Wednesday, December 30, 2009

thought-starter # 3, loyalty versus frequency

Thought-starter # 3: Loyalty versus frequency

“At the core of any successful enterprise, enabling its very existence is the value creation process. Value creation generates the energy which holds the business together… The forces of loyalty are measurable in cash flow terms

because of the linkages between loyalty, value and profits. Loyalty is inextricably linked to the creation of value.”

-Fred Reichheld, Bain

Examining the historical purchase behavior, captured in our marketing database, we can define the value our customers have had in prior years. We can also project out what these same customers might be worth over the next five to ten years. Most of us know this projection as lifetime value (LTV). As we examine

the value of our customers to make the decision to establish loyalty bonds, it’s essential that we recognize three things:

1. LTV is a projection based on historical behavior.

2. LTV has more to do with how we treat our customers after

we have acquired them than how we acquired them.

3. LTV is most effectively measured by measuring the re l a t i o n s h i p

we have with our customers, not with measuring transactions.

Frequency Programs vs. Loyalty Programs

This brings us to frequency programs. Frequency programs are usually transaction-focused, non-selective and often destructive. Most of us participate in a multitude of them. Initiated in the early 1980s by the airlines to entice business travelers, many companies have successfully replicated these once highly successful programs.

All too often, however, frequency programs are created as me-too administrative programs, programs that merely respond to competitive offerings, programs that shift-the-burden away from a true loyalty solution. Following this logic, a poorly conceived or executed frequency program will not help us select the best customers for our business. A frequency program may cause us to acquire customers we cannot service adequately or, even worse, diminish the perceived value of our product offering. In short, frequency programs and loyalty programs are two distinctly different animals.

Executed as relationship-welding, relationship-enhancing efforts, loyalty programs must be derived from the strategic corporate mission. The best loyalty programs aim to create value-based relationships with our best customers. The determinant variables in this equation are:

1. How well do your external service values align with your customers’ needs?

2. Do your external service values align with your core competencies?

3. Do your core competencies rest on a foundation of loyal employees?

Let us offer this simple comparative matrix to allow you to evaluate the purpose of your own loyalty effort.

Loyalty Focus Frequency Focus

Recognizes… • Heterogeneity • Homogeneity

• Employee contribution • Responses to mailings

• Value-added • Transaction-based

• Customer-focused • Competitive-focused

• Needs-based • Incentive-driven

• Relationship-focused • Payout-focused

• Two-way dialog • One-way communications

• One size fits one • One size fits all

• Needs-based • Mailing list bias

• Outside-in focus • Inside-out focus

• Focused targeting • Indiscriminate targeting

Measures… • Share of customer • Response rate

• Share of requirement • RFM

• Duration of relationship • Cost per response

• E:R for customer • E:R for mailing

Loyalty Management and Customer Experience Management at their foundation use the best tools and practices of the data-based, integrated, direct marketing practitioners to build, develop and foster relationships and loyalty where appropriate. Always based upon the delivery of value. Data-based relationship marketing affords you the opportunity to redefine the traditional “value chain.” Today’s loyalty-based marketer is more about building community: mutually interdependent alliances of stakeholders including employees, customers and vendors. All predicated on delivering value to the relationship and relevance in each and every individual contact. Fully recognizing that value changes with each new touch, or contact, between your customers and your company.

Customer Retention Strategies and Tactics

Thought-starter # 2, the calculus of loyalty

Thought-starter # 2: the calculus of loyalty

There is a calculus of loyalty. Experience, coupled with the latest findings published by Bain and TARP, now demonstrate this. In business, as in our personal lives, loyalty (etymologically related to the Latin lex or “law, faithfulness”) has definite rewards. The single most compelling reason for a business to exist is to create value for its customer community. If your purpose in life (for your business) is to create value, you’ll prosper and grow and loyalty will be the single largest contributing factor. If not, you’ll be out of business in the next five to ten years.

Until recently, the rewards of business loyalty were understood only intuitively. It made sense to us as marketers that loyal customers bring with them greater profit over time. In fact, the original frequency programs were designed to capitalize on, and are direct evidence of, this intuitive knowledge.

Frequency programs and frequency measures may be destructive, however, unless the economics of loyalty are taken into account.

Loyalty reliably measures whether superior value has been delivered. Most of

us now recognize that “value” is completely customer-defined. The equation might look something like this:

your customers’ expectations for the experience – “the actual”

VALUE = ____________________________


When our customers experience continuous, reliable, and increasing value we know that they will be Loyal. Loyalty brings with it a series of second-order economic effects, which cascade through the business system:

1. Revenues and market share grow through repeat sales,

purchase of other products and referrals.

2. Costs to acquire and to serve existing customers shrink.

3. Profits go up.

4. The company culture change.

A self-renewing, continuous improvement process installs itself. Employees have increased job pride and satisfaction. Employees stay longer while customers come back.

In achieving customer loyalty, the single most important decision any company can make is selecting its customers. We can neither serve every customer well nor be all things to all customers. It’s a costly istake, a diminishing of our resources and skills, to try to retain each and every customer because, quite simply, not every customer is worth retaining. In fact, we need to learn how to identify and disengage with customers who are not profitable to serve.

To wrestle with the subject of loyalty, it’s vitally important that we define who a customer is and then define their lifetime value, expressed in net potential value (NPV) terms.

Then, we must understand how much of the customers’ “share of wallet” belongs to us today and how much of their wallet we can earn. We can then make intelligent decisions about how to invest in our current and potential customer audiences based upon their reciprocal commitment to us (as demonstrated by their pocketbooks).

What Variables Do We Me a s u re ?

We define a customer by at least two variables; e.g., a customer is someone who buys X number of dollars worth of my products over Z period of time. We can add dimension to this definition by expanding the definition;

e.g., someone who buys X number of dollars of Y number of products over Z period of time. Finally, we would want to add the contribution margin of that customer and/or net profit dollars.

Share of Customer and Lifetime Value

While this is an important step in all forms of marketing, in the business-to-business environment we further need to understand how much our customer spends on competitive products That is, the share of wallet (share of customer). For example, if Sue Ann buys $400 of our widgets and a total of $600 of widgets, her loyalty coefficient to us is much higher than if she buys a total of $7,500 worth of

widgets. (Note, however, that some buyers may have constraints on having a single source for any product family; the realization of this “truth” and including this variable in our understanding helps flesh out the calculus.)

In addition to understanding the value of our customer, it is essential that we define the rate at which we lose customers — the defection rate — as well as how many customers we acquire during a given year. Caution is called for here: a greatly skewed picture of the value of our customer community will result if we average the defection rate out, e.g., over 10 years. That’s because most companies report their defection rate is highest over the earlier years of a customer’s lifetime. Any loyalty valuation must recognize this.

I know that many of us see the admonition to “define who a customer is” and laugh or belittle the maker of the statement. But keep in mind the fate of IBM — while IBM touted the fact that everybody was their customer, millions of dollars of replacement parts and add-on business went elsewhere.

A customer, then, is someone who buys X-number of dollars of Y-product offerings in Z-period of time. That is, we define a customer by the dollar amount, the penetration or depth of products purchased, and the factor of pertinent recency.

thought starter #1: define your customers & measure the value of your marketing database

Thought-starter #1: define your customers & measure the value of your marketing database

One issue organizations often struggle with is “how to measure the value of investments made in its marketing database”. Let’s see if we can build a simple, yet practical, evaluation framework for the marketing database in your company. This approach I believe focuses more on process, information management and outcomes, and this approach is more actionable than traditional ROI measures

In today’s business environment, the highest deliverable value of your contact marketing database is the ability it gives you to target, segment and grade[1] your existing customers. Ideally, this repository of facts, through efforts to enrich the data, is transformed into a customer knowledge platform. The insight given from studying the database then is used to direct our customer[2] loyalty and retention efforts.

In the 21st century marketing world, cutting-edge business-to-business marketing database efforts will measure at least these four dimensions:

a. external service values: i.e., what are the 3,4, or 5 primary reasons customers buy

b. why we lose customers (defection analysis)

c. operational database performance

d. social interaction and customer insight

The best of the best marketing databases in the ’80s and’90s demonstrated their excellence when measured against operational deliverables and measurements. Today, the world-class marketing database looks at why our customers buy (external service value), where/how we stand to lose them, its operational performance, and, finally, real-time, actionable research into the customer’s mind-set and definition of value.

Today we have richer information: for many of us an overwhelming richness of data & information. Our data mining tools are incredibly sophisticated. Overlay upon overlay of data can give us greater insight than ever before. In general this approach is given the umbrella title of “business intelligence”.

Easier said than done? Not really. You can gather this information initially through investigative research, and then subsequently maintain it through the ongoing contact your customer management center has with your customers, prospects and defectors, using phone, email, and social media. You can then interpret this marketing data to target, to segment and to grade your customers, sharing the data synthesis both inside your organization and with your channel partners to ensure you’re making needed improvements.

In order to add the greatest power to these efforts, you first must define your customer. Yes, define a customer, your customer! The definition of customer is the touchstone upon which all else rests. Without the definition, none of the other steps can take place, and none of this theory can touch ground and add value to your operations and its success.

[1] Grading does not refer to assigning customers “grades” as our teachers did; rather grading is a valuation process, which allows you to optimize your market coverage approach and to manage the limited resources your firm has in direct proportion to the expected returns on that investment. At its center, this approach looks at customer, prospects, & defectors as the portfolio of assets that must be managed proactively.

[2] Essentially the same holds true for partner management initiatives as well.

Friday, December 18, 2009

"Sustainability", a distinctive definition

“A new and distinctive definition of sustainability.”[1]

How do you feel about how the Health Care Debate and health care reform have been handled so far? Personally, I’m fed up with, and a bit confused by, the “public conversation” over Health Care Reform. Personally, I can’t help but believe that the public is being too confused to decide, and the roots of the confusion were the words chosen by certain groups in order to make their point. The next public debate is going to be about creating a sustainable future. The multiple threads of the conversation are already glistening, popping out for examination. Among the threads we can already identify: global warming, carbon emissions, cap and trade, waste, water, soil, food, and so on. And so, as with many people, I am trying to wrap my head around the term “sustainability”.

I do not want to fall victim to lobbyists, or industry positioning, or vitriolic posturing by a faction with an axe to grind. I’ve seen how damaged the public conversation can be after witnessing the debacle over Health Care Reform. Believing that, if I read enough and talk to enough people, I can come away from these educational moments with a more balanced, more rounded, and a more thoroughly informed understanding, I set out to investigate the challenges that accompany the theme of sustainability, and how to guarantee a safe, prosperous world for our children and their grandchildren.

My educational journey has permitted me to experience the poetry of Wendell Berry and the anti-Capitalist rantings of Vandana Shiva. I’ve allowed myself to be captivated by Al Gore’s visuals; and, I discovered that I don’t have patience for the alarmists who produced Food Inc. I found E.O. Wilson too ephemeral, too “airy-fairy” for action; and I found Peter Senge’s The Necessary Revolution challenging me (and each of us) to make a difference and to help the wave move out from its center.

I was drawn to John Ehrenfeld’s deeply philosophical book, Sustainability by Design, for his definition of “sustainability. Ehrenfeld is an industrial ecologist, a systems thinker, and, philosopher. Throughout the book he makes use of the now-familiar-to-many causal loop diagrams, system archetypes, and mental maps made popular in Senge’s phenomenally successful book, The Fifth Discipline.

Ehrenfeld throws down the gauntlet by offering provocative assertions, while continuously using Senge’ Causal Archetypes as framing images, metaphors, and mental maps: Fixes that Fail, Shifting the Burden, & Limits to Growth in this profound questioning of our current situation, which he labels “the global crisis”.

“To create sustainability, we must first adopt new meanings for the words we use to tell our stories.” I certainly agree that language and the metaphors by which we live (write and speak) are more powerful than we normally realize. And, in our use of language we do have the power to shape the future. Just think for a few minutes about the language sales and marketing uses to talk about the people who buy and use your products and services. “Campaigns”, “account penetration”, - we display our cultural values through the language we choose.

Storytelling will have an important role in the public debate. We will have to decide as “The People” how we want to, and will, shape the future of our planet. Ehrenfeld points out “in the environmentalist’s conversation, we almost always speak only in terms of problems to solve, and rarely in terms of nurturing possibility.” He goes on to say: “Something is missing here. Better, many things are missing here.” Using words and causal loop diagrams, Ehrenfeld’s mantra is we need to create a new future (italics mine) because what we have been calling “sustainable development” is just painting the pig, dressing up a problem with a fix but never solving the problem with a creative solution.

His definition of “sustainability” is “the possibility that human and other life will flourish on the planet forever”. He then goes on to add that “flourishing is the key to a vision of a sustainable future, and this way of conceptualizing sustainability connects to every kind of audience.” In other words, this definition works for marketing, for sales, for scientists, etc. as well as for solving such issues as creating a sustainable future. Does it connect with you?

[1] Sustainability by Design, pg. 6, John Ehrenfeld, Yale Press, 2008

Wednesday, December 9, 2009

Marketing Madness : Steps to recover

Recovery in a world gone mad

For the last 40 years, B2B marketing professionals have created program rules intended to cause results. From steps-to-the-sale programs, to dealer-loader initiatives, to programs aimed at directing the behavior of the parts counter guy, to frequency programs: the list is seemingly endless. "Incentives" have brought a kind of destructive madness to marketing. Rather than creating a holistic solution, these programs - in the language of systems - have "shifted-the-burden", become "fixes-that-fail", and highlighted why our channel partners should be thought of as "the commons" in the "tragedy of the commons" archetype. it is time to create sustainability in our marketing programs. that will require a kind of recovery for marketers.

“Recovery programs”, in the form of the multitude of 12-step programs that have proliferated since Bill W. and Dr. Bob, made profound contributions to living and the wisdom literature of the 20th century, is a radical paradigm shift in attitude and in living. Its two primary drivers — powerlessness and acceptance — are characteristic thoughts counterintuitive to the marketing imagination.

The reality of marketing today is that we must acknowledge our need for recovery. Over the past decade we have watched the power shift 180-degrees into the hands of our customers. We must all realize and embrace our powerlessness, and understand that accepting this brings greater power. In marketing, as in life, we need to become focused outside of ourselves and allow that others —our customers — hold the power and the key.

The power in the marketplace is held by our customers. No one can doubt this in the twitter-age of social media. Many of us erroneously believe that we own this power. Many of our dealers believe they own it. The truth, however, is that the customers have redefined value and the ways they want to buy our products, and, as such, hold the power over us. Moreover, through the power of social media, our customers now “hold sway” over our reputations and the success of our customer experience management initiatives. To not accept this power and to ignore what our customers tell us is to guarantee that we will be out of business in the near future.

One of the most powerful and pervasive movements of the 20th century has been the movement to heal the individual. Wherever we turn we are confronted with healing the inner child, dysfunction, codependency, etc. In the business arena, we’re being told to listen to our customers, to empower our employees and to develop a sense of community in the workplace, and this whole process is a journey.

Suppose we were to take the wisdom of self-knowledge, responsibility, acceptance, doing things one day at a time, easy does it, etc. and apply them to our marketing lives. Where would these musings take us? Perhaps it will lead to a paradigm of healing to make up for the marketing damage we have done. Let’s call it 12 Steps for Marketing Recovery.”

The Twelve Steps for Marketing Recovery

Step 1. We admitted that we were powerless over people, places, things, and situations, and that our sales and marketing lives were unmanageable.

Step 2. We came to believe that a power greater than ourselves could restore our focus and us to sanity.

Step 3. We made a decision to turn our wills and our lives over to the care of a power greater than ourselves: to our customers.

Step 4. We made a searching and fearless moral inventory of our sales and marketing selves.

Step 5. We admitted to our customers, and to ourselves, the exact nature of our wrongs.

Step 6. We were entirely ready to remove all our defects of sales, marketing, and customer experience.

Step 7. We humbly asked our customers to guide us as we remove our shortcomings.

Step 8. We made a list of all those we had harmed and became willing to make amends with them all.

Step 9. We made direct changes to our treatment of customers and to our processes wherever possible.

Step 10. We continued to take an inventory of our sales and marketing practices and when we were wrong we promptly admitted it.

Step 11. We sought through a quest for continuous process improvement and purging of our database to improve our conscious contact with our customers, seeking only to assimilate, to cultivate, and to retain them.

Step 12. Having had a spiritual awakening as a result of these steps, we tried to carry this message to others and to practice these principles in all our affairs.

Twelve-step programs hold many points of enlightenment for us as business people since their principles define behavior, communications and ethics in a world driven by openness, honesty, willingness and responsibility. The opposite behavior in

the language of “recovery” is codependency.

In agribusiness, codependency takes the form of entitlement programs, programs which rob our businesses of integrity, strength and self-reliance. Entitlements and the incumbent expectations of payments from manufacturer to their channel partners ultimately serve to destroy the marketplace and the covenants/relationships between manufacturer, dealer and grower. Entitlements hurt business because they cause loss. Loss of credibility, loss of price stability, loss of support, and loss of profit for all.

Reversing the codependency of entitlements is just one way the 12 Steps for Marketing Recovery can offer a road to marketing recovery. The solution requires detachment and tough love, but the end result is healthier, more profitable business relationships.

Monday, November 23, 2009

Words that work: inside the halls of your business

Our direct experience has shown that, in certain agribusiness companies, our workers are feeling the strain of the public debate over food. Has it hit your place yet?

We train our sales people about features and benefits, about how to overcome objections, and about how to close the sale. We guide and train these people but what do we do for the rest of our staffs? And even for our sales people, maybe we haven’t adequately prepared them as well as we could have on talking points and their behaviors. What are you doing to help them deal with emotions and to help them regain their personal confidence through “words that work”?

The words we choose certainly make a definite difference in our relationships with spouses, children, and co-workers. In our business lives, our choice of words can make or break a sales situation, cause a customer service moment to turn ugly, or strike a chord that conveys instant understanding. In fact, our words, in part, define our customers’ experience. Agribusiness companies have employees who take the brunt of the sometimes sensationalized debate home with them. It’s our job to seize upon this time as one of additional education and communication to relieve their stress and to help them use words that work when confronted.

The business model of agribusiness is self-contained, highly complex, and had been virtually hidden from public view until the last 10 to 15 years. The recent increase in public awareness, if graphed, would be up and to the right at a steep angle! How much clarity is there really for the public about agribusiness, farming, sustainability, and feeding and clothing the world? Agriculture cannot withstand a repeat performance of what we are witnessing in the public debate over Health Care Reform.

This is a very public example of what agribusiness is in for in the coming months and years. We’re living through a confused, and angry public debate over our nation’s true and real need for Health Care reform. After months of shouting, influence-led proselytizing, and raucous Town Hall meetings, where are we?

The next great public conversation will be about carbon emissions, global warming, and sustainability. This far-reaching, complex, and already highly fractionalized, conversation will include among its topics “cap and trade” versus “cap and tax”, agribusiness, emissions, the industrial food system, farming, and almost everything and everything related. The conversation, if we allow media to dictate it could become even more sensationalized than the one on Health Care Reform. The message gaining strength and credence, and the doubtless ongoing message will be: how we as “the people” must change past practices to create a sustainable future. Let’s keep that message constructive, educational and balanced.

This is a time to unite. Each of us across the value chain, from grower or producer to seedsman to corporate executive, needs to help shape the language of this conversation. For some of us, we need to start inside our very own businesses.

Tuesday, November 17, 2009

words that work: the wisdom of calling it "a fight"

I was glancing over blog headlines today, when my eye was caught by the headline " A Food Fight."

Like so many others, there are days when I turn off my computer disgusted by the factual mistakes and blatant lies told in the press about agriculture. Growers and producers are misunderstood. Agribusiness is much more complex than almost everyone understands. Agribusiness feeds and clothes the world. American farmers have a proud history of stewardship and sustainability. To date, however, much of the public debate has done more to confuse the general audience with polarizing language and war-like tactics - tactics clearly intended to strike terror into the hearts of the intended audience.

Therefore, I certainly applaud how the industry has been drawn together to reverse public opinion and to correct the facts about farmers, farming, and the "Food industry." What causes me concern, however, is the choice of metaphor.

The blog, which appears on AgWired, starts off:

" A FOOD FIGHT got underway today with dairy farmers and beef producers joining forces to fling facts in the face of food foes."

I have to ask if there isn't another "metaphor to live by" other than the "argument is war" metaphor, which underlies the author's opening lines. Cindy, the author, goes on to say that the purpose and main message from this food fight "is to Give Thanks for food and farmers."

I get her message. Yet the words "fight" and "give thanks for" are oddly juxtaposed.

Those of us involved in agribusiness, whether we are ranchers, producers, growers, farmers, dealers, seedsmen, equipment manufacturers, or marketing consultants, should reflect upon the power of words, ideally before they escape our lips, pens, or keyboards. We don't need a repetition of what has happened in the public debate over health care reform.

We do face a communications "opportunity", or "challenge" when it comes to the subject of food and of creating a sustainable world for future generations. A key to the success of our sustainability efforts will be our ability to come together, despite not being fully comfortable with doing so, and to collaboratively and creatively build a future. I am merely asking us to think about the metaphors we choose to help guide us to that future.

Thursday, November 12, 2009

Alice through the looking glass: words that work or not?

The last few pieces I've posted have dealt with finding "words that work". There can be no more important time to make sure you are using words that work than when speaking to a customer or prospect. Here's an interesting example of such an exchange: between "the customer" and "the company". A passage from Lewis Carroll's Alice Through the Looking-Glass serves as the example.

'Humpty-Dumpty said: "There's glory for you."

"I don't know what you mean by 'glory'," Alice said.

Humpty-Dumpty smiled contemptuously. "Of course you don't till I tell you. I meant, 'There's a nice knock-down argument for you!'"

But 'glory' doesn't mean 'a nice knock-down argument'," Alice objected.

"When I use a word," Humpty-Dumpty said in rather a scornful tone, "it means just what I choose it to mean, neither more nor less."

"The question is," said Alice, "whether you can make words mean so many different things."

"The question is," said Humpty Dumpty, "which is to be Master - that's all."

Perhaps the example is a stretch, but each of us can remember an encounter similar I am sure.

Remember: It is not what you say that matters; it is what they hear. More importantly, if they have no idea what you mean by what you say, you can rest assured that what you hear will create a disconnect rather than a deeper connection with your customer.

Finding "Words that work" for your customer-facing roles

"English...tends to ambiguity and obscurity of expression in any but the most careful writing."

Robert Graves, the great English poet, mythographer and translator, wrote these words in his 1943 book, The Use and Abuse of the English Language. I can only imagine how Graves might react to the language of 21st century sales, marketing, and customer service efforts. If our written language is imperfect, what indeed can be said about our verbal skills?

For Customer Experience Management and CRM proponents, our message is this:

- there is a vital connection between your company and your customers that is forged at, and across, each touch point with them, as they move from suspect, to prospect, to trial user, to customer, and finally either to loyal customer advocate or to the position of terrorist, whose attitude threatens your reputation.

It is clear that we - each of us in those roles - must take more care, be more clear, be more precise, and more completely understandable as the company providing the service, products, solutions, and answers than our customers need be. Our front-line personnel can often feel besieged, if the customer is upset. Emotions can get in the way. In those "moments of truth", to borrow Percy Barneveld's phrase, when our frontline personnel are telling the product story, resolving an issue, or trying to sort through a complaint, the reputation and image of your company are put at risk.

Most of us understand this reality. Many of you have tried to communicate, train, and monitor your front-line people. Yet, all too often, it is the linguistic part of the interaction that causes the breakdown. I am not advocating scripting. I've never really liked the idea of any customer-facing representative having a script. I do advocate, however, guidance and planning: training, role-playing, on-going communications, and (perhaps even) a company-specific, conversational "dictionary" as actionable tools that each front-line, customer-facing individual can absorb and personalize.

In today's economy, our customers are looking for openness, resolution, and consistency. While words alone will not save or protect your reputation, words alone can sink your Customer Experience Management Efforts.

Monday, November 9, 2009


"Reputation" is a direct borrowing from Latin. Etymologically, it means "what is thought about ", from the Latin "re" and "putare". Reputation, like Trust, is a precious treasure. As with any other treasure, it can squandered or protected, invested in, burnished or destroyed. And, in today's flat-world, dominated by social media your "reputation" not only is on the line 24/7 each day, at each touch-point across your organization, but the "Risk" associated with the slightest "wrong step" no longer can be isolated and contained.

Today, as never before, your company's reputation, brand, image, and customer experience are inextricably linked together. Customers are defining your performance and their own "receipt of value" at each and every touch-point. Have you measured how your own customers see you of late?

One company that consistently amazes its customers ,when it comes to providing outstanding customer support, is USAA. If you haven't served in the military you might not be aware of them. If, however, you, your parents, spouse or significant other has served, or is serving, or is part of the armed forces family, then you know. Not only are their products above reproach but their customer management centers provide unparalleled support and unrivalled satisfaction to their millions of customers.

USAA's success is due to their unrelenting dedication to being customer focused. Their own reputation sparkles. Here are three reasons:

1. Continuous emphasis on product knowledge and on-going training
2. Communications skills with an emphasis on listening: they understand the adage: "it's not what you say, it's what they hear", so they "seek first to understand" - as Covey would teach.
3. Consistency: internal and external values are aligned and they "walk their talk." And, if you were to ask more than one representative a question (regardless of how complex) they would play back the same answer.

How many of us can say that about our own sales, marketing and customer service personnel - the ones daily on the front line with our customers?

These are steps any firm, in agribusiness, finance, or you-name-it, can borrow and build into its daily operational values and practice. USAA'S reputation is brighter than many stars. How does your reputation sparkle today? Or, has it become tarnished? Which of their 3 steps might you adapt to your own situation. It is your reputation on the line, isn't it?

Thursday, November 5, 2009

an education challenge for all in agriculture

Like many of us, I am deeply bothered by the current public debate about food, food production and safety. The traditional, and newer "social" medias have taken this very, very complex issue and lumped together factoids about "feeding the world", "clean air", "global warming", "genetically modified crops", and the very sustainability of our planet. Doing so only made things worse and certainly more confusing for most listeners. A great deal of positioning; a good deal of shouting; not much listening and working together going on there, so far, in this public debate.

Agribusiness cannot allow itself to be dragged into a public brawl such as the one we've recently watched - and still are watching - about Health Care Reform and The Public Option.

These issues surrounding agribusiness and farmers, are among the most important topics of today because we all are involved in food and clothing and environmental issues. Yet, journalists such as Michael Pollan, Paul Roberts, and notable world citizens, such as Vandana Shiva, are inciting their audiences and special interest groups, mostly through fear and "adjustment" of the facts. In contrast to these divisive voices, Peter Senge, of Fifth Discipline fame, offers a much more tempered approach, deeper and more thoughtful and quite a bit more challenging to each of us in his newest book, The Necessary Revolution.
Crafting a sustainable solution - just to guide the public debate - can, and will, not result from singularly slanted, or otherwise distorted preaching. These interrelated problems can only be corrected through a creative learning process. Rather than creating an atmosphere in which a true long-lasting solution can be crafted, these activists see only one way: their own. Instead we need to work together. Education and communications will play a huge role in shaping the outcome for many of us. It will take hard work.

We lose all chance to shape the future, however, if we allow those outside agribusiness to shape the public debate or if we yell and/or complain about what they are doing.

We need to listen. We need to practice what Stephen Covey suggests: "seek first to understand, then to be understood". We also need to build a dictionary that guides this conversation and mutual learning. All of us need to shape the language and use words that work and metaphors that reach across the gap between sides, pulling them into our conversation.

Keep this truism on a Post-It: "...those who define the debate will determine the outcome" (c.f., Frank Luntz,What Americans really want ... really).

It's time to re-tell, or to tell anew, the story of farming, of how the world is fed and clothed - and what it will require when there are 9 Billion people on earth. It is time for us to educate the rest of the world about farming, agriculture, tillage practices, land and water conservation, seeds and chemicals. If we shape the conversation, without rancour and with a complete and easy-to-comprehend story, which helps reveal the truth in its complexity, everyone will come out ahead. Then we can move ahead proud of our stewardship and assured of a sustainable future. But remember, "It's not what you say; it's what they hear" that matters

If agribusiness addresses these same sometimes-difficult-and-admitedly- complex subjects through education and communication - the ones the extremists have distortedly made visible - so that our fellow citizens of the planet can help better understand the reality, the rancorous, drama can subside; constructive conversation, dialogue and trust can be built; and, we can craft a sustainable future together.
That future will renew the social contract. Then we can walk our talk proudly.

- old consultant adage, however: easy to say, harder to accomplish.

Sunday, November 1, 2009

The Integrated model - the essence of best practices CRM

The Integrated Model is a Gold Mine: it’s the essence of successful CRM.

In business-to-business marketing, the integrated direct marketing model is a gold mine for the marketing group that wants to build sustainable relationships with the right customers. The Integrated Direct model is the foundation of best practices Customer Relationship Management and Customer Experience Management. The economics of the Integrated Direct model come from two primary facts:

1. Marketers have come to realize that they cannot afford to invest in all customers and prospects equally. In fact, acquisition efforts should be segregated out from cultivation, retention, and “win-back” efforts. Integrated Direct Marketing – that is the integration of your “market coverage efforts (sales, marketing and service) - allows us to do that. This delivers the promise of CRM.

2. More expensive contact types, such as face-to-face or special events, can be leveraged with tremendous effectiveness by lower contact types, such as the Internet, social media, E-mail, print, snail-mail, and phone.

Here’s what the integrated direct marketing process can do for you:

1. Reduce the expense to revenue ratio by at least 15%

2. Increase the number and frequency of value-based contacts to the right prospect or customer

3. Increase the perceived service level at the point of contact

4. Increase product penetration

5. Increase customer loyalty

Additionally, in support of particular product lines, Integrated Direct Marketing ensures:

1. Faster Introduction

2. Higher amplitude of sales

3. Segmented and sustained market position

4. More control when migrating customers to newer models, products and services.

Quoting Bob Stone, long the venerable guru of American direct marketing, a definition of direct marketing must include three phrases: “interactive system,” “using one or more contact media,” and as must all direct marketing “effect a measurable response or transaction.”

Integrated Direct Marketing is not direct mail; it is not telemarketing; it is not transaction focused. The integrated direct marketing model is data-based and loyalty focused. Integrated Direct Marketing is highly targeted marketing that uses an integrated, organized, planned system of contacts by which we make offers to individuals using a variety of media. This system of building sustainable loyalty with our customers and prospects creates an on-going civil dialogue. It is accomplished by integrating communication across all contact media - print, the Internet, E-mail, mail, phone, field events and face-to-face visits from the field force. It’s defining characteristic is the delivery of relevant value. The value is defined for us by our customers and prospects. It provides for the delivery of relevant value-based information at the right time, in the desired delivery system, to the right individual that ensures interdependent relationships built over time.

This “Market Coverage” model makes use of the marketing database as the repository of corporate memory, storing the results of all interactions with customers and prospects.

In addition to simple facts such as demographics and product usage, today’s sophisticated marketers are building database systems that capture the complexity of buyers’ needs and purchasing behavior along with relevant complaint and/or satisfaction issues. The information then is available for product design groups, marketing, sales, research and other corporate functions. The database becomes the springboard for the organization’s need to be responsive, flexible, and dedicated to learning. Through the technology of our database, we are able to store response data by individual contact within an account. Moreover, we are able to measure our effectiveness relative to cost and to results. The measurability tracks profits, investments, expenses, account penetration (or, “share of wallet”), problems, issues, complaints and satisfaction.

Integrated Direct Marketing is a systematic method of getting close to our customers. Using this tool we can integrate our channel contacts and media efforts through a common database, which is focused on our target universe. Through testing we can validate results and expand our program and processes with great certainty.

The marketing database is mind of the IDM organization. It is serviced by a proactive outbound call center (or telemarketing unit), which becomes both a listening post to customers and the dealer channel as well as a way to leverage the field organization in building relationships and selling products. In the Integrated model the marketing database is shared with the field organization, your channel partners, and all internal departments.

The essence of a successful Integrated process is the ability to capture, centrally, information about our customers and prospects at all points of contact – and then to transform that information in actionable knowledge that is shared across and between those functional areas inside your firm that touch the customer or your channel partners. The key to success then is how well the marketer can segment within a given target audience. It is critical in the B2B arena to segment on similar sets of unfulfilled needs and purchasing behavior. This allows us to understand our customers’ need and how they buy and then to market our products and services to these identified niches.

Once the segments have been identified (keeping in mind that the entire target universe may emerge as one large segment), the next step to take is to grade accounts within segments to ensure that the investment made is the least amount of money to strengthen the relationship with the particular account.

The grading model is a valuation model. In the Business-to-Business world, the grading model no longer should be the simplistic A-B-C model. Instead, it should allow enough granularity to understand the profitability and penetration potential of each cohort or segment. I suggest 5 grades, although in certain cases, I believe 7 to be the optimal number of grades.

Grading (or, “valuation”) is the economic modeling of the Integrated Direct effort based upon an investment decision, which takes into, account the historical (actual) revenue and potential revenue from a particular segment of accounts. In other words, grading serves the marketer as an economic and analytical tool, which requires that we invest in the major segments we have created proportional to their economic history and potential.

Integrated direct marketing works both as a stealth defensive weapon, as well as a highly leverageable marketing tool. The competitive advantage it affords the skilled executioner is proprietary and affords increasing , not decreasing, economic returns. The fundamental concepts we use in loyalty-focused customer relationship management include:

1. Market to individuals … not to corporations

2. Address the unique set of needs of that buyer group (or application)

3. Individuals are clustered (i.e., segmented) around common sets of needs which define a market niche

4. All contacts with an individual, whether a customer or a prospect, must be of value as defined by them

5. The technology we use is transparent

6. Planning is critical

7. Testing is mandatory

8. Integration is the process used to ensure that the higher cost contacts are leveraged

9. Properly executed the integrated model creates a continuous improvement process that profitably drives business strategy by creating a sustainable atmosphere of cooperation and coordination across, and between, your company’s various functional areas.

10. The investment made is proportional to the level of commitment to us, to the expected return from this customer.