In my LinkedIn post on Halfords’ new customer strategy, I set out an eight stage plan to maximise customer lifetime value.
The stages are as follows:
- Start with why – define Halfords’ core beliefs
- Quantitive and qualitative customer research
- Create a balanced scorecard of objectives
- Design the desired customer experience
- Honestly assess whether Halfords people, process, data and technology capabilities can deliver the experience
- Apply lean and agile principles to a change plan that will fill the capability gaps
- Measure and learn using the scorecard above
- Accelerate into delivery
1. Start with why – define Halfords’ core beliefs
In their recent market update, Halfords stated the following:
“The Halfords brand has a strong heritage and high awareness but it is often seen as functional and can appear old fashioned for some younger customers. So we have clarified our brand purpose and framework. Our goal is to be customers’ first choice for their life on the move and we will achieve this by being Committed to Making Customers’ Journeys Better…
“We are investing in building customer data and our insight capabilities. The data that currently exists is held in different places across the business and our relationship marketing is currently email-based with only basic customer segmentation by product. There is huge scope for improvement here in order to maximise the lifetime customer value. The benefits of this include increased frequency of visit, greater cross-shop between motoring and cycling, and higher basket size…
“We will collect more data about our customers and build a single customer view across the business whilst transforming our marketing campaigns to be customer segment led, rather than product category led.”
Casting a critical eye over this – and having just read Simon Sinek’s seminal book “Start With Why” – I think Halfords could more clearly articulate why they do what they do.
They describe clearly the what and how and of using customer data to drive more frequent spend. However they don’t answer the existential question of why Halfords exists. An answer is hinted at in the new strap-line “For Life’s Journeys” but this could be expressed more clearly. Perhaps something a long the line of “we believe in safe, fun adventure outside the home”.
By answering this, Halfords can align the use of data to their purpose.
For instance, rather than selling a targeted cross sell message, Halfords can send a message about travel safety or fun on a trip. Oh and by the way here are some products to help you achieve that…
My caveat upon this is that the update quoted from was to city analysts and shareholders. The business may already have a clear sense of why that I haven’t seen.
2. Quantitive and qualitative customer research
Next I’d want to conduct a thorough assessment of current and prospective customers.
This would start with enriching and profiling the existing customer base. Where do they live? How much do they have? What do they drive? Where do they holiday? What are they buying?
Armed with this data I’d build out core customer segments with accompanying pen portraits.
Customer feedback groups would then be held with each segment to get additional insight on needs and wants. Ideally these groups would be split between Halfords’ existing customers, people who don’t use the brand but are a strong look-a-like match, and people from demographic segments that don’t match any type of Halfords’ customer.
3. Create a balanced scorecard of objectives
Using the data and insight gathered in stage 2, I’d now seek to set a number of objectives that link back to the strategy and the definition of why.
Customer lifetime value is an obvious choice as a metric and would certainly sit as part of my strategy.
Based on the strategy I’d want to also track the following metrics:
- Level of discount applied per order – how much am I having to discount to win a sale
- Customer and order source – gradually I’d want to see a shift from bought media to owned and earned media as customers become more engaged with the brand
- Feedback and review scores – to ensure that I’m providing a quality service and product to customers
- Percentage of anonymous vs known customer orders – ideally this will start to shift as customers recognise the advantages of being known in store
As well as customer metrics, I’d want to have easy access to store employee feedback to understand what front line staff are experiencing. Having worked in retail, I personally know how painful poor systems and lack of relevant product can be.
4. Design the desired customer experience
I’ve written about a framework for designing customer experiences that touch all channels in the past – mapping the customer journey across all channels.
In Halfords’ case the brand is going to need to be truly omnichannel. The experience should be the same in any channel that customers engaged with.
Designing the channel experience in each channel, will enable me to identify what needs fixing and what the current business capabilities should be.
5. Honestly assess whether Halfords’ people, process, data and technology capabilities can deliver the experience
Knowing what needs to be fixed requires a frank examination of the current capabilities. A common mistake is to compare capabilities against a utopian vision. To ensure forward momentum, the capabilities need to be assessed against what is needed to deliver the vision and experience defined.
Capabilities would be assessed across the following areas:
- People – what are the necessary roles and responsibilities to deliver the experience?
- Process – what processes will we need to deliver the experience the way it should be delivered?
- Data – what data will be required and how will it be gathered?
- Technology – what solutions, integrations and tools will be required?
With the gap between the current and needed capability, initiatives can be drawn up to fix these problems. Initiatives may include a team restructure, software selection and implementation, hiring, data integration, or process redesign.
6. Apply lean and agile principles to create a change plan that will fill the capability gaps
A plan should now be formed from this bucket of initiatives that will deliver the necessary change at Halfords.
There are a few things to consider when building the plan.
The first consideration is scoring. Each initiative should be scored for it’s estimated business benefit and relative cost. Going through a group scoring exercise can help to quickly get a consensus on each initiative’s value.
Next comes the consideration given to dependencies. There may be an initiative that delivers little real value but which is vital for future phases of the change.
Phasing is a further consideration. When implemented, an initiative (or group of initiatives) will unlock the ability to deliver a new element of the experience. By breaking the plan into distinct phases you can show rapid progress and prove the business case for future investment. In some cases the value generated may pay for future phases of development. Effectively a bootstrapped transformation programme.
Connected to phasing is Eric Ries’ popular lean startup approach.
This process relies on turning an idea into the minimum viable product and then testing it for feedback. Once feedback is received the next iteration of the idea can be developed. It’s worth considering if there are very easy ways of testing the initiative before doing a full investment in them.
7. Measure and learn using the scorecard above
As initiatives are implemented it will become necessary to measure the outcomes. This should be planned in advance with agreed definitions of the metrics that are to be scored against.
Crucially, there should be appropriate feedback loops to ensure that future investment is optimised based on previous experiences.
8. Accelerate into delivery
John Kotter’s work on change management is massively under appreciated by businesses.
In Accelerate, Kotter has identified why some companies are able to transform at an accelerated pace whilst others seem to stall and stutter their way to an incomplete ending. An ending that is often premature.
Essentially, Kotter’s work found that acceleration in change comes from creating an environment where bottom (or middle) up change can happen. Management provide objectives, oversight and steering whilst those further down the hierarchy work in cross party working groups to effect change.
Putting customers in the driving seat will require Halfords to effectively manage and deliver change.
I’d be very pleased to hear what ideas other people have on delivering the change that Halfords wants to deliver.
Add a note to the comments or contact me directly.