Ask Yourself Those Questions

OK, so a slightly flippant post with a serious point. I run The Henley Partnership @Henley_HP for Henley Business School. During our masterclass events, I tweet the insights created, interesting observations and information offered. And I do this carefully, and thoughtfully.

It’s always good to get feedback, and useful to just step back – taking a moment to pause and reflect on your own personal and professional value. In anything you are doing. And in everything you are doing. That sounds a really “deep and meaningful” remark, and I don’t mean you should question the fundamentals of your being (why you are here on this earth, what you are here to do, that kind of thing). I mean something much more straightforward. You need to question the value of the work that you do, and the way that you do it.

So my moment to pause and reflect was on Tuesday, as I was happily tweeting away during one of our fabulous events. An alert popped up, saying that the MD of Scandinavian consulting business had followed me on Twitter. Nothing extraordinary there. I’m deliberately trying to increase my followers at senior director level. Imagine my surprise when the next alert said I’d been followed by someone whose twitter name includes the legendary cartoon character SpongeBob Squarepants. Ok, so “legendary” is perhaps an exaggeration, but I remember many evenings watching Spongebob with my young son. And there was a recent film made about him (can a sponge be a “him”?)

My point is simple. When you get feedback, make sure you listen. Never stop questioning and challenging your value. Was this telling me my tweets are too trivial? Not serious enough? A bit lightweight? Was that why I’d attracted SpongeBob? I spent a good half hour looking back at my tweets, checking that they were right for my customers and my audience. And I still can’t work out what attracted SpongeBob. Maybe the MD of the consulting firm could tell me! But I am happy that my tweets are adding value. Happy that, with a few refinements, they can be better. And happy that I took time out to ask myself those questions.  I’d recommend you do the same.

When Suppliers Value Their Customers

You’d think I’d be writing about when suppliers value and love their customers. But I’m thinking more literally than that. I’m talking about what happens when suppliers actually place a monetary value on the amount a customer could potentially spend with them (or how much a group of customers could spend on average). It’s usually called Customer Lifetime Value, or CLV. What happens?

We’ve seen this approach with banks and their wealth management divisions. They’ve segmented their customers by their assets or wealth (and therefore value to them). Segments include Ultra High Net Worth, High Net Worth and Mass Affluent. There are broadly three different types of segmentation. You can segment customers by:

  1. value, i.e. the amount of revenue or margin you can earn from those customers
  2. characteristics, i.e. the features of each customer (in this case including the source of someone’s wealth)
  3. behaviours i.e. their attitude to the service and how they use it (in wealth, they could be disinterested, self-directed, demanding etc)

When suppliers consider the features and characteristics of their customers, you often see this empathetic approach being reflected in the service provided. If they focus on behaviours, they can provide service that respects those customer wants and habits. And I’d argue that focusing purely on value leads to certain customer segments being ignored or marginalised. In a world where suppliers are competing fiercely for the best customers (people with “ultra high net worth” and “high net worth”), you can see what’s happening to those in the “mass affluent” segment. There are few suppliers willing to provide quality service, leading to customers self-directing their investment decisions (the DIY approach).

Now, I have some sympathy for banks on this point. The sheer weight of legislation, and the impact of the Retail Distribution Review (launched in June 2006 and still having a huge impact) has meant that suppliers can’t make enough profit with those less-wealthy segments, unless brilliant technology and slick interactions make their process efficient and service valuable.

What seems to be happening is that fewer people are getting good financial advice. This is a societal risk. If people fail to get advice, too many will make mistakes with their investments and pensions. They may, for example, take additional risk to try and bolster their shrinking pension pot. Mistakes mean loss and potential hardship. If hardship means relying on others for financial support, that’ll be a burden on all the central and local government services. So it’s down to reputable firms to find a way to service these customers, and still make money, before this situation becomes societal. That will require systematic innovation.

Now I’ve focused on wealth management, where arguably the effect of segmentation is most dramatic. But the same principles apply elsewhere. When I worked in risk, I was involved in a huge change programme led by a “big-four” consultancy. On the face of it, we segmented our customers using buying characteristics. We actually used only their “book value” i.e. their spend with us. We moved the least-valuable customers to a new division, set-up to service these customers in a different way. And we lost all but two of those customers within twelve months. That’s what happens when suppliers value their customers. Segmentation requires something more intuitive.  Segmenting by value, characteristics and behaviours is a much more intelligent approach.