery efficiency at scale). This product-centric orientation within the majority of organizations can cause rifts in customer-centric priorities and is felt on such tangible levels as how P&Ls are established and assigned.

On the surface it would seem the solution is easy: move toward a customer-centric organizational structure aligned around customer needs, and optimize for delivering on customer demands. Not surprisingly, this is far easier said than done. Per an academic study published in the journal Marketing Science, as much as 30% of the Fortune 500 have already made the shift toward a customer-centric organization structure. The results have been mixed, however, with some companies realizing productivity gains after a period of transition, while others actually saw a drop in performance. The study highlights a number of factors that should be considered before making the change, including industry and competitive landscape. Brands should consider the unique needs of their business, as well as their customer base, before making the significant investment in organizational restructuring.

Models for Internal Re-structuring

For those brands who have done the due diligence and wish to delve deeper into the restructuring opportunities, here are two primary internal organizational models to consider when shifting to a customer-centric business:

  1. Customer Segment Aligned
  2. Customer Lifecycle Aligned

Model 1: Customer Segment Aligned

An organization aligned around customer segments chooses to optimize productivity to address differentiated needs within the customer base. Traditional functional roles like product development, marketing, and finance are subsumed within a “segment” line of business, building a singular focus on that particular set of customers and their unique set of needs. This is a foundational shift toward customer-centricity, and if armed with sufficient customer insights, can effectively align what are typically cross-functional roles to better deliver an experience in line with known customer desires, orientations, and needs.

Brands should consider this model if there are groups of customers within the base who have distinctly different needs related to the same product or service. This is likely the case for most brands, but examples would include Travel & Hospitality, Consumer Technology, Financial Services, and types of Specialty Retail. Customer needs can vary greatly in each of these industries, and the brands must react by providing products, services, and experiences that resonate individually. A young adult on a limited budget will have a different orientation toward travel than say, for example, a retiree with a healthy financial nest-egg. The travel experiences they expect will vary greatly, and a travel company must respond accordingly.

Another example would be a larger Financial Services firm who offers a variety of financial products and services. Some of their customers will be younger professionals who’s “need state” is oriented toward early-life financial planning, leveraging employer-funded matching programs like 401Ks, and other “basic” financial tools while the total assets available remain limited. An older customer, however, may have a larger pool of assets to manage, and an inherently more complicated “need state,” exploring alternative tax shelters, lower risk investments that can be liquidated more easily, etc. Providing a similar customer experience for both customers would miss an opportunity to better add value to the customer and build loyalty. Organizing around these “needs-based” segments, however, may better align the organization to design and develop, market, and sell and service financial products customized to the specific needs of individual clients.

In this example, having internal organizational alignment (in addition to product or service offerings) around the specific segmented customer needs will increase the ability to deliver an experience that is individually compelling, more personalized and value-added.

Model 2:  Customer Lifecycle Aligned

An organization aligned around customer lifecycle chooses to optimize around the customer’s experience with the brand over time, building expertise specific to key lifecycle phases or moments correlated to desired customer behavior.

Brands should consider lifecycle alignment when customer value is most directly correlated with tenure and/or repeat purchase, visit, etc. Though “need state” will always play a large role in building loyalty, some business models demand a more lifecycle-based orientation toward optimizing customer relationships. Industries where this is often the case include subscription or contract businesses like Software and Telecom, where business performance is optimized most directly through customer retention, up-sell and cross-sell.

An example where lifecycle aligned organizational structure would apply is for a cloud-based software provider whose product is monetized as an annual subscription. Software offers a utility to the end-user, and retention in these business models can be optimized by delivering utility through key lifecycle phases:

  1. Ensure a positive onboarding experience
  2. Drive early product engagement and value
  3. Increase breadth/depth of the product engagement over the lifecycle
  4. Mitigate churn risk ahead of subscription renewal

In this software example, having deep expertise within the organization that aligns to these lifecycle-based objectives can help increase desired customer outcomes and drive business performance.

For companies looking for integrated customer loyalty across the business, ‘customer segment aligned’ and ‘customer lifecycle aligned’ provide good, directional models for consideration. Regardless of which is right for a specific business, both models help remove cross-functional disconnects and conflicting priorities that slow progress toward customer-centricity.

Though the prospect of internal re-organization can be daunting, with the right planning and intentional approach, a successful change to a customer-centric organization structure can be achieved with minimal disruption.

This article is the fourth of a year-long PK series. For context and additional reading, see the first, second, and third articles of the series on Loyalty360.com.


About the Author

Clay Walton-House serves as Managing Director of Integrated Loyalty Services at PK. He helps Fortune 500 companies create and implement new customer engagement strategies that accelerate growth and build loyalty. His expertise lies in understanding consumer behavior and translating it into actionable customer insights. Clay has a proven track record of successful loyalty program design and optimization, helping uncover ways to build retention and loyalty strategies into a company’s broader business model.

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