Why Annual Planning Hurts Customer Profitability

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Annual planning is a missed opportunity for driving customer profitability inside the corporate machine. Ah, the joy of the annual plan. Those last three months before the fiscal year ends are spent rushing about trying to decide what you’ll do next year. Each silo pushes its numbers around for head count, capital expenses, vendors, and programs.

The silos usually pick their projects and plan their budgets independent of one another.

Here’s what happens: Short-term tactics with outcomes easily attributable to individual departments (for purposes of “clean” compensation and metrics) comprise annual plans and financial commitments. These often come at the exclusion of messier company-wide efforts that could resolve customer issues and subsequently yield more significant long-term revenue. As a result, customer experience and customer profitability opportunities are lost in the (lack of) hand planned projects, and planned experience hand-offs between the silos.


Programs? ? Is this where the customer comes in? ?Or is it vendors? ?How does all of this tie together across the organization?? Tilt. It doesn’t. Annual planning is perhaps one of the greatest missed opportunities regarding customers. Everyone’s budgets and plans get cobbled together. We miss the opportunity to strategically forge ahead on key things that would have an impact for customers. Instead we do a multitude of separate things that don’t connect and neither does the customer experience.

Do You Capitalize on Annual Planning to Manage Customers as Assets?

  1. Do you do a loss review prior to planning to know which customers left and why?
  2. Do you evaluate trending of customer issues prior to planning to identify priorities?
  3. Do you take stock of customer segments and their profitability prior to planning?
  4. Do you convene a forum of cross-company groups to determine the customer priorities for the upcoming year?
  5. Do results of those forums impact annual plan investments?

Does any of this sound familiar? It’s likely that the mad dash that has caused annual planning in your organization is partly to blame for the lack of focus on the customer. It’s a bit odd that in all the hand waving about strategy, a company’s biggest asset, its customer base, is not yet viewed as that big asset when it comes to the annual plan and what to invest in.

Some of the companies I have worked with did the hand wave to “customer satisfaction” when the annual survey results came in. Based on the culture, there was some rushing around to change some things, especially if they didn’t like the results. But I’ve also seen more often than not, that customer survey timing is out of whack with annual planning cycles. (i.e. too early or too late to be considered). This is hardly a continuous improvement effort with progressive metrics to drive an increase in customer experiences, customer profitability, and customer loyalty. There is typically no baseline for each of those three dimensions or goal line. Yet this is how most companies continue to approach annual planning. And it is impacting customer profitability.

Without common accountability targets, actions will continue to be planned tactically, based on the individual annual plans of the silos. Companies need an ongoing roadmap to define where they want to make progress in customer profitability, customer loyalty, and customer experience delivery.

Annual planning customer-centered goals may include, for example:

  • Taking a strategic look at how much prospecting for new customers or business needs to be done every year to replace the revenue lost in the previous year.
  • Establishing annual goals for the movement of customers from one level of purchase behavior to another.
  • Identifying the priority customer experiences requiring cross-company efforts to fix or differentiate the end-to-end experience.


Without these types of customer-centered goals, the company continues to focus only on business outcomes; wheel spinning continues, and companies continue to stand still regarding customers without knowing exactly why.

Uncover Ways to Drive Customer Profitability
1. Turn the annual opportunity missed into an annual opportunity gain.
2. Utilize data, customer feedback and real time outcomes to drive customer profitability
3. Unite the silos to start with the customer experience priorities FIRST, and then dole the work, the tactics and the budget out to the operations.

Read more about annual planning in my book, Chief Customer Officer: Getting Past Lip Service to Passionate Action.

Republished with author's permission from original post.

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