The Ca$e for Customer Focusing

Extracted from PricewaterhouseCoopers' "Trendsetter Barometer".

Over the past three years, four-fifths of America’s fastest growing companies have initiated important new programs aimed at customer expansion, customer retention, and/or customer profitability. And, as if this significant involvement were not enough, a majority is planning to either greatly enhance an existing customer initiative, or launch a new one over the next 12 months. There is an important payoff to this reaffirmation: those planning new customer-focused programs have achieved 46 percent faster revenue growth than their peers over the past five years, and are projecting 35 percent higher growth over the next 12 months. These are highlights of the latest PricewaterhouseCoopers "Trendsetter Barometer," released recently.

Building A Strong Customer Focus

Nearly three-fourths of fast growth CEOs (73 percent) say their company understands the evolving needs of buyers in their market either "extremely well" (24 percent) or "very well" (49 percent). This may be because a total of 81 percent have initiated important new programs focused on customer expansion, retention, and/or profitability over the past three years—with the typical company involved in two of these three areas.

Although more have launched programs to expand their customer base, retention initiatives are viewed as more effective--with customer profitability programs lagging, both in number and in management satisfaction.

"Trendsetter" CEOs suggest there is room for improvement in their customer focus:

• Less than half (46 percent) are "extremely or very" satisfied that their company is supporting customer requirements in the most cost-effective way. More non-tech (51 percent) and product sector (48 percent) CEOs are "extremely or very" satisfied than their high tech and service sector counterparts.
• Only 39 percent are "extremely or very" satisfied with their company's efforts to increase revenues among different customer segments. Across industry groups, non-techs fare slightly higher (43 percent).
• Only 31 percent are "extremely or very" satisfied with efforts for increasing profitability of customer segments--higher among and non-techs (38 percent) and product companies (35 percent).
• Only 27 percent are "extremely or very" satisfied with their company's sales forecasting, with an equal number rating it negatively. Non-tech and product sector businesses rate their forecasting systems slightly higher (31 percent, and 30 percent, respectively)--but this appears to be an area of major CEO concern, especially in the current uncertain business climate.

"Companies often build relationships with the wrong customers—or try to structure relationships with the right customers, but using the wrong capabilities," notes PricewaterhouseCoopers' Paul Gulbin, a director specializing in customer-related issues, based in New York. "Instead of attempting to provide full service to all, businesses can operate more profitably by focusing on products and services that relate to specific customer segments. Businesses should always be conscious of, and fine-tuning the alignment between sales, service channels, and sub-channels. And they also need to do something about value-destroying customers, from which the company does not make an acceptable margin."

Those Adding New Customer Programs Expect Outsized Growth

A total of 56 percent of "Trendsetter" CEOs are planning to launch or significantly expand an important customer program over the next 12 months. These include:

• 46 percent who will focus on customer expansion (22 percent launch, 24 percent grow);
• 31 percent, customer retention (14 percent launch, 17 percent grow); and
• 25 percent, customer profitability (12 percent launch, 13 percent grow).

Companies planning these new customer initiatives are the fastest growers. Over the past five years, on average, their revenues have increased 46 percent faster than peers who plan no additional programs in the near term. For calendar 2002, they expect final revenue growth at a 60 percent faster rate; and they are planning 35 percent faster growth over the next 12 months.

"Those planning new or expanded customer programs are on track for a significant reward," notes Gulbin. "They bring new meaning and emphasis to the old axiom, 'The customer is always right!'"

PricewaterhouseCoopers' "Trendsetter Barometer" interviewed CEOs of 402 product and service companies identified in the media as the fastest growing U.S. businesses over the last five years. The surveyed companies range in size from approximately $5 million to $100 million in revenue/sales.