Define Your Customer Type

Each customer is either an Intermediary or a Final customer.

Intermediary customers are those commonly termed "channel" customers. Intermediary customers include wholesalers, retailers, and, occasionally, brokers. These customers see that the product is sold and delivered to a final customer.

The Final customer is either an end-user or an installer. Consumers make up the bulk of the end-users, though organizations such as companies, government entities, and other organizations, can also be end-users. The installer type of final customer includes both contractors, who serve the ultimate end-user, as well as original equipment manufacturers, who buy products to install in their own final product.

From this description it follows that there are three potential customer/supplier interactions:

• Intermediary customers buying from the producer of the product

• Final customers buying from the producer of the product

• Final customers buying from the intermediary of the product

We have organized our brainstorming ideas around reducing the costs of each of these three customer/supplier interactions.

You may wish to use more than one customer/supplier interaction to brainstorm innovation ideas. Final Customers purchase either from an Intermediary or from the producer of the product. Products and services that a producer of a product improves in order to help a Final customer will often assist the Intermediary of the product in selling to that Final customer. Consequently, a product producer could use all three customer/supplier interaction sections of the Customer cost-based brainstorming outlines in order to develop new products and services.

To conduct your brainstorming for product innovations, you would concentrate your attention on the customer who is most critical to your success. If both types of customer (i.e. both Final and Intermediary customer) appear equally important, then brainstorm ideas for both separately, using the customer cost steps we outline in Describing Customer Costs.

Once you have chosen the type of customer for whom you will innovate, you should choose two or three representative examples of target customer segments, where the target customer segments are defined by the customer size/supplier role of the customer relationship. For example, if the company should decide that it must be able to compete for Very Large customers in their Primary and Secondary role positions, then these become two of the target segments when you define customer targets by size. In order to brainstorm innovations, you should choose a representative customer from the largest two customer size/role segments, for example, a customer in the Very Large/Primary role position and one in the Very Large/Secondary role position to serve as representative customers.

For more on the important step of segmenting customers by size, please see the Diagnose/Segments/Value of a Customer Relationship section of Strategystreet.

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