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Strategy Models

Who’s Got the Power?

Jake Rønsholt & Roland Gerets, Partners @ BrainTower

Porter’s 5 forces model

Sun Tzu “The Art of War”

7S strategy Model (Tom Peters)

Strategy Models: Who’s got the Power?

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• Most strategy models are based either on a focus ono The market opportunityo The competitiono Inside excellence as a driver for success

• Even if these strategy models have proven their value in time, the changes in economic and market conditions require an open mind to incorporate new balances of power

• Today, one of the key power balance changes is the one between Provider and Customer

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• This is where Arnoldo Hax’s Delta Model adds an additional dimension by placing the Customer centrally in the forming of your Strategy

The way to win is not to beat your competitor but to bond with your customers!

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v Low cost

Best ProductTotal CustomerSolutions

System Lock-in

DifferentiationCustomer Integration

Redefining theCustomer

Relationship

Horizontal breadth

Exclusive channel

Dominant exchange Proprietary standard

Enabled througheffective use of technology

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Challenges to move from best product to system lock-in?

Best Product

• Product differentiation, as technology gets more mature and lifecycles shorten, is very hard to achieve. If your product becomes a commodity, you are deprived from superior financial performance, from serving your customers splendidly and from having fun

• Focus on being the lowest cost provider in an undifferentiated product category will require a continuous effort to optimize supply chain

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Challenges to move from best product to system lock-in?

Total Customer Solutions

• The first move is to stop selling “products” but start selling customer solutions. Customization, learning, and services bundles with products as a unique customer offering

• The objective value of a product or service are secondary to the perceived value of the customer

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Total Customer Solutions

Customer Integration

• Customer Integration seeks to effectively substitute for or leverages activities currently performed by it’s customer. Competencies will be bundled and are brought to the customer to enhance his economics

• Example: vending machines (non owned) with data supply on stock and consumer behaviour

Best productTotal CustomerSolutions

System lock-in

vClub C-mode machines:• Mobile phone payment system• Member club advantages to earning points• Points provide access towards free drinks, barcodes with offers on

mobile phones and occasionally a barcode coupon for a free drink• Scanners

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Total Customer Solutions

Redefining the Customer Experience

• Redefining the customer experience seeks to deliver a full experience to the customer from the point of acquisition through the complete lifecycle of ownership of the product.Musts are: o An intimate knowledge of the customer baseo An effective customer segmentationo A differentiated treatment of the customer tiers

• Example: Carglass Best productTotal Customer

Solutions

System lock-in

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Total Customer Solutions

Horizontal Breadth

• Horizontal breadth seeks to fulfil the entire customer needs by a set of customized products and service offerings. Features and functionalities are such that products are unique desired and command price premiums

• Example: Bol.com and Coolblue.nl

Best productTotal CustomerSolutions

System lock-in

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System Lock-In

Exclusive Channel / Restricted Access

• Exclusive channel / Restricted access seeks to create significant barriers for competitors to even compete for the acquisition of customers. Attention: difficult to achieve and sustain as regulatory practices tend to be deployed to prevent it

• Example: vending machines and freezers Ola

Best productTotal CustomerSolutions

System lock-in

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System Lock-In

Dominant Exchange

• Dominant exchange seeks to provide the company an interface between buyers and sellers that is very hard to displace once it achieves critical mass. In this case the first mover advantage is critical

• Example:o Nespresso (technology with controlled supply and sales

channels)o Senseo (pad with limited exclusivity)

Best productTotal CustomerSolutions

System lock-in

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System Lock-In

Proprietary Standard

• Proprietary standard seeks to draw the customer to your product because of the extensive network of third party complementors that are designed to work with your product. This option is only feasible when the rewards are enormous

• Example: Microsoft Windows

Best productTotal CustomerSolutions

System lock-in

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Illustration of Successfully Moving from Best Product to

Total Customer Solution, with a hint of System Lock-In

The Essilor Varilux Case

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Customer Relationship “Management”: classic data driven model

Data Cleaning

Formatting Standardization Deduplication Validation Enrichment

Marketing Database

Listbroking In-companyfiles

CampaignMgmt

. . .

Reporting & Analyses

Profiling

Campaign

Sales

Sources

MarketingDatabase

Dataquality

CampaignManagement

Close the loop

Analyses

Sources = only “external factor”:One time renting, data relevance, up-to-date,

input continuity & volume, …?

Customer Relationship: intimacy & interaction driven modelCreate value for brand, retailer & consumer...

Increase brandloyalty

Strenghten independant retail channel

Create direct relationships

with consumers

Manufacturer

IndependantRetailer

Consumer

via a B2B2C contact strategy

Customer Relationship : data driven marketing model

Marketing Database

Data Cleaning

Formatting Standardization Deduplication Validation Enrichment

Listbroking In-companyfiles

Reporting & Analyses

Profiling

Campaign

Sales

CampaignMgmt

. . .

Adding the retailer network as a source to the Marketing database...

Introduce retail network as main source of consumer dataEnsures a continuous flow of qualitative consumer data in addition to

classic list broking and in-company files

MarketingDatabase

ListbrokingIn-company

files

Store A Cash register

ConsumersStore A

Store BPostal card

ConsumersStore B

Franchisee CPostal card

ConsumersStore C

Data extractionStore A

Data processingStore B

Data processingFranchisee C

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• What was the deal between Essilor & the independent opticianso To help the optician deploy a state of the art customer & contact

management and be able to implement a loyalty marketing that would differentiate them from the competition

o The objectives were: increase market share, ROI, shorten purchase cycle, increase traffic to store, improve loyalty

o Economies of scale providing access to advanced contact management tools

• What was the mechanism (Total Customer Solution)o The participating optician uses a web platform for input of the customer

profile, behaviour, preferences and provided serviceso 4 clusters, centrally managed, define the customer segments and the actions

during the lifecycleo 4 stages within the lifecycle are defined to optimize individualize customer

contacto The web platform tracks the customer contact / loyalty actions, which are

visualized in a dashboard with benchmarks

Customer Relationship : Individualized consumer contact

Re-activate Aftersales

Buildrelation

Stimulate

Purchase date Per Customer we determine:• Expected purchase interval• Content• Incentives• Contact Frequency

Customers are reached via the right channel

Jim, your glasses have arrived

There are 4 main clusters, based on purchase behavior, frequency and motivation.They are then clustered into eye care or fashion and then product type / age

vRe-activate After

sales

Buildrelation

Stimulate

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• What’s in it for Essiloro Essilor is able to implement a state of the art CRM approach with high ROIo Essilor bundles tons of information on the customer behaviour in this market

segment and is able to provide highly appreciated added value to the independent optician

o These customer insights combined with a centralized approach provide a competitive advantage towards the large optician chains

• What’s in it for the independent opticianso The ability to deploy an powerful and advanced contact management and

loyalty strategy but with limited investmento Maximize his position as a trusted advisor with personalized serviceo Create image of a dynamic and proactive businesso Strategy impacts main drivers for his businesso Every letter generates on average €25 of business

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Results:

A clear Win-Win for EssilorThey make love with their Customers, not War with their Competitors!

Participating opticians 250

# consumers in Dbase 2.500.000

Active consumers in program 450.000

# mailings per month 80.000

# different mailings per month 2250

Conversion 6%

ROI

For every letter sent, the optician gets €25 business in return.On average an optician invests €10k per year and generates an extra €120k turnover

> 300%

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• Conclusionso Knowledge (consumer, shopper, customer) is Power.

When put to work with the latest technology it’s Profit!o Essilor focused on a sales channel that was seen as losing versus consolidated

chains, understood their needs and provided a solutiono By providing a Total Customer Solution to the independent Opticians (A to Z

Direct Marketing Programme), Essilor actually locks-in the Channel as no one else has such a direct access to their customers

o Know the value chain of your business and where you can add value!

• A couple of questions for your own reflexiono Is my Business B2C or actually B2B2C?o In B2B2C, How can I combine my strengths with B’s knowledge (and systems?)

to enhance my consumer knowledge, create more value for B and create additional consumer contacts for my business?

o The value chain: how often do I question the classic business models and think about different models allowing me to capture more of the value?

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You’ve got the Power!

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