Assessing new business through customer value propositions

The Problem

When you are an award-winning leader of the asset finance sector, your customers expect you to be a one-stop shop, providing consistently excellent services and products. Introducing major new products therefore represents a major risk, as there is little margin for error. And it becomes even more challenging when a new product is only one of a large number of change initiatives underway. This was the challenge our client faced as they considered a potential new International Trade Finance (ITF) product, earmarked to deliver strong turnover and margins within the next two years.

Our client wanted to be sure that the case for ITF justified the risks inherent to changing how they operated. They also wanted to comprehensively consider their customers’ perspectives to minimise any chance of the product misfiring.

Our Solution

We were brought in to help for two reasons: Firstly for our unparalleled understanding of how the asset finance sector operates; and secondly because we are able to quickly and effectively assess what customers do and do not value, and therefore what they will be willing to pay for, using our proprietary Customer Value Proposition (CVP) methodology. Rather than start with a list of products that are then ‘tested’ with customers, we start with the customer’s perspective to design distinct propositions that are profitable when offered to the right group of customers.

In this case our solution was to:

  • Evaluate the ITF market in terms of its size, nature, segmentation and competitive landscape by stitching together multiple data sources in the absence of any single, robust set of data for the industry. We were then able to identify the potential profit margins and the minimum market share needed to sustain our client’s target volume of business.
  • Identify distinct Customer Value Propositions through interviews with a representative cross-section of existing and potential customers and brokers. By speaking to customers and interpreting their responses, we identified three segments with distinct requirements for ITF.
  • Assess whether our client should enter this market, drawing on our market and customer analysis, and an initial assessment of how this could be done.

We set out a balanced case for the three distinct ITF propositions, assessing each according to their likely take-up, their alignment with the corporate brand, and their potential returns versus the corporate target. Furthermore, by delving deeper into the types of ITF product and services demanded by distinct customer groups, we were able to clearly demonstrate what delivering an ITF offering would feel like operationally and what changes would be required.

Client's Benefits

Our work met with unanimous approval from our client’s management team. For the first time, the management team had a clear and robust evidence base that enabled it to make informed decisions on the strategic direction of the organisation. Following our work, our client chose to focus on their growth in existing areas of Asset and Invoice Finance; a decision that appears to be vindicated by the subsequent downturn in the markets.