Rule 4: customer value proposition fuels your growth strategy

Now we know our ultimate goal and growth strategy, we need to go one step deeper. The main question is: what drives your growth strategy? Now we are in the area of customer (consumer) value proposition. How do you differentiate yourselves comparing to competition to win customers? You have four basic customer value strategies:
1. Functional Leader: you have the best product compared to competition.
2. Customer Intimacy: you are very close to the customer, so he is willing to prefer you above competitors.
3. Operational Excellence: you have the best price / quality product.
4. Lock in: customers cannot without your services or products. If they would stop using your products and services, they will be eliminated from must have functionality. Basically, customers are trapped.

The first three strategies are become famous due to Tracey & Wiersema. The say, you have to perform on the first three points to a certain basic level, but one of these strategies is dominant in your strategy and determines, to a large extend, the strategic objectives.

So, strategy is all about choices. One of these basic strategies will determine the direction of your objectives, and consequently, your KPIs you need to measure the success of the company. How does that work. If functional leadership is your dominant strategy your focus of objectives (and related KPIs) will be on image and new functionality (innovativeness). For example you could measure your time to market of new functions compared to competition. You need to be first. If customer intimacy is your dominant strategy, you will focus on service and relationship. Related KPI’s could be customer wallet share type of indicators. If operational excellence is your dominant strategy your focus of objectives (and related KPIs) will be availability (easy to get the product / service), price, quality and service. You could measure for instance, price gaps to competition, service levels or product defects.
Lock in is a different cup of tea. Not many companies can do this. You could measure the easiness of stepping in the lock in and the difficulty to get out (churn rates, for instance).

Of course you should always measure customer satisfaction, if you can, together with customer loyalty. With customer satisfaction you measure perception. Loyalty measure customer behaviour. Both, together with your internal KPIs will give you great insight in cause and effect relationships.