In 2011, CEO’s will experience another year of unprecedented high unemployment and slow-or-no growth.

However, the next 12 months will be particularly difficult for businesses of every type, size, and location because:

• Customer loyalty, long in decline, has virtually disappeared: In 2009, only 36 percent of business travelers were brand loyal, compared to 42 percent in 2007 and only 20 percent of US car buyers were brand loyal, compared to 80 percent in the 1980s. (NYT, December 1, 2009; October 20, 2009).
• Customer buying behavior has been irreversibly transformed by technology: There is no longer a difference in the purchase behavior of “online customers” and “offline customers”. Most of today’s prospective customers are addicted to sites that instantly compare choice, availability, quality, service, and the most dangerous comparison of all – price. These customers are a generation of “new experts” – confident and determined because they are equipped with purchasing firepower unavailable to any previous generation.

What follows are the five most serious challenges of 2011 and the practical ways that CEO’s can combat the damaging effects of each on their financial performance. All five challenges focus on the single most valuable corporate asset – customers.

Challenge #1:  Retain current customers and generate repurchase, advocacy, and referral.

The obvious, but all-too-frequently forgotten challenge in difficult economic times is an aggressive initiative to maintain the company’s current customer base. An exclusive focus on new customers is counter-productive because motivating current customer retention, repurchase, advocacy, and referral is more promising and profitable.

Moreover, meeting current customers’ expectations is more challenging than ever before because today’s CEO’s live in glass houses constructed by social media. A single posting on Facebook or Twitter about a customer’s experience with the firm, real or perceived – positive or negative, will influence millions of other customers and prospects.

In a world of eroding customer loyalty, customer retention must be a top-down, high priority, company-wide mission. Reliable metrics to assure continuous improvement in customer retention is critical to survival and profitable growth in 2011.

Challenge #2:  Consistently improve prospect-to-customer conversion

Today’s customers are empowered by vast information on the internet about all products and services and benefit from the immense choice of sellers in every category.

Moreover, these “new experts” realize enormous financial and psychic rewards by using their ever-smarter, smart phones to compare competitive prices. This huge population of often-ruthless buyers (28 % of US mobile phone subscribers in 2010 according to Nielsen Company) will grow exponentially in 2011 and will exploit this profit-destructive instrument in every consumer channel, and increasingly, in every industrial channel.

CEO’s must anticipate this severe challenge, define a smart response strategy that will satisfy the prospect’s appetite for value, and create organizational alignment behind prospect-to-customer conversion.

Challenge #3: Create enduring customer preference.

In 2011, CEO’s must disregard the seductive appeal of “brand building” because, for large and small companies alike, this extravagant investment is both unaffordable and unproductive. Moreover, in the digital age, conventional media advertising is viewed by most customers as yesterday’s recipe for hype.

Given the intense challenge of creating customer preference for a business or brand, a far more productive investment option is an improved website because today’s prospect’s initial contact is almost always online, whether the customer intends to by online or offline. A site that compels interest, differentiates the seller, and facilitates navigation will create customer preference.

In today’s world where customers seldom care where they buy, customer preference is choosing one seller over all other options – becoming the customer’s 1^st Choice.

In 2011, being the 1^st choice of the “new experts” is a far more influential than being well known.

Challenge #4: Identify a source of profitable new customer revenue.

2011 will be a daunting challenge for CEO’s – a year highlighted by the continuation of global uncertainties, domestic political conflicts, and high velocity changes in technology.

Yet, the changes in technology will drive changes in customer buying behavior and this is where growth-oriented CEO’s will find new sources of profitable revenue.

This was true in 2010 when: Amazon’s e-books raced ahead of sales of hardcover books; Apple sold more than 3 million iPads in less than four months; Proctor & Gamble announced an initiative to market direct to customers on the internet, bypassing retailers; and Italy’s Fiat took control of Chrysler to create a company with global scale.

And, this will be true in 2011 for those CEO’s in every category of commerce who are determined, courageous, and imaginative enough to “look around the corner” for changes in customer purchasing patterns – not just straight ahead where too-few growth opportunities exist.

Challenge #5: Develop an ambitious, but achievable growth strategy.

Finding growth opportunities is a severe challenge for CEO’s, but it’s just the first challenge. Finding a way to fund growth in lean years, such as 2011, is an even bigger challenge.

There is a solution if CEO’s will change how they approach strategic planning for 2011 and beyond. Here again, determination, imagination, and courage trumps the time-tested sequence of planning which demands that financial planning is the first order of business.

This fixation on an obsolete planning process that was configured before high velocity changes in technology introduced high velocity changes in the business world guarantees that funding will be unavailable for innovation. However, making innovation the first order of business will assure that ideation will produce potential sources of profitable new growth.

When this occurs, management can evaluate the risk/reward ratio of the various growth opportunities as well as the funding required to test the reality for success. All that remains is to examine how to eliminate or reduce expenses in less urgent, less promising categories so as to fund high priority avenues of profitable growth.

Those CEO’s that mandate this contemporary planning methodology have the potential to leap ahead of competition in 2011, perhaps on a smaller scale, but in the same manner as Amazon, Apple, P&G, and Fiat who consistently “look around the corner”.