ELEMENT 6: CUSTOMERS

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1. ELEMENT 6: CUSTOMERS

‘‘Customer’’ Defined

Customers are the reason that organizations exist—they are the most valuable assets. They are con- sumers or other businesses that utilize the enterprise’s products and services. Large customers and / or groups of customers can exert significant influence over an organization. The business model is a framework for analyzing the contributions of individual activities in a business to the overall level of customer value that an enterprise produces, and ultimately to its financial performance.

Categories of Customers

An organization’s customer base is made up of customers with many different attributes. They may be categorized along many different dimensions, depending on the purpose for which the segmen- tation is performed. Possible segmentation criteria include size, market, profitability, geographic lo- cation, customer preferences, influence or bargaining power, and intellectual capital. Segmentation gets the enterprise closer to the customer and allows the enterprise to understand customer needs in a very deep way. This closeness gives the enterprise access to information that is critical to strategy formulation and implementation. In addition, the enterprise and / or engineer can utilize customer segmentation techniques for various improvement initiatives.

Product and Services and Customer Linkages

Products and services and customers are inextricably linked. An enterprise’s value proposition is expressed in the value—the products and services—it delivers to its customers. In the New Economy, these linkages will become more formalized as organizations innovate and produce new products with their customers. Customer capital will grow when the enterprise and its customers learn from each other. Collaborative innovation will be in everyone’s best interest.

Relationship of Customers to Markets

Markets are made up of customers that have some common interests. Markets can be divided into finer and finer segments (customer groups), with each segment having its own issues. Market segmentation allows an organization to pursue the acquisition of those customers that are most attractive to its value proposition. Segmenting markets also provides the basis for tailoring products more specifically to the customers’ needs.

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