Customers’ Risk Maps

Ali

Anani

To Juao Maya I dedicate this presentation to Juao Maya,

who is a virtual friend. His comments reveal his inner positive emotions and first class thinking

The Risk of Customers This presentation attempts to draw attention

to the risk of customers on the organization by drawing risk maps

RiskRisk is defined by the equation

Risk Severity = Impact of Risk*Frequency of Risk

Can we extend this equation to accommodate customers’ risk?

Risk Mapping

To visualize the risks from customers we opted to put risks factors on a grid and a monograph

Risk Mapping- 2

Not all customers are the same. Some customers do not visit you frequently; yet they spend a lot without being demanding. In contrast, frequent customers might be very demanding and less profitable

Gerald Nanninga Observation This observation was supported by a recent elegant

post by Gerald Nanninga. He observed that heavy users are not necessarily your best customers. Their activity tends to make them more demanding and more likely to leave. By contrast, the lazy customer may buy less, but be more profitable to serve and less likely to leave.

My Comment on Nanniga’s Post This post is a sheer beauty. Slow, but steady customers are

more profitable than hasty and riskier customers.I enjoyed the Kellogg example. It fits beautifully with the value-laddering technique that promotes heart-moving approaches. Dispensing with the double-coupon strategy and replacing it with the targeted strategy of approaching lazy customers by offering them fast check out service is a timely shift. Address profitable customers by fulfilling their emotional needs is the strategy to go for.

The Impact Dimension Several factors influence the impact of a customer His lifetime value His influence (how much of an influencer he is) Intangible value- how many people would turn into

customers following the customer’s advice His “table bill” on each visit Fast or slow customer

Customers’ Risk MapsProbability of Default

Frequency of Visits Separating

Line

Projected Consequences Risk Score

Nearly Impossible

Slightly Impossible

Unlikely Possible

Slightly Possible

Reasonably Possible

Assuredly Possible

Incessant

Frequent

Irregular

Infrequent

Rare

Evident

Significant

Severe

Very Severe

Disastrous

Mild

Evident Risk

Extensive Risk

High Risk

Very High Risk

Risk Customers’ For Lazy CustomersProbability of Default

Frequency of Visits Separating

Line

Projected Consequences Risk Score

Nearly Impossible

Slightly Impossible

Unlikely Possible

Slightly Possible

Reasonably Possible

Assuredly Possible

Incessant

Frequent

Irregular

Infrequent

Rare

Evident

Significant

Severe

Very Severe

Disastrous

Mild

Evident Risk

Extensive Risk

High Risk

Very High Risk

Risk Customers’ Maps for Active Customers

Probability of Default

Frequency of Visits Separating

Line

Projected Consequences Risk Score

Nearly Impossible

Slightly Impossible

Unlikely Possible

Slightly Possible

Reasonably Possible

Assuredly Possible

Incessant

Frequent

Irregular

Infrequent

Rare

Evident

Significant

Severe

Very Severe

Disastrous

Mild

Evident Risk

Extensive Risk

High Risk

Very High Risk

Heat Maps Denis suggested that one of the best ways to visually

represent risk is to use a Risk Heat Map. Denis suggested that one of the best ways to visually

represent risk is to use a Risk Heat Map. In this map, vertical axis represents the probability of a given risk occurring. Horizontal axis depicts the impact that the risk will have on the project or program should it materialize.

See the next slide- the assigned color of risk may change depending on the risk appetite of the management

Customers’ Heat MapAssuredly Possible

Probability

Reasonably possible

Slightly Possible

Slightly Possible

Unlikely Possible

Slightly Impossible

Nearly Impossible

Rare Infrequent Irregular Frequent Incessant

Impact

Risky Employees Risky employees are among the most

significant liability for a company but are among the hardest risks for a firm to identify and manage.

A risky employee dealing with a high-risk customer is an ingredient for burning fire

Read more: http://www.jamaicaobserver.com/business/Manage-risky-employees-or-lose-millions_8241741#ixzz1NcEoaMKR

In Summary Risky external customers might trigger the

stressed internal customers to misbehave; the risk of losing customers increases sharply

As the impression of first visits are impacting, demanding customers might draw high risk by antagonizing the employees serving them

It is extremely important that employees with the right profile deal with difficult customers