Business Strategy to Business Plan Part 4 Operations and Customer Value | John Colley | Skillshare

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Business Strategy to Business Plan Part 4 Operations and Customer Value

teacher avatar John Colley, Digital Entrepreneurship

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

20 Lessons (1h 33m)
    • 1. Part 4 Operations and Customer Value Intro Video

    • 2. INTERNAL STRATEGIC ANALYSIS Operations and Customer Management

    • 3. What are Business Operations?

    • 4. Strategic Analysis with the Business Model Canvas

    • 5. How Can Corporate Structure impact Strategy?

    • 6. Organisational Development: Initiating Strategic Change

    • 7. Reviewing the Operations of the Firm

    • 8. Click and Mortar - Online meets Offline

    • 9. ECommerce Business Models

    • 10. Internal Strategic Analysis - Business Plan Tie In


    • 12. Understanding the Customer Value Proposition

    • 13. Positioning Your Firm in the Market

    • 14. What do we mean by a Profit Model?

    • 15. Hax's Delta Model

    • 16. Switching Costs and Customer Strategy

    • 17. Managing the Customer Experience

    • 18. What is the Customer Journey?

    • 19. Customers, Customer Value and the Business Plan

    • 20. Part 4 Operations and Customer Value and Coming Up Next

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About This Class


Welcome to my Business Strategy to Business Plan Course

Discover MBA Level Business Strategy and Create your comprehensive Business Plan simultaneously. Everything you need is here including a highly detailed Business Plan template.  

INTERNAL STRATEGIC ANALYSIS - Operations and Customer Management

In this section we turn our attention inwards to the operations of the firm, focusing on all aspects of Operations but keeping a close eye on Customer Management


We focus on the importance of the customer and how a firm can add value to them.  Understand the Customer Value Proposition as a central core of your strategy.

About this Course

Discover Business Strategy to MBA standard - from an MBA (with Distinction from Cass Business School, London) - and simultaneously create a comprehensive Business Plan guided by an award winning 30 year London Investment Banker.

I guarantee that this is a unique course: the only course that teaches you Business Strategy and shows you how to create your Business Plan - at the same time!  The 21 Assignments in this course draw on John's unique experience, including bespoke strategic exercises of his own which you will not see anywhere else.  Step by Step following the incredibly detailed Business Plan template, John will guide you to apply the Business Strategy lessons to create your Business Plan. These will help any students of all levels and in any industry.  

This course has over 160 lectures, over 14 and a half hours of detailed instructional video and nearly 180 downloadable materials (available from a dropbox link you will find at the start of the course).  Despite its complexity, John has created a detailed course matrix for you to use to navigate through the course and understand the synthesis of Business Strategy 2 Business Plan.  There are over 20 Assignments to make the course fun and highly interactive.  The 2 Quizzes will challenge you too!  Every section has an introductory video explaining the learning objectives and lessons in that section.

This course will be published in 12 Parts - One part per week  

Business Strategy 2 Business Plan Part 1 - Fundamental Strategy and Analysis -

Business Strategy 2 Business Plan Part 2 - Leadership, Products and Services -

Business Strategy 2 Business Plan Part 3 - Competition, Industry and Markets -

Business Strategy 2 Business Plan Part 4 - Operations and Customer Value

Business Strategy 2 Business Plan Part 5 - Sales and Marketing

Business Strategy 2 Business Plan Part 5a - Digital Business Transformation -

Business Strategy 2 Business Plan Part 6 - Financial Statements

Business Strategy 2 Business Plan Part 7 - Financial Analysis

Business Strategy 2 Business Plan Part 8 - Goal Setting and Performance

Business Strategy 2 Business Plan Part 9 - Growth Strategies

Business Strategy 2 Business Plan Part 10 - Valuation, Exits and Returns

Business Strategy 2 Business Plan Part 11 - Business Plan Synthesis

Enjoy the Course!  If you have any questions or issues, just reach out to me here

Best regards


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John Colley

Digital Entrepreneurship


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1. Part 4 Operations and Customer Value Intro Video: Hello and welcome to business strategy to business Plan Part four. And in this part of the course, we are going to be looking at operations and customer value. Hi, my name is John Colley. I'm a 30 year senior investment banker on I'm really excited to welcome you to this course , and indeed, because it's such a long course, welcome to part for this class is perfect for you. If you really want to better understand business strategy on and at the same time, learn how to write a business plan at the end of the course. As long as you follow all the assignment step by step with me, you will have written a comprehensive business plan simply by following the course projects . Now, of course, is divided into 11 separate parts, and every part off the course takes you one step closer to that business plan. In this part four. We're looking at operations, internal operations, that business on the important topic off customer value. Now, the internal strategic analysis that I'm going to get you to do is going to look at the operations and customer management. We're going to look inwards, having looked outwards in the previous module inwards to the operations of the firm, focusing on all aspects of operations but keeping a very close eye on customer management. I'm also going to take you through an exploration off customer value because the custom of any proposition that your business creates for your customers is absolutely critical to your success. We focus on the importance of the customer on how the firm can add value to the understanding off the customer value proposition, and this is always going to be a central part of your strategy in your business. Now, in this part of the course, we have a course project, and in this course project, it's all part of the building blocks to help you put that business plan together on, we're gonna ask you now in this part of the course, to create the first draft of your business plan Internal Operations section. I've given you a number of resources and headings on some notes to help you to do that. Now I'm really excited to share this course with you, and I know you're going to absolutely love it. If you haven't already done so, check out the earlier parts off the course, and I look forward to seeing you in this one in part for so business strategy to business plan part for operations in customer value. I know you're going to get on awful lot out of this, and I really hope you enjoy it. 2. INTERNAL STRATEGIC ANALYSIS Operations and Customer Management: internal strategic analysis, operations and customer management section Learning objective. In this section, we turn our attention inwards to the operations of the firm, focusing on all aspect of operations but keeping a close eye on customer management section introduction. Having looked outside of the firm, it follows that we should turn our attention inside. Now on, Look at the business itself more closely. Business operations, concolor a wide range of activities. So we share with you what we think they mean. We introduce you to the business model campus, one of the most useful strategic analysis tools out there. We love it on. We know that you will, too. Our discussion then turns to corporate structure and organization and a review of operations. Do not be afraid to challenge the status quo. Just because this is how you do it today does not mean that there are not better ways out there. You need to think, and we provide the tools to enable you to develop the insights on critical faculties you will need. We have to address the challenge of e commerce on we discuss the hybrid click and mortar approach as well as different e commerce business models. The final lecture ties in the business plan headings, as I hope you have now come to expect the business plan assignment completes this section, enabling you to add further to your business plan and cover off the internal operations section at the end of this section. At the end of this section, you will be critically evaluating how your business is organized. Why do you do things this way? Can you do some things or everything differently and better? The key to good strategy is not being afraid to challenge the status quo and ask difficult questions. We hope you're starting to do this. Welcome to the awkward squad. 3. What are Business Operations?: here we are at the start of our internal strategic analysis on our firm. So let's ask the key question. What? Our business operations. This is the internals section off. The analysis on we're looking very much inside the firm and fundamentally business operations are the activities of the firm designed to create value for customers and profits for the firm. Quite simple. There's obviously a lot more to bear in mind, of course, that firms grow and change and evolve ALS the time and therefore not only our business operators operations not static, but they very enormously between different types of industries, which is why industry specialisation can become very important for senior management. So we're going to take a look in this section on business operations through the lens off internal strategic analysis. I'm also gonna tie this into the business plan because obviously in this course, the two are very much interconnected and interrelated. The business plan key headings I want you to consider as we go through this section are manufacturing and operations, fixed assets, production capacity, suppliers, seasonality and how it can be overcome. Software partners, channel partners, sectors and premises. So these little the internal operations and infrastructure off the firm. But we also need to be able to conduct our internal strategic analysis so that we conform our strategy for this part of the business. That means we need to consider Staffan HR technology process and value chain innovation and R and D on the regulatory and social issues so far as they impact the internal processes off the firm. So the challenge off this section is How are you going to optimize your business assets to achieve your business goals and objectives through the execution of your business strategy ? And that is what it's all about. So business operations are all about the internal aspects off the business. There's a lot to cover Andi, if you think about it logically and structurally, I think you'll get your mind around it without too much difficulty. But remember all the time that we're looking at business strategy, and we're aiming to relate it and tied into the business plan 4. Strategic Analysis with the Business Model Canvas: in this lecture, I want to take you through strategic analysis using the Business Model campus. This is a fantastic model, which was devised by Alexander Acosta Valda in 2004. In his thesis, The Business Model Ontology. A proposition in a design science approach. Don't worry too much about the long words. Essentially, it's a great campus and template for analyzing your business model. Now there are nine key building blocks on the campus, and I provided in the downloadable pdf a template for the canvas, which you can print out. It's on white paper is very easy to print out and also a detailed checklist for each of the nine blocks. So that's all in there, and you'll get this Pdf as well, and this has got a lot of detail in it, so I'm going to spend a fair amount of time on this. But bear with it because it is a fantastic model. You'll find it extremely useful. Here are the line blocks. I notice a lot of writing on this page, but I thought it be useful to give you a very clear definition off each of the line blocks before we look at them, so I'm going to go through them. It's pretty while reading what's on the page, but I do want you to get these points on board. So the first block key partners okay These other partners who optimize help the business toe optimizes operations on reduce risks of a business model. Typically, they're either supply or distribution partners, but that may be strategic partners as well. Key activities. The most important activities in executing a company's value proposition. Key resources, the resources that are necessary to create value for the customer value propositions. This is basically the products and services off the business, which it offers to meet the needs of its customers. Customer relationships. You have to identify the types of relationships you as a company want to create with your customer segments channels basically that these air the routes to market how the custody. The firm delivers its value proposition to its target customers through the channels customer segments. These are the different types of different groups off customers who the business or firm is trying to serve the cost structure, which is everything that the the firm has to spend in order to create his products and services and deliver its proposition, its value proposition to its customers and then revenue streams. Basically, how the company makes income monetize is each customer segment. So these are the nine building blocks on. This is what the canvas looks like. You can see them going from left to right. Key partners, key activities, key resources, value propositions, customer relationships, channels, customer segments, cost structure on revenue streams. On This is the template, which is downloadable from the pdf, which is attached to this lecture. So let's look at these each one by one on the first of these is obviously key partners. These are the companies or people that your business has a strategic relationship with. They might be suppliers or distribution partners. If you want to think about it and think about your analysis, what resources does your firm received from these partners? What key activities are performed by them on what is your company's motivation for working with them? So that's how you're evaluating the relationship you have with these partners now. Often firms will cultivate buyer and supplier relationships, which enable them to then focus on their internal core activities. In addition to that complementary business alliances can also be formed two joint ventures or strategic alliances through competitive or non competitors in order to enable the company to focus on delivering its value proposition internally and effectively outsourcing some of those activities to those relationships. Key activities These are the activities fundamental to the business operation. Think about the value chain. So what key activities do you have to execute to deliver your value added What activities Set your firm apart from other firms? How do your revenue streams, distribution channels and customer relationships differ? And do you need to improve efficiencies to cook? Keep costs low? So what we're talking about here is What are you doing? How you doing it? Are you doing it efficiently and effectively as possible on? Are you differentiating yourself through your activities in order to provide a unique value added proposition till customers key resources These air the assets which are essential to deliver the business value added to the customers. So the products and services. So you have to ask yourself what specific assets are essential? What resources does your firm depend on to run what resources do need to maintain your customer relationships and does your company require significant capital, physical, intellectual or human resources. So these all the questions you're asking us off. It's basically the resources you need to execute and deliver your value proposition, the value proposition itself. This is at the core off the business. We've talked about having products and services which had differentiated have unique selling points. So this is the fundamental offering you have to your customers. And it's the primary driver off all your business operations. So Google organized the world's information and everything. Stump stems from that. So ask yourself, What are you trying to give to your customers? What problems are you trying to solve? How are you offering something different? Unique. Differentiated? All these things are really important. So going on with value proposition. What is it in the proposition that differentiates your company from its competitors? Because the value proposition provides value through a series of elements on these Airil the leads elements, which you can consider newness, performance, customization, getting the job done design, brand status, price, cost reduction, risk reduction, accessibility and convenience and usability. Now I've put all those in because I want you to be thinking about, um, there's a lot of detail there. But don't forget your devising your strategy and value. Propositions can be quantitative, so price and efficiency So you're basically giving a very good value or qualitative the overall customer experience on an example that will be again in the luxury brands area, where the quality of the experience means that the product itself is not price. Instant. Let's talk about customer relationships. Number five. This is all about the interactions with customers, and you have to ask yourself, What type of relationships do you have with your customers? I'm gonna give you some examples in a minute. How does your business interact with customers? How frequently do you communicate with them and how much support do you provide for them now? Custom relationships can be personal assistance, dedicated personal assistance, self service, automated service through communities or through croak croak. Co creation. Difficult. Say so. Think about the different ways you interact and build your relationships with your customers so critical to having a sustainable business. Number six is channels. These are the methods you use to deliver your products and services to customers, so you need to ask yourself, How do you deliver your value proposition. How do you reach your customer segments? Consider the supply, distribution, marketing and communication channels. Number seven is customer segments now that we've talked about market segmentation and finding the characteristics and off the groups of your customers so that you can bring them together and identify them in specific market segments. So when what different types of customers do you have? And who are you creating value for? You do need to have a clear idea in your mind who your different groups of customers are. Ask yourself who your most important customers are, and often at 80 20. Analysis would be valuable here. Look at your entire customer list on, then work out the which customers deliver 80% of your revenues, and I expect if you get a large number of customers, you'll find it's. Approximately 20% of your customers will deliver 80% of your revenues, and then you need to look at your top 10 in that. So what different types of customers can you identify and are unique or mass market? Let's look in a bit more detail. If you're mass market, then you're just trying to sell everything to everybody. You're not really exercising very much differentiation in your customer segmentation, but you might go the other extreme and niche market specialized needs and characteristics for your clients again, the luxury market. Another good example. You You may have additional segmentation within a customer segments, so you're focusing down on them. You may diversify and have different customer segments with different products, and you may have a multi sided prop platform of market where you're serving mutually dependent customer segments with different range of products. So think about how you are segmenting your customers, and we did talk about customer segmentation in a previous lecture. The cost structure is basically how a company spends money on its operations, and you have to ask yourself, What are your key costs? What your key drivers of costs. So if your sales go up a lot, how will that affect your costs? And you have to relate your cost of specific revenue streams? And then you can start asking ourselves questions about efficiency and economies of scale and all this sorts of things so you can class your business in one of two ways. Is your business very cost driven? So are you trying to be a low cost producer on Therefore every cost is is very, very critical. And that then basically leads you into having sort of cost plus pricing. Or are you value driven again like a a Louis V. Tom, where? Actually, they're probably not that worried about costs. They're much more focused on delivering great products and value to their customers, and as a consequence, offering they can, they can obtain higher profit margins, a completely different approach. The characteristics of course structures were obviously fixed and variable. But you also can think about how you can get economies of scale on economies of scope. And I put the definition it makes you understand it costs go down due to incorporating other businesses, which have a direct relationship to the original product. So you basically bring in additional products on because you can sell a broader range off products to a customer. You can actually reduce your costs as a result of having a broader products. Coat number nine. Finally, the revenue streams. This is your source off cash flow. This is the way your value proposition generates money. Andi, you may have a single revenue stream or you may have multiple revenue streams against this . You have to consider very carefully what your pricing strategy is on bats a critical aspect off, you know, managing your revenue streams and your income. And how do your customers pay you? Do you have multiple forms of payment? So those are the nine different parts off the business model campus. I just wanted to flag up a couple off limitations to the model because I want you to keep thinking strategically. First and foremost, the model is largely static. It is a snapshot picture off your business as it is now. It doesn't really capture or incorporate any changes in strategy or changes in the business over time, so you need to make be aware that that is a limitation. And secondly, I know we're doing the internal strategic analysis at the moment. But the model may focus too much internally and does not take into account sufficiently the external environment of the firm. Now we have done a whole load of external analysis and not a series of different models, so you can incorporate some of those to take into account the limitations of the business model campus quite a long lecture. This one, Quite a lot of detail are. Make sure the pdf is available to you. It's a really, really important model for analyzing the internal part of your business on how you're gonna organize your business and deliver your value proposition and make money. So do pared a lot of attention. I've tried to give you lots of resources, lots of detail, and I hope you find it very helpful. And remember, this is a critical model which you need for your internal strategic analysis. 5. How Can Corporate Structure impact Strategy?: Let's take a look now at corporate structure and how it can impact strategy, and I'm gonna get a little philosophical on you. In this ledger. Corporate structure is essentially the organization off. The firm's how you go about organizing your firm, and it can very, very significantly between companies and industries. Remember, the departments in this context are specialized functions where, like I t and accounting, where people are cooperating together on the basis of their skill set on, then the department's between themselves cooperate to deliver the objectives off the organization. There are four essentially four types of operational organizational structure on they are functional, divisional matrix and hybrid, and we're gonna take a quick look at those. So functional is where employees are grouped onto departments based on skills, tasking, accountability. So I t. And accounting so pretty straightforward. A lot of the support functions when you look at the Value chain are grouped functionally, whereas the other elements in the Value chain may be grouped in a different way. So divisional grouping is where you group all the business activities by specific market product service or customer grouping. If you think about a large car firm it may have a Volkswagen division of BMW division. You should. I mean, well, it'll have the BMW five in the BMW six in the BMW, three on many on another side. So the business activities are self contained around the product service. Whatever happens to be on, they very much focused collectively on delivering that product and service. Of course, you can also have a geographic division where if you are a U. S corporate and you open up a UK subsidiary that sits, subsidy will be self contained to deliver all the products and services, and it will be a division off the main company. But the main distinction will be the geographic division, a matrix structure. And this is when I particularly don't like, is a combination of divisional and functional. It's a grid, and basically you end up with divisional down this way, functional across the top, and then people have to lines off reporting. On the plus side, it allows for decentralized decision making. Greater autonomy decisions could be made faster than maybe more innovation. It can be higher cost, and it can lead to internal conflicts. The one time I came across this structure was when I was handling an M and a deal in Germany and there was a divisional structure across this particular organization and it was . The organization had subsidiaries in the United States, in Italy, in Switzerland and in Germany and in Austria. On each of them reported geographically and each of the reported functionally and division is the whole thing was a car crash, and every time that something went right, there was a clamor of people to take credit for it. And every time something went wrong, there was a very easy toe. Basically, blame it on some other part of the organization at the cost structure was completely out of control. The company was losing money hand over fist. It was a nightmare, So matrix structures are not what structures I'm particularly keen on. The hybrid structure is similar to the matrix structure, but where you have a combination of functional and divisional essentially divisions I departments either one or the other, so you can have a department that's organized a visually or a department that's organized functionally on. The organisation comprises groups of departments organized in different ways. I think when you're doing our strategic analysis you have to challenge the structure off the organization on, Ask yourself, Is it right for the strategy, your devising? Just because it's the structure that you've inherited? You mustn't be scared off challenging that structure and being prepared to change it. Major change obviously, comes with significant risk, but it may be more damaging in the long term not to take that risk and not to make the change. And you must ensure that the structure reflects the accountability and reporting that you have inside the organization. Of course, you can use a SWAT analysis to evaluate your corporate structure, strengths, weaknesses, opportunities and threats. And I'd like to also throw at you for full dust philosophies behind the organization on Organizational structure to consider when you're looking at your corporate structure. The first of these is the rational model. So the rational model argues that in an organization there is only one logical way to perform tasks. The obvious example of that is the assembly line. Okay, so you if you take a rational approach, then you have a very cut and dried organization. On the other hand, the natural model argues that businesses don't not only want to achieve their own goals, but they also want to have an influence on the external environment. So you get a lot of not for profits. Take this approach, but also a lot off a young start. UPS companies, which are very environmental friendly, environmentally friendly on realize that whenever they take a decision that also taking into account what external impact it's going toe have. So that is a very current on very important business model and philosophy to consider. The socio tech technical model basically argues that businesses are in a continual state of change. Influx on that change is unavoidable and therefore, to a degree, a good thing. And when you're considering how you're managing your organization, you have to ask yourself how you are dealing with change because a lot of these models are very static time wise on, they don't consider the evolution off the business over time. And finally, the cognitive model basically argues that what's important in an organization is the tasks and decisions made by teams, and they put emphasis on the coordination on of tasks by employees. Andi thinking about how the organization continues to evolve on the basis off the decisions that it's making. So there we've considered how corporate structure can impact strategy on. Ive also invited you to think about the philosophy behind the structure that you have in your organization and to challenge whether it's the right structure and the right philosophy for the strategy you want to deliver. 6. Organisational Development: Initiating Strategic Change: Let's take a look now at organizational development. Initiating systems change. The whole point about this is when you're doing your internal analysis, you need a methodology for actually identifying problems, Andi rectifying them and changing the way your organization is put together. And this is what this will help you with. So organizational development is a an objective based methodology for initiating systems change in a firm. It basically helps you to to implement the changes that you feel are necessary in the light off issues that you have identified. I eat change strategy. Okay, so it's a really helpful tool on process that you should be aware of. And it provides the the organization with the tools to respond to changes in its markets. In this competition, you've seen already that one of the criticisms of some of these models is that they're static there. Fixed in time on this model helps you to address changes as they happen over time. So I think it's very helpful, So the benefits are that you can address change continuously over time that you end up with or you achieve vertical, increased vertical and horizontal communication with your staff. I eat you align your staff with the goals, values and objectives because they're all communicating much better and discussing how they can change things for the better i e. They're talking about strategy, which is great, the u improve and you help your employees to develop their own skills to effect the changes required. So you're developing your employees and staff to our higher level, which is great. You end up with enhance products and services, and often a result of this is innovation, which is terrific. You get higher employee engagement throughout the firm, and ultimately, if you get it right, you get increased profitability. The implementation is done through the action Research model, which has six components on the keywords are action and research. Actually, they come the other way around. You do the research, and then you take the action. But it's called the action research model, so the six steps are problem design, so you have to identify the problems and the issues that you want to change. Feedback on assessment, which is the investigation off these identified problems. So what are you going to do about them? Planning thes air? The planned intervention measures seminars, workshops team building, etcetera, Andi. Measurable objectives. So you plan what you're going to do, and you have to set measure of objectives so that you'll be able at the end to evaluate whether you being successful. Then you go through the intervention and implementation, you execute the required changes. Then you evaluate. You assess the outcomes to decide whether or not you've been effective and successful, and then success. The desired change is achieved has been successfully achieved, and that's what you're looking for. So those are the 36 clear steps to the theme the systems change that you want to put into effect in the action research model. So organizational development initiating systems change. This is a tool and a methodology to help you not only evaluate your strategy but also to affect your strategic change within your organization. 7. Reviewing the Operations of the Firm: the internal strategic analysis will require a detailed review off the operations of the firm, and that's what we're going to discuss now. Operations. Cover the planning organization and execution off the entire business and processes off the firm. The objective is to align the goals the strategic goals which identifying your business plan with the business itself and make sure that the business is delivering what you want to achieve. The strategic plan that you've laid out on an efficient organisation will balance revenues and costs to achieve the highest level of profitability consistent with achieving that strategic objective. So the operations include product design, where you're ensuring that you meet the customer needs at the right quality forecasting, predicting customer demand and ensuring its Met supply chain management from raw materials to finished product to distribution and delivery the entire value chain as identified by Michael Porter. So this also includes in venturi management, production processes, distribution, sales, sourcing of suppliers and all on a timely basis. The operations also include the delivery management to ensure product is delivered to customers on time and on quality. Operation review requires a high degree of organisation, ensuring that each operation is delivering optimal performance, that there's coordination between teams and department, using the resources that are available correctly on addressing any issues, obstacles or interruptions and crises as and when they arise, it will need to focus on the staff in the organization to make sure that they understand what they need to do. So you need to communicate with them, listen to them and relate to them. You'll need to make sure that the technology inside the organization is optimized to ensure efficiency and cost and how can enhance or improve processes. So, as you can see, an operations review is a very comprehensive top down review off the entire business, and you need to take it function by function, process by process, department by department. Look at the value chain and use that, perhaps is your map toe work through each department in each part of the organization. What you're looking to do is to find ways to improve the organization, but you also need to ensure that its addressing the strategic issues that you want to set out and for the future you are aligning organization through this process with the strategic goals that you want to set on. You're also using it as a process to challenge yourself, to understand whether what you want to achieve in terms of your strategic objectives can be delivered by the firm and, if so, what you need to do. So it's a fairly comprehensive process, but it's a critical part of your internal review. And of course, the outcomes from this will be reflected in your descriptions when you set it out in the business plan. 8. Click and Mortar - Online meets Offline: I want to talk to you now about click and mortar where online meets offline. One of the major shortcomings off strategy plans, as taught in business schools, is that they don't always keep up to date with changes in business, particularly the rapid pace of change on particularly the online e commerce changes of the last 20 years. This is certainly true of traditional business models. So if you go to Porter's five forces, you don't really hear anything about online retailing or e commerce of that nature. Um, it is important, however, to address this elephant in the room because online business e commerce, digital entrepreneurship, whatever you say is very much here to stay. It is the business model off the future, and it is something that you need to be aware off on factor into your strategic plants. And who knows your business might be an online business. You may not have any arm a zit were offline activities other than perhaps in the fulfillment. So you need to be aware off the different models and structures on be able to think about it and who knows If you are traditional online offline business, then the online. The digital world offers a fantastic opportunity, and this is something you should be reflecting in your business strategy in your business plan. So a good place to start is really where the two meet each other clicks and water, where online meets offline business. Essentially a click and mortar Omni Channel e commerce business model is one that integrates the two. It is both online and offline, so you have on line on online shop, online retail operations or online services provided. But at the same time, there is a really business on the ground. There's either retail store was some sort of customer facing office or something, where you can go and speak to people so it works for products and services. And you can look at this if you like as a strategic response, particularly in retail to Amazon, where Amazon have come in, basically sell almost anything now, and that is being a huge threat to retailers who had to develop their own online offerings as a response to make sure they can actually sell online to compete with Amazon and off course. Many of them also self through Amazon and sell through eBay, so they try to take a bit of that market as well as selling through their own store. The customers gain from the combination because they get the in store experience and then they get the online convenience. So if you want to order something quickly, you can click on it and it will be delivered to your house. If you want to go in and try the shoes on in the store, you can go to the retail store and try the shoes on, so that can be very important. Of course, companies who are re traditional retail companies can reach MAWR customers through the online digital channels, and they can just through the footfall in their store. And, of course, you then have the hybrid model from this, which is the click and collect in store model. So people buy something online, but they go to the store to collective. And of course, some online businesses are moving offline, and Amazin again is another example of this. In the food market in the US they bought Whole Foods, which has got supermarkets on the ground, and it will be interesting to see how Amazon, who are very smart, adapt to that and try to use it as a combination off, probably online and offline. The advantages. Off click and mortar Omni Channel. Well, obviously, lower costs because you have a higher degree of automation, particularly the online, the online business. You get access to a wider market because you go away. The online digital marketing channels that you wouldn't otherwise have access to. You get improved customer trust because not only are you online, but they can go into the store and meet your you're representatives and try products on for themselves. And, of course, you get the opportunity to add value to additional services, such as loyalty programs on that can be very valuable for your business as well. So you need to think about the online business opportunity. You need to think about how your business is going to if you like, do business in the 21st century with the digital economy, it's an absolutely essential part off any strategy and process on. I'm introducing it here and we'll look in the next lecture at e commerce in more detail to make sure you've got these thoughts deeply embedded into your strategic analysis process, ultimately into your strategic plan on then, of course, into your business plan 9. ECommerce Business Models: I want to take you through the three main e commerce business models on to make sure you're thinking about digital business as part of your strategic planning. Since 2000 really, e commerce has become an essential part of the business landscape. There is no going back. It is here to stay. And obviously during business online is critical for any business in today's landscape. Simply put, firms have to have a digital strategy, and you need to put together a digital strategy or an element off digitization in your business plan and in your strategy as you go forward. Many firms, it must be said, still operate offline but complement their offline activities. There really world activities there mortar activities with a combination off a digital channel and digital strategies to go with it. The first type off digital business model is the marketplace. Now in the market. Place sellers list their products and services for sale on eBay, Amazon, Alibaba fiver, all these sorts of places and the marketplace provides the opportunity in the platform for buyers to for sellers to put out there offering and because it's such a well known platform and buyers know that they confined things there, they flock to the platform. They can be B two B or B two c. It doesn't make any difference, and they can be a combination of both. And typically, marketplaces charge a commission on the sale. Sellers typically as well handled the fulfillment. Although Amazon FB a fulfilled by Amazon, is probably the major exception to that. I think the main point about marketplaces is even if you have your own website and you have your own digital channel, it's still worth considering listing your products or services on the appropriate marketplaces because, frankly, the marketplaces to a lot of the marketing for you, they provide the magnet that people attract eyeballs and visitors to the site on. Therefore, it's another opportunity to monetizing to sell your products and services. Therefore, don't rule out marketplaces even if you only have your own website that you're selling from . The retailer's essentially are selling other people's products. If you think of any offline retailer John Lewis, you know Macy's, they will have an equivalent online store selling a very similar range of products to those they have in store. The there are exceptions where they are purely online retailers. Netta Port A is an example where they have a whole range of different peoples products, but they don't have a real life store. They sell a range of brands on. Their challenge is to get sufficient people to come and visit their site sufficient traffic coming to their site to convert to sales. Now brands also have their own websites, and essentially, these are direct sales to customers, complementing their existing sales channels on their existing distribution channels. So if you think about Mulberry, Bobby has its store in Bond Street. It sells its products through other retailers, other large retailers. Let's say Harrods would be an example, but they also have their website, and so they have their own brand website where you can go and buy their their products from . This tends to be obviously a much more focused selection. It has a very strong customer connection. People go to mulberry dot com and presuming that society because they love mulberry goods and they want to buy something for mobile. And typically the brands have to handle both the marketing and the fulfillment as well as obviously running the site. If you look at the trends going forward. I think the retailers are probably being squeezed because people are more discerning about that. What they want. Brands certainly build MAWR customer loyalty. That's absolutely true. But marketplaces provide access to traffic, which is why I think if you even if you have your own website in your own brand, it's definitely worth considering selling on the appropriate marketplace as well. And what you're essentially having toe way up is the lifetime customer value versus the cost of acquisition, because if you have your site, obviously that cost something. But in order to get the traffic to the site, you may well have to go for paid ads and paid traffic to come to the site. And obviously that has a cost to it. And therefore you have to know what you're paying to get the traffic and what the value of that customer is once they, you've converted them to buying from you. I will say something, however, at this point about subscriptions, because a lot of anti online retailing on online sellers are trying to convert their business models from one time sales to subscriptions. So you see it with core sales and people trying to get subscriptions rather than one off sales. You see it in a sorts of different areas, and obviously software is the service. Microsoft has gone to us an annual subscription model at any of the enterprise software as you like. Think of S A P has gone toe annual subscription model. So digital business, when it's transactional, is less sustainable. If you have to go and earn each customer again and again and again, it's hard work. If you can get them to sign up and stay with you, then obviously you have a much greater chance of increasing that lifetime customer value. Amazon is a very good case in point, and for a lot of products that you buy from Amazon. They give you in that on the right hand side the option off setting up a monthly or quarterly subscription for that product. It's a really interesting strategic approach that Amazon taking. They clearly recognized the value off the subscription model, and they see it is a direct route to increasing sales on building customer loyalty. So that's a quick overview off e commerce business models. You have to think about digital business as part of your business plan as part of your strategic plan on you. If you're not doing it already, then you must build it in now and consider it as an additional channel to market. 10. Internal Strategic Analysis - Business Plan Tie In: Now we come to the stage in this section where we're going to tie in our internal strategic analysis to our business plan. At the heart. The internal strategic analysis has at its core the focus on operational excellence, and we really be looking at the operational processes off the business. We have actually covered products and services in a separate section on this one. We're focusing really on the activities of the firm, which we looked at in considerable detail in the business model canvas. So the business plan has its own distinct sections, which have to be addressed, on which we will tie in here the sections that you'll need to think about our staff in HR technology process, innovation, regulatory and social. So the stuff and H R headings that you'll have Teoh talk about our culture, active participation, attractive workplace quality, focused leadership, workforce planning, incompetence. And you'll see that a lot of these tie in obliquely not only to the discussions we've been having in this section, but also to other aspects of the course. And this is the inevitably the continual challenge off, continually thinking about things in the round, holistically as a whole and then being ableto pull things together from wherever you need to. So we've talked about quality and previous sections. We have a section on leadership. The culture of the organization is something that really comes out subjectively from all this. But of course your staff and your HR, depending on the business model. The philosophy of the business which we've discussed are issues which only you can explain and talk about. But hopefully the challenges that I've given you in sharing you the strategic analysis model analysis models that you can use will help you to do that with technology will deal with our Indian a moment. Tell you, we're really talking about the efficient state of the I T and high availability off information. And again, that's something which you'll touch on in the business model campus in terms of process clearly value chain, but also supply chain on operational processes. Tie into that, we've looked at the Value chain in the external section, but I explained then that it crossed over to the internal section the supply, production, distribution and, of course, the risk management. And again, these are all topics which will be familiar to you now that we've gone through this section on internal strategic analysis, innovation and technology capital. This is about coming up with new ideas, new products, services, new ways of doing things. And again, I've challenged you on this. But looking at the you know I identifying I d off opportunities, a research and development, poor failure, design and development of products and services. And then, of course, there launch. So these headings you'll have to explain. But there hopefully topics that are already familiar because we've talked about them and we've addressed them then the regulatory in social environment, health and safety, employment and community, these air internal issues, but obviously from external factors and in the pest analysis, we've talked about this in some of the external, alas, is we've talked about this on a macro scale, but now you have to tie those trends and those issues into the internal functioning of the business and their impact on the internal aspects and processes in within the firm. The key conclusion from this section for your business plan is how are you going toe optimize the assets of the business to meet your strategic goals and objectives on That's the question you're answering in the business plan, and that's the challenge or setting yourself in your strategic analysis and your stress. Gee, so there we go. The internal studio announcers business plan tie in. I hope you're beginning to see that, although it's a complex picture. Non, the less the similarities there, the connections there and really during the analysis is really helpful because it gives you one line of clear thought, and then putting the business plan together forces you to think through and explain exactly what you're going to be doing. 11. CUSTOMER VALUE PROPOSITION: customer by New Proposition Section Learning objective. We focus on the importance of the customer and how a firm can add value to them. Understand the customer value proposition. As a central core of your strategy section introduction, the only valid purpose off a firm is to create a customer, Peter Drucker. Now we are getting deeper into strategic analysis by applying what we already know and focusing on the customer to see how we can ensure that the firm positions them front and center off the business strategy. The customer value proposition is a very useful concept when trying to connect your products and services to providing benefits for your customers. We discuss market positioning profit models and introduces hacks. Is Delta model to help you to connect your business strategy to your customers? You need to develop an effective customer strategy so we explore switching costs, the customer experience on the customer journey, horrible name, very effective framework. Of course, we tie this into the business plan in the last lecture for you. The business plan assignment in this section will help you to complete the customer section off your business plan at the end of this section, at the end of this section, we believe that every business has to get very serious about serving its customers. We think that you will believe this at the end of this section. Two. What is more, you will be equipped with strategic tools and frameworks to evaluate this challenge effectively and make decisions about your own business. You will also know how to transpose this to your business plan. 12. Understanding the Customer Value Proposition: Let's take a look at the customer value proposition and try to understand what we are talking about. This is essentially the value promise that the firm makes to the customer. It's saying these are the benefits that you're going to get from my product or service Andi . It gives the customer very concisely the rationale of why they should purchase from you. It must include a clear statement or definition of how the product or service differentiates itself from the competition. A customer value proposition is focused on a target market segment. You need have a very clear idea of your customers are the statement should be short, clear and concise. It has to transmit values. It must be unique. It shouldn't be a slogan or a catchphrase. It's a very clear statement or value for the customer. It's a vital part of the custom company strategy. Having a clear about customer value proposition. Your mind means that actually, you know who your customers are, and you know how you're adding value to them. That's absolutely at the core of your strategy. So this is a critical part off your strategic analysis, and it will permeate everything in your business plan. It'll also tie in very closely with your marketing strategies. But as I say, you need to have a very clear focused understanding of who your target market is. So when you two, when you go about creating a value proposition, what do you do? Well, first and foremost, as I said, I'll say it again. You need to know your customers, and that means you need to understand the market. You need to have segmented it, and you need to know which segment of customers inside that market you're going after. Secondly, you need to have a clear idea in your mind and be able to took a calculated and express it off the costs and benefits associated with your product or service. You need to know how much is going to cost you to deliver it. You need to know what the benefits are on. The difference during the two is the value you add on. That's why you can add ah price above your cost because the benefits justify that value. Then you're also making sure that you look carefully at your competitors on here we go back to a SWAT analysis, particularly the strengths and weaknesses of your competitors on you, then want to be able to demonstrate how you differentiate yourself from them. Your statement should be clear and concise and make sure you incorporate it with style, flair and panache into your marketing materials, so it really comes across as a high quality message. So that's the customer value proposition. You're explaining to your customers the value that you're giving them, which gives them a compelling reason to buy from you, and you're showing them how you're different from their competitors. This is the core of your business strategy on it will be at the heart of your business plan . 13. Positioning Your Firm in the Market: talk now about positioning your firm in the market. The whole point about this is you unconsciously positioning your firm in relation to your customers and influencing them deliberately about how they perceive your business, product or service. So you're establishing your brand or identity in their eyes so that you can help them to connect and understand why they should be buying from you. Now you can do this on a number of levels. You can be as a luxury brand. If you think about Gucci or Louis Vuitton, they're very much positioned as luxuries. You think about Apple, then it's more style, design and innovation. And if you think about McDonald's, then it's obviously low cost on your cheapness of the ready meals and that sort of thing. So you have a very clear eyed idea. When you think about the business, then the positioning, if it's done properly, comes immediately to mind, so strategies can include product benefits you can position on the basis off the benefits that your product gives to the customer. You can do it on price. Like McDonald's. You can do it on quality, like Louis Vuitton you condone. Use an application to a certain extent. That's what tech products do. And of course, you can do it in relation to your competition, so you can clearly differentiate yourself on the best. You're better than your competition on that certainly apples approach. So to create a positioning statement, you need to do a little bit of in house research. First of all, you need to establish the uniqueness off your proposition by taking and look at what your competitors are doing on working out how you're going to set yourself apart. Then you need to be clear in your own mind about your current market positioning Onda. Then look at your competitors market positioning, so you need to understand how your competitively position in the market versus your competitors on. Then you can work out with an understanding of where you are with your competitors and understanding of your uniqueness. You can work out how you are going to position yourself. Andi. Make sure that your position is a unique one, so developing a market positioning vision and statement is critical to the strategy. You have to be clear how your position in the market and the four things you need to be clear about is which target market are you addressing? Which category are you operating in? And by that I mean, if you're in a mobile phones, mobile phones is the category. If you're selling televisions, televisions is the category, and you have to be very clear about your unique differentiation and how you're gonna explain that and deliver that on, then the main benefit. Okay, unique differentiation feature Main benefit arising from the question. So what from the features. So you have a unique differentiation, and then you have the main benefit for the customer on That's really critical. So your statement looks something like this for Target Market. This target market, the product you know, which is in this category that best delivers on the unique differentiator, whatever it is, because the product and only the product provides the main benefit. So it's It's a fairly simple formulate construct, but there's a lot of thinking behind it, So to wrap it this up and to really get this in context, we're talking here about customers on your market. Positioning is the link between your customer analysis and your marketing plan, which we're going to come onto later, so you really do need to give this a great deal of thought, and it needs to be baked into your strategy. You need to understand where your position in the market, who your target market is on, what's unique about your business and what is the main benefit that delivers to your customers. And if you get all that right, then you'll know how to position your firm in the market. 14. What do we mean by a Profit Model?: This is one of these terms which you hear all the time. And yet, most of the time people may not really understand what they're talking about, although it seems obvious. So what do we mean by a profit model? It's important to actually take a thinking and strategic approach to designing a business that is going to be profitable. It's not enough to basically make something and then hope you can sell it. And I hope you can sell it at enough of, ah, premium that you eventually going to cover all your costs. You need to have all this worked out beforehand. Hence you have to have a model that you can design your business in. So it's a profitable business. The key thing is to generate sufficient revenues to exceed all the costs incurred both fixed and variable in the whole process on the whole operation off the firm. So the starting point for this is, as ever, the value proposition of the firm which we've already looked at. This is the key outstanding point. This is where the products and services they're gonna be delivered. This is how the firm differentiates. And this is how the firm is going to deliver extraordinary value to their customers, which will make their customers recognize that that's a differentiated, high quality product, and they're gonna want to buy it. Having got that sorted out, you then have to organize the assets of the firm to deliver this value prop value proposition in a profitable way. So you have to do something more than just have value proposition. So they're basically four types off profit models. I'm sure you'll recognize all of these, but we'll go through them production. Essentially, you make something and sell it. It's creation of a product or service. Apple is a good example of both. They have products and they have services. You have rental or leasing a fee for the temporary use of an asset. Think about car high or car leasing. Basically, you don't own the car. You have it for a period of time. You pay a monthly fee for the right to have it, and at the end of the contract you have the asset back. You never actually owned the car in the advertising model. You're providing a space for a business to promote its products and services. Now you will seem big billboards on the out, the sides of roads you drive past. That's an advertising firm obviously providing those billboards. But of course, online. Google and Facebook make most of their money from online advertising from being able to present you on your computer with somebody else's offer at a time and space where you're receptive, receptive to it or you're the right sort of audience. That is exactly where Google and Facebook made their money and why they're such valuable companies. The last one is a commission based business, and this is basically charging a fee when acting as an intermediary between two principles and the obvious example. This is its affiliates. But you know, if you think about stockbrokers, they're buying and selling shares on behalf of other people from other people's companies, and they take commission in the middle on affiliates, when they bring a particular product or service to somebody's attention, that person buys that product ourselves. They get a commission for generating that sale. So those are the four types of profit models, the components of a profit model and not rocket science again. Basically, you've got three core areas, the production and operating costs and area, which is basically if you think about the profit and loss account. That's everything above the gross margin, this of sales and marketing, which is in the section below the gross margin. We talk about SGN, a sales generation, general and administrative. That's those sorts of areas. But it's then delivery of goods and services, which is basically you produce the product. You sold it to a customer, and now something's gonna make sure that customer gets it in a timely fashion. So those are the so main building blocks. But again, think about the Value Chain. Think about how all the various components joined together to deliver the product or service, and you've got to make sure that the costs in each of those elements is sufficiently low. That the end result means that the company makes a profit. So I don't think this is rocket science. But at the same time, it's very easy to just talk about profit models without actually understanding the components off them and how they work and how they tie into things like the firm's value proposition. So definitely take this on board, keep thinking in frameworks and building blocks, and I'm sure you will find this this concept of the profit model. Now you understand a bit more about what's behind it. You'll find it a useful term to use on the useful model to build with. 15. Hax's Delta Model: now I want to talk to you about hacks Is Delta Model. This is a really brilliant, very straightforward, easy to understand but very current model for understanding both strategic implementation on your positioning in relation to your customer. So let me start at the beginning. It's a strategy framework with a pro customer approach towards implementation and effective management and corporate business strategy. So it is very much customer centric. And as you'll see you basically don't worry about your competition, you were entirely about how your connecting and interacting with your customer it was of the wretched thing is corrected. It was devised by are no dough hacks from the Sloan School of Management and M I T and D Wild Dean. While I hate Tom, this auto corrected sometimes catches you out. Now the main point about hacks. His model is its customer centric. It focuses on addressing the needs of the customer, and it does this by positioning around the triangle, and it shows you different ways to implement management strategies, and we're gonna take a look at this Now. There are three different approaches. There's the best product positioning the total customer solution on the system lock in on their all positioned around this triangle. And here's the triangle, and you can see if we start with system lock in at the top. You have dominant exchange on, then on the other side of it, you have proprietary standards. I'll give you some examples in a minute. Get then going down the left hand side. You have restricted access and horizontal breath. Which brings you to total consumer solutions on then, underneath that, we have custom integration, redefining customer experience. Differentiation. Which brings you to the best product, and then the last one is low cost. But let's put some corporate names on this on. Then we'll look at some examples and I'll take you through. I'll show you the corporate names you can download this Pdf to to look at it yourself. But then I'll walk you through each of these. So for the dominant exchange examples of Google Amazon eBay, I'm sure you can see that restricted access. ITunes horizontal breath, Amazon again. Customer integration kindle. Redefining customer experience. Amazon differentiation. Singapore Airlines Low cost Wal Mart proprietor standards apple. So you can see a lot of this is technology enabled, but it's a very current model, and it's very useful for current today's business, and it should certainly be factored into how you devise your strategic positioning in relation to your customer. So let's take a look then with low cost. This is the most difficult strategy to implement because you absolutely have to have the right infrastructure to sustain it. Now WalMart has got the largest i t infrastructure of any company in the world, and it is got so much data and so much information. It is very difficult to compete against Wal Mart because they're so efficient and so cost driven, now the best product for both technical and in a performance. If you look at Apple's products, then they stand out head and shoulders above the rest because of their technical quality. They're designed quality in their performance, so they position themselves very nicely there in terms of redefining customer experience. This is where there's been an appreciable change, the customer experience and, of course, the Amazon itself. The whole Amazon platform is so unique on it, the way it feeds up suggestions to you, and if you bought this, you buy that and it's got lots of reviews and engagement. It's very, very, very smartly done. The Kindle is again. Another way completely redefines the way you read books. But of course it ties you into it. And, of course, Starbucks, The whole Starbucks coffee experience when it came along was very, very unique. Is being copied quite a lot, but they never quite quite got it. If you look at customer integration, this ties customers into the product. And, of course, that's what the Kindle does. You by your Kindle on, then you want to keep on going back to Amazon to get the books, because that's see anything that works with the Kindle. You can get other things onto your Kindle, but it's really quite hard in terms of the dominant exchange with these examples speak for themselves. Google, Amazon, eBay, they're the defect owes solutions in their market, and as more people use them, they become more useful. So once you've established that dominance in the market, it's very difficult Teoh for competitors to break in. But you're not focusing on the competitors. You're just focusing on the customers and establishing your dominance. Horizontal breath again. One stop shop. We're back to Amazon. They have so many products that you can buy there that if you know it almost becomes an automatic. Think. If you want to get something, you just go to get on Amazon and get it online and online and deliver it. And, of course, with Amazon prime, then you know you. It's very easy to have it delivered very quickly. So system lock in. This comes down to proprietary standards with the Apple operating system, and you get the entire economics of the whole integrated profit product major, all working together but locking out everybody else. And once you're in the Amazon ICO structure, you know you love it so much, you keep on buying it. I'm sitting here at my desk and on my desk. I've got an iPhone. I'm looking at my I Mac. I've got a lap apple laptop on my left. I've got a ni pad on my right and akin the Kindle's Amazon, of course, got the iPad there when all these things tie in. I've even got an old iPhone sitting on my charger. All these things tie into an integrated product range, so the best product and low cost strategies are the most difficult to sustain, but the system lock in is the most sustainable because you basically basing it on a whole integrated system. This shifts the entire strategic focus. You're no longer worrying about your competition and how you're going to differentiate and out compete them. You're focusing purely on delivering the needs of your customers, but with a strategic intent designed to make your customers completely dependent or want to be dependent upon you. It changes the dynamics around completely now. To do this, you need to bring in some adaptive process. You have to have a process in your organization for adapting. These strategies on these processes must align with the strategy that you choose to follow . So operational effectiveness you need to design your entire supply chain, your customers, your supplies and anybody that complements your business to reinforce the direction you wish to drive your strategy. So you we've looked at supply chains. We've looked at value chains. You need to now say right, this is the strategy we're going to adult on this. These are the processes we have, and we now need to adapt our processes to make sure they deliver the strategy. Customer targeting is focusing on attracting, satisfying and retaining your customers. So you are completely customer focused and you maximize the financial utility and satisfaction off your customers while you're there. And the classic ago example that is Amazon prime. Once you subscribe to Amazon Prime, you know you keep on going back to Ramsey because you get free delivery. But you also then get into Amazon music and you get the Amazon video streaming supplied for free. So you're getting tied in. And then if you're in the Amazon streaming you by their videos So you're there thinking mawr more market share. And they proven that once they get you into my arms and prime, you buy more stuff from them. No great surprise there. So customer targeting but focusing on financial, utility and satisfaction is critical. And of course, innovation is important. You have to keep innovating. Look at the rate at which Apple produces its products and services, so you have a continuous stream of new products and services coming along on that keeps you one step ahead of the competition. So you're focusing on the customers and you let the competition play catch up to summarize the focus is on the complement consumer on the Considering the customer on not on the competition, you select the best strategic option for your business. You adapt your processes, toe fit that strategic option on. Then you execute on making sure that you achieve those strategic objectives. Taxes. Delta model I think it's brilliant, I think is a really useful model as you're thinking about your customers, which we are in this section. Then you can start to say, Well, what strategies can I adapt? Adopt, which are the best for my business and therefore deliver the best customer satisfaction. You get the most from your customer financially, and you leave the competition standing behind you, trying to play catch up. Brilliant. That's what you should be doing. Think about it for your strategic planning and for your business plan. 16. Switching Costs and Customer Strategy: I want to talk to you briefly about switching costs and customer strategy, because these can affect customers and the relationship with the firm. But the same time they're also a strategy employed by firms to actually retain customers. Switching costs are basically incurred when customers switch from one brand particle service to another. I'm sure you've all come across it when you've tried to move your mobile phone account from one supplier to another. Although there are obliged by law to let you take your number across, they make the process as difficult and as complicated as possible to try to reduce your inclination to want to go through all that hassle to switch plans. Plus, of course, they'll also if you tell them you're thinking of switching. It's amazing what good service you get on what offers you get quickly from their department , which is designed to reduce the amount of churn in the customer base. It's also known as a switching barrier, So if you think about barriers to entry in Porter's Five Forces model, it's the same sort of thing and there could be financial and non financial barriers and costs. There are three types of costs. Time costs where it takes a long time to actually take you through itself through the process. Psychological costs where you're not sure whether the change you make is gonna be worth it , whether the new product or service is going to be as good as the one you've currently got on effort based costs where there's an awful lot of paperwork or effort met you have to make to achieve and get across this hurdle. High costs are when customers are less likely to make the switch, and low cost is when they're more likely. So if you think about any of these costs, you know there is a range of high to low, and you can evaluate therefore the likelihood that change will happen. Now, companies often make it deliberately difficult for customers to switch on. Examples of strategies they employ are things like cancellation fees, where they charge you a fee to cancel the contract and to move where they make the process very complicated, so they make it as difficult as possible. Where they generates a significant paperwork makes you have to fill it all in before you can actually switch over from one service to another now, interestingly, often competitors. What will try to cover off some of these costs and efforts to encourage you to switch? So you see very often people, particularly banking firms, offering incentives, financial incentives if you switch your bank account or your current account, particularly from one bank to another, which inherently has got quite high switching costs because it's quite a complicated process. You've got order of standing orders and direct debits set up. So they're trying to give you a financial incentive to get across over the effort on the psychological costs off, making the change. So those are switching costs and customer strategy. It's important to you think about these, particularly in regard to the products and services within your firm and how you're going to incorporate this facet off strategy into your strategic plan and into your business plan . 17. Managing the Customer Experience: Let's talk now about managing the customer experience. The customer experience is defined as thesis, um, off the total interconnections between the customer and with a firm over the lifetime of relationships. So it's a long term thing. It's often a very emotional thing, and it's quite complicated and their multiple touch points with the firm. So it's quite a complex issue to consider and manage. But it's very important because it encompasses every aspect of a company's product and service, both before, during and after a transaction. It includes both direct contact with the company, where there's actually an interaction going on talking to employees, buying, following up the customer service, whatever it is, but also the interact in the indirect into reactions such as people talking to you about the firm, something you read in the press, what you hear on the radio. So it's really all encompassing and it needs to be thought through very seriously. The benefits are quite substantial. The benefits of customer, a good customer experience is increased. Customer loyalty increased customer satisfaction on better word of mouth marketing. Is this social proof positive reviews, recommendations, the sorts of things that really make people want to buy eso is really critical. The customer experience management is a strategy and process adopted by a firm to ensure that customers have adoptable experience. So as F firm and his organization, you have to bake this into your strategy. There has to be a very strong awareness off the need to manage your customer experience to ensure the customers get a great experience. So it is a central part of your strategic planning and it has to be part of your business plan. Now. Bad customer experience is caused by things like and none of this will surprise you. I'm sure you can all think of an example when this came, came Teoh affect. You can remember tryingto call Affirm the other day, and it was on the phone waiting, with their wretched noise and their wretched background music for about an hour before I got through. So the first thing long wait times are so frustrating. Employees who don't understand customer needs can be really annoying, unresolved issues or questions. I've got a situation with a company where we had a product delivered. The quality is not very good. It has been rolling on for three or four months. Where am I ever gonna buy another product from that company? Once I get this sort of that, you can bet your bottom dollar I won't be too much automation. People like it to be more personalized on therefore services, not personalized comes up next or rude or angry employees. I'm sure you get the picture. Ways to improve customer experience are to create a clear customer experience vision inside the business. Help your staff to understand the guiding principles of what you want them to do. You need to understand who your customers are. We've talked a lot about segmentation but also create avatars. Create individual personas for your key customer segments on Explain them to your customer support team so they really feel they know the customers they're talking to. It's important to connect an emotional connect emotionally with your customers. They say 50% of an experience is based on emotion, so if you can make that emotional connection, then you're really start to get through. Capture riel time customer feedback through live chattel. Follow up emails have a quality framework so that you can train your staff toe have consistently high customer experience standards act on employee feedback there the people who are in touch with your customers. So if you get some feedback from them on a particular issue, then make sure you address it regularly not once a year, and finally try to measure the return on investment from great customer experience. One of the tools and there are several, but the one I want to flag up to you is the Net promoter school. You send them a simple 1 to 10 scale, one question survey that says, Would you recommend this company to a friend or relative? And you end up with a simple benchmark herbal customer experience? Metric. So that's managing the customer experience. It's a critical part off dealing with your customers and building your customer loyalty and building repeat business. So pay it some attention, take it seriously and make sure it's baked into your strategic plan. 18. What is the Customer Journey?: take a look at a key question. What is the customer journey? I want to ask you or answer the question what the customer journey is. But I also want to explain to you why it's so important. And this is all about the customer life cycle, and it's It's beyond was if you like. It's more of a road map for the customer experience, but you need to map out how your connections and how your contact points and touch points with your customers works because they calculated that a customer needs six or seven touchpoints with a car business, a firm with you before they're ready to buy on. I'm going to talk about this in this lecture, and hopefully you'll understand the importance then off when you're putting your strategic plan together, how you plan to develop that contact on the bad relationship with the customer through the process so they get to the point where they're ready to buy from you. So the customer journey encompasses the key steps between the company and the customer, from the initial awareness to the final stage of evangelization in the customer life cycle . Now, one of the ways I explain this in very simple terms and I quite like this. This particular little methodology is the find me. No, we like me. Trust me. Pay me, evangelized me. So basically, if somebody is out there, if I have a pretend potential prospect who is in my identified segment that I think they are potentially customer But first of all, they have to find me. They have to develop awareness that I exist and then I have solutions for them. Then they need to get to know me a little bit more so they need more information on background and understand what I have to offer that has to then develop into a deeper, positive feeling. They need toe like me because you do people. We do business with people you know, like and trust. And that's the next stage, which is trust, because without trust, they won't be prepared to hand over any money because they won't have any confidence in the solution that I am offering them for whatever the pain problem is that my product solves. So once the trust is there on, then they're ready to make a decision. Then they're prepared to pay me on then providing that all goes well and have a really positive experience. Then they tell other people about me and they become evangelists. The business and they become repeat customers as well. So the rest of three distinct phases to this There's the before purchase, the during purchase and after purchase face, and that's quite a useful framework toe have in the back of your mind. But let's talk about these steps, which is out of market trigger active evaluation, purchase decision, experiencing loyalty. And you'll see that in a sense, these map the no, no, me Fine. We know me like me. Trust me, pay me, evangelize me model. So out of the market is basically where the customer has a situation has is probably aware that there's a problem or an issue needs to be addressed. But then something triggers it to want them to solve the problem on its that trigger that sets them on a journey of exploration, which is where they become aware that I have a problem. That console I have a solution that can solve their problem once they become aware of that . Then they go and research it. They go and find out Mawr. Maybe take some advice from friends, read reviews. Look at the website pages. See what it has to say about the product. Check that it actually offers them a solution. They may go and look at other products and solutions to get a comparative. A comparative check to see that that what I'm offering is the best in the market on at that point, they then are ready to buy, and they make the purchase decision so they make the purchase decision, and then they go through the whole purchase process on the quality of that experience, then determines whether or not they become repeat customers, whether or not they become loyal customers. Now, your touchpoints, for those just to give you an idea about how you can set this up for yourself, is, you know, when they're out of market, then maybe you can direct mail them. Or maybe you can put some Facebook ads up or something that they can find you on. Then, when it comes to the trigger face, then you can use more of your social media to make them aware of the opportunities. Maybe you've got some content on YouTube. Maybe you know you're you've got a Facebook group and somebody refers them to it. Maybe they see one of your tweets. That then leads them back to your website, where they're considering and evaluating your your solution. Andi. Maybe they want to actively get involved. These or maybe they take the free trial for a month or whatever your product happens to offer, you know, that can enable them to be more active, maybe involves going into the shop and checking it out. Then you have the purchase decision. So maybe there needs to be some human interaction with them to close that deal, which means you put them in touch with your sales team once they made the decision, which they made the purchase. Then you can follow up with emails, or you can follow up with calls or take them through the installation, whatever the processes and then the loyalty comes after the process where they're working with your product on. They then enjoy the benefit of your customer support so you can see how these different points need tohave a strategy behind them so that you actively manage your involvement with your customers all the way through the customer journey in the sense you are their guide on their journey, you are walking side by side with them, virtually guiding them through the journey that they're taking in the early stages. They're probably not even aware consciously that you're there. But that's the whole point that you develop that relationship with them, gradually toe until you get them to the point where they're ready to buy. And having a customer journey mapped out, whether it's a funnel or whether it's some sort of business process, which you get your your internal teams to buy into is critically important and has to be part of your business strategy. 19. Customers, Customer Value and the Business Plan: Let's take a look now at customers. Customer value on the business plan. We want to take a look how we tie this section into the business plan from our business strategy. The whole point about the business plan is that you are delivering value to your customers . That is the whole objective of your strategy. And that is why understanding the customer value proposition is so important because it ties in directly with your customer needs. The custody business plan section covering customers has the following headings that wants to show, or you should show the top 10 customers and percentage of revenue. This is to demonstrate who your most important customers are on the element the or the level of customer concentration in the business, which is a critical factor. You should be able to identify your customers by sector, and you should be able to explain your customer's needs. Andi consequently obviously how you fulfill them and, of course, a market segmentation analysis showing your different cohorts store different groups off segmented customers so that if you like the base knowledge, but it's important to go further because in this section we've looked at customer value on the whole customer value proposition. We've looked at customer segmentation, and we've also looked at market segmentation. In other parts of the course. We've reviewed the customer journey. This is a particularly good metta for for the three online business in the digital business works, but in a sense is also true of on offline business. And if you can get the idea of the customer journey in your mind on how you're going to address it strategically, then it's a really useful tool for understanding how you're going to develop and deliver that customer value. And, of course, we've talked about the customer experience, which is key to building customer loyalty and repeat business. The challenge in drafting the customer section The business plan is to go beyond the analysis. You'll see the base headings are really numerical analysis, just sharing who your customers are. But I think it's important in the business plan to inject strategic intent and direction. So you have to explain not just who they are but what their needs are and how you're basically going to address those needs because without customers and without a go to strategy for those customers, you basically haven't got a business. Now I've put the basic business plan headings from the business plan, which I gave you the beginning of the course in the appendix. That slide deck. So you've got them and you can download this slide deck from the resources section. So that's the customers customer value and how it ties into the business plan on. We're continuing to build up this strategy and at the same time build and create the ability to to take that strategy and explain it in a business plan. 20. Part 4 Operations and Customer Value and Coming Up Next: Well, that brings us to the end of part for this course, and I just want to do a little wrap up and give you a heads up on what is coming up next. So I really hope you enjoyed part for and you've got to grips now with the internal part of the business. We've looked at operations and customer management. We looked at all aspects of operations, in fact, and the internal operations, and we kept a very close eye ous. I'm sure you now appreciate on the importance of customer management, but we've gone further than that because we've also looked very closely at customer value proposition. And that's all about how you create a fantastic proposition for your customer that adds value to them. And if you understand that, then you'll go a long way to having a successful strategy for your business. Now, in Part five, we're going to move on, and we're going to take a look at sales and marketing strategy on we're gonna help you to develop some frameworks to apply to yourselves a marketing strategy to help you ensure that you get the best return you can on your marketing investment So that's coming up in the next part in part five. If you're watching this down the road, then that should be already published and you should be able to find it and just go and take a look. So enjoy the project with this course where you're writing the business plan part of your part, which covers our internal operations. And I look forward very much to seeing you in part five off this course. So that has bean apart, for we looked at internal operations and customer value. Andi, I hope you look forward, Teoh seeing you very soon in part five of the course.