Needs-based Segmentation revisited, part 2

In the previous posting I spoke about "the toolkit" we use for needs-based segmentation: targeting, segmentation and grading. Targeting, Segmentation and Grading (or, Valuation) are three of the most powerful weapons in any business' arsenal. This “toolkit” is comparable to open-source code. Constructed theoretically over the last 15 + years by integrated databased sales and marketing masters, this approach recognizes that: a. No firm can be all things to all people b. The value of the firm is equal to the sum of all the customers with whom it does business (and yes, your CFO will accept this!). c. All firms are constrained by resource limitations: people, time, money, etc d. It makes compelling sense to invest your sales, marketing, channel management, and customer service dollars and effort in direct proportion to the expected return on that investment e. Especially in tough economic times, investing in customer relationship management and customer experience management positions a firm for competitive uniqueness as business improves Accordingly, actionable segmentation to promote selectivity and wiser investment decisions is one of the most valuable applications for your marketing database and your CRM/CEM initiatives. Until quite recently, more business communications than not aimed at customers and prospects(present and potential) tended to address them as a great, undifferentiated mass…because there was really no practical way to do otherwise. It was the “We can be all things to all people” approach. Obviously, no business can survive and flourish if it attempts that approach. Limited resources: people, time, money need to be invested in direct proportion to the limited resources that can be applied – and accordingly, this is where targeting, segmentation and grading come into play. Today, computer and business intelligence advances have made it easy and practical to break down the companies in your market universe just about as finely as you like, according to whatever factors you choose. Recognizing the fact that not all customers are created equal, it also allows you to target your limited resources toward those that are most potentially valuable to you. It gives you a practical alternative, and the next best thing, to one-on-one communication. The technique is called needs-based segmentation – the segmentation strategy of choice, since it is needs that drive market behavior. This is the clustering of customers (and later, prospects) according to common sets of needs and purchasing behavior…as these relate to your organization’s external service values…then dividing your customer list into one or more segments, each consisting of a group of customers who share a common set of needs, and a way of doing business.

revisiting: Actionable, needs-based segmentation

Decisions, decisions, decision. Targeting, Segmentation and Grading are three of the more important decisions any company can make. In fact, Targeting, Segmentation and Grading (i.e., the valuation of customers, prospects and the “universe” from which to choose) are the primary building blocks of an effective CRM and CEM (customer experience management) strategy. These actionable steps represent conscious management decisions based upon business intelligence, corporate memory, and the on-going strategy of the business plan. “Being in Business” necessitates making decisions. The single most important set of decisions any business-to-business enterprise can make are those involving selection - of the products and services you will provide, of the customers for whom you will provide them, and of the channels through which you will market them, differentiation, sourcing, profitability, etc. Segmentation is at the heart of this selection process. I originally presented this idea of actionable needs-based segmentation more than10 years ago. I want to reiterate the validity of this approach and present some simple tools with which to put these principles into action, while recognizing the need to incorporate the additional insight available to us today as a result of new channels such as social media and the heightening of social responsibility. This “toolkit” is comparable to open-source code. Constructed theoretically over the last 15 + years by integrated databased sales and marketing masters, this approach recognizes that: a. No firm can be all things to all people b. The value of the firm is equal to the sum of all the customers with whom it does business (and yes, your CFO will accept this!). c. All firms are constrained by resource limitations: people, time, money, etc d. It makes compelling sense to invest your sales, marketing, channel management, and customer service dollars and effort in direct proportion to the expected return on that investment e. Especially in tough economic times, investing in customer relationship management and customer experience management positions a firm for competitive uniqueness as business improves Accordingly, actionable segmentation to promote selectivity and wiser investment decisions is one of the most valuable applications for your marketing database and your CRM/CEM initiatives.

call centers: trying to get a problem fixed

Customer Service is dead! at least within 8 out of 10 representatives.

sure: that's anecdotal at best and based upon my ongoing struggel to gain connectivity.

For the last 7 weeks I've had new internet and TV service. I also have gotten a "fancy", new wireless printer. I can't get either to work!

talk about frustrated. I have spent more time with the various call center people and technicians and managers; yelling at IVR systems (more likely swearing); and wondering why a problem can escalate without notice and satisfaction.

Simple programming- a couple of lines of code at max -, for example, would solve one problem - not putting an already irate customer back at the start of the "voice mail jail box" of going through a rigid IVR tree.

Instead of having to spend fully 5 to 10 just to get through the front end of the IVR and the automated testing and the often fallible voice recognition software that politely deflects my profanities: the system is smart enough to recognize my phone #. Since I now have called in 12 times on the same - yes, THE SAME ISSUE - that same smart computer program could - nay, should - recognize that I'm probably unhappy and put me to a special cue.

Maybe that is too much like common sense.

Oh, but I remember what I keep wanting to make as a point:

common sense isn't so common;

call centers need to be renamed "customer management centers"; and,

the most successful implementations of CRM and CEM go back and adhere to the basics of civility, common sense and giving value to their customers.

Modern Distribution and the systems thinker

Shaping the future role of distribution for AG: Scenario Planning and Simulation Games as business tools.

One of the most important books of the last decade of the 20th century is "The Fifth Discipline by Peter Senge. It delves into "systems thinking," "pattern mastery," and how to create "systems thinkers" and "learning organizations." In "Learning" corporations may have their most powerful and truly their only unique competitive weapon and advantage. Senge and many leaders since have certainly made this argument resonate. In my work, I often use these "patterns" and associated "mental models" to assist clients to diagnose their current situation. Another important contribution of the work at MIT, another tool that we can use to step back and see the whole, is "simulation games." There are two marvelous games, I have seen and use. One of the most entertaining and instructive games available is The Beer Distribution Game. Literally thousands of teams from across multiple industries and the private sector have played, and usually lost, this “production/distribution” game, since it was developed in the 1960’s at MIT. the other is "the fish banks simulation." These games are set up as “laboratory replicas” of a real setting, and the framers have been able to isolate “the disabilities and their causes more sharply than in real organizations.” Learning from these simulations allows us to step-back and see issues and problems as well as to design wholistic solutions.

The major premise of this learning is that “it reveals that the problems originate in basic ways of thinking and interacting, more than in peculiarities of organization structure and policy.”

Stepping back, examining our preconceptions and mental models, and creating a future solution is one of the leadership challenges each of us face. Individuals who make a habit of this are known as “systems thinkers.” Now, while that may sound like some esoteric academic pursuit it really isn’t. Simply put it means stepping back and seeing patterns that are intuitive and easy to grasp. Stepping back and seeing these patterns in our everyday businesses and especially against our strategy for the future can allow us to make decisions to ensure our corporate profitable, longevity and sustainability.

Two of the more familiar patterns are called “The tragedy of the commons” and “shifting-the-burden.”By analogue, the channel, our distribution partners, can be viewed as "the commons."

"The Commons" usually refers to a shared resource. individuals hoping to maximize their own individual gain end up diminishing the benefits for everyone involved: the result of what originally was a great idea can become " a collective nightmare for all."

Two great illustrations of the structural problem are: 1. common grazing land or, 2. the neighborhood swimming hole The tragedy of the commons can be best described as a situation in which it makes sense for each "player" in this "drama" to pursue their own best interests. In the case of the swimming pool, so long as the activity involves only a small number of people relative " to the amount of the commons" (the pool space) available, each individual will continue to enjoy some benefit. If the the number of people grows too large for the pool space, our quality of experience goes down. Those evenings when we drive to the swimming hole and find out that all of our neighbors are there, our quality of experience diminishes to nearly zero. In the simulation game for grazing land, when that "commons" becomes depleted, herds shrink, land no longer can bear the grazing and everyone suffers?

In other words, there are underlying limits. If the players in these games fail to step back and understand the larger system of which their company is only a single player, they lose sight of the end game: "business-as-usual" can easily end up causing everyone to lose.

So my question is:

How well do you think this analogue applies to the challenge of crafting a future distribution and channel model to best serve our customers, our channel partners, our stakeholders? I'd really like your comments.

CRM: Why now? Strategy may dictate it.

“Clarity of purpose, clarity of understanding” – Zen proverb.

As an effective business leader and manager, you work to keep your organization on track by trying to answer…

a. Who are you?

b. Why are you here?

c. Where are you going?[1]

The primary thing in your mind is to “clarify and communicate Identity, Purpose & Long-Range Intention.”[2] My vantage as an advisor & teacher allows me to look at the world from a multi-disciplinarian’s point of view. Educated to be a scholar and teacher, I wound up in business. Thankfully, I discovered Agribusiness and CRM.

Why CRM and Why now?

My friend and chief project manager reminded me that:

“… there is no time like the present to focus on effective and measurable CRM.”

Now, to broaden my background, I spent much of the last 4 years in banking, so I know firsthand the fragility of the global economy and the importance of cultivating loyalty with our core customers: one of the central tenets of Customer Relationship Management. As I was reminded:

“the current economic conditions absolutely necessitate that you never take your customers for granted and that you know with certainty if your marketing and sales investments are really working.”

Chrysalis Marketing knows CRM and we offer a holistic, thoughtful, and measured approach to implementing strategy, to delighting, and to keeping your customers. We have strong opinions on how to keep them delighted, as well as how to find, acquire, and retain other customers who look like your most loyal and profitable customers. We believe we have a proven, albeit methodical, approach: a roadmap to successful Customer Relationship, and Customer Experience, Management. It is an outshoot of our passion as agribusiness professionals, to put forth and share our passion with you.

Passion, for the student of life, is a fascinating emotion. My passion in business is about creating customer-based, customer-focused business models, in the business-to-business world. Customer Relationship Management (CRM) is hard-wired in my DNA. Trained as a critical thinker and recruited into the performance management industry in the mid-80’s, I also have a deep background in Customer Management Centers (usually termed “call centers” – but they can be so much more!) and was a distributor. Now, it often happens that individuals find it difficult to take disparate experiences and build upon them. I’ve been blessed, however. And, “it” all came together for me when I first sold marketing services (research, training, incentives, marketing communications, etc.) into agribusiness, while simultaneously Rapp and Collins offered their first work on database marketing. Those confluence of events coalesced as a business “epiphany”.

This light-bulb that went on helped me realize that data, i.e., simple informational facts, were beginning to be affordable (as the cost of computerized memory & storage plummeted) and that companies could use that data, if they translated it into actionable knowledge, to create a bond with their customers. Thus began databased marketing, followed by what the industry pundits termed “integrated, direct, databased marketing”. Those key trends laid the foundation for Customer Relationship Management and, what we now term, Customer Experience Management.

In most simple terms, CRM is business strategy: a set of decisions that a company needs to cultivate “customer intimacy” as a disciplined, core competency. And it is one that proactively manages the customer lifecycle. CRM uses people, processes, and data, translated into “actionable knowledge” in order to manage these 4 ever-repeating stages of a business’ customer lifecycle and experience management, viz.;

1. Customer acquisition

2. Customer assimilation/nurturing & retention

3. Customer defection and purposeful release

4. Customer “win-back”[3]

Put another way: as business leaders we share certain common challenges as we formalize our strategic direction, viz.:

1. how to build a relevant business model that delivers value

2. how to manage our business in a flat-world, driven in near-real time

3. how to deal effectively in deploying our limited resources: people, time, money, and data

4. how to build loyalty across our “value chain”

Loyalty of the right, core customers forms the basis of well-functioning CRM efforts and the touchstone of our organic growth strategy.

Let me stop for a moment to consider these points in a little more detail. Creating a business model that delivers relevance and value to our targeted customers traditionally ensured that we would succeed. Business Designs, however, grow old and stale. Over the last 15 years, as marketing management grew closer to becoming a scientific discipline, we have learned that customers will leave if, as their needs and ever-evolving definitions of value change, the Business Design fails to provide relevance and value.[4]

The next 2 points, the “flat-world” in Internet-defined time and the limited resources of our companies, should be self-evident, but I think we often overlook the huge implications of both. Issues such as immediacy, transparency, and how we invest our limited resources require deliberate attention to detail – are we sometimes failing to pay close attention enough? Finally, the term “value chain “refers to all those “entities” from product inception, creation, design, etc. to market-coverage.

In sum we can look at the implications for our business strategy. Strategy, per Porter is about “choice; or, more bluntly, per Slywotzky, “selection” is the single most important decision any company can make: selection of things such as:

a. why we are in business

b. who are our targeted customers

c. how will we make money, etc

In today’s financially troubled world, our imperative in agribusiness is to make a decision, to select to use CRM as our governing strategy, allowing for 2 admonitions, viz.:

1. As sellers, we avoid the two most common errors:

a. Wasting time-consuming and price-inflation relationship programs on transaction buyers, or

b. Approaching relationship buyers with transaction-oriented strategies.”[5]

We know that the various functional areas in each of our firms must be aligned better and must cooperate fully, while coordinating all customer-focused activity. As such, our “core leadership Challenge is: coordinating marketing, sales”, product development, operations, service, etc.[6] In practice, those companies that first transform themselves so that this structural and process modification has been done internally. and who then take this same alignment out to the marketplace, when dealing with their channel and end-user communities, have been highly effective and created effective, successful CRM efforts.[7]

So how will this newsletter provide value to you?

As a writer, I am driven by my passion, my experience in business and daily life, and a hope that what I have to say will assist and stimulate my readers.

Our intention for this blog, this ongoing series of attempts to communicate, is to satisfy many levels for our community of participants. Our hope is to:

· present, debate, and synthesize the key business strategies and concepts pertaining to CRM strategy, business design, implementation and practice- inspecting carefully the dynamics across our “value chain”- the producers and growers who are our customers and our channel partners;

· open a new forum in agribusiness, which welcomes dialogue and/or debate concerning the issues of customer definition and selection, sales, marketing & service; channel management, and what we believe is a healthy tension with our channel partners, needed in our distribution-enhanced B2B world;

· offer counsel and guidance

· suggest a “new covenant” across that “value chain”

· suggest how both our metaphorical description of the “game of agribusiness” needs to change , and to suggest just how to “change the game”

· demonstrate a roadmap, constructed under an actionable framework, on how to build a successful Customer Relationship Management (CRM) solution, producing a business model (design) that is customer-based and customer focused

We will inspect the key issues of agribusiness. We intend to provide focus and direction of the key management ideas, concepts, strategies, and issues, which have to be accomplished by, with, and through people, processes, and data transformed into actionable knowledge.

For Chrysalis Marketing, our business is to provide value to you in Agribusiness. Our bailiwick includes CRM strategy development and execution, channel management, sales, and marketing, service and call centers; event management, and customer insight. We look forward to hearing from you over the next years.

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[1] Cf., Pg. 27,Executing Your Strategy: how to break it down & get it done, Harvard Press, 2007: story of border guard’s questions to young boy traveling from East to West Germany in the 1960’s.

[2] Ibid, pg. 27: what the authors call “Ideation.”

[3] Cf., Customer Win-back, Jill Griffin & Michael Lowenstein, Jossey-Bass, 2001. In her book, Jill was kind enough to feature the type of customer buying behavior analysis we first proposed in the late ‘90’s while working with Vic Hunter of Hunter Business Group.

[4] Cf., The contributions of Adrian Slywotzky, beginning with Value Migration, are inestimable.

[5] Concurrent Marketing, Frank Cespedes, Harvard Press, 1995.

[6] Ibid., : i.e., the imposition of a “concurrent marketing” framework

[7] Adapted from Cespedes presentation to The Marketing Science Institute 18 months previous.

CRM in AG: how Larry Wilson has a lot to teach us 25 years later

CRM AgriPassport

Changing the Game in Agribusiness CRM

Agribusiness fascinates me. So do the issues of customer loyalty, customer focus and customer relationship management. As an industry we feed and clothe the world. As marketers we have the unique pleasure of working with some of the most genuine people imaginable; we also have some of the most complex business and marketing challenges as well. An area in which many agribusiness and Agrimarketing professionals fail to realize their full potential is in “customer relationship management” – in delivering relevance and value to our customers and business partners.

Our distinct advantage, as agribusiness leaders and marketers, is that we “can get our arms around” our target universe much more completely than almost any other business model that springs to mind. As such, we should be able to build customer-based, customer-focused business models more effectively than our business peers in another industry. There should be a roadmap we can follow. My hope is to use “CRM Passport” to start an on-going industry dialogue. In some ways, I think it is about the basic blocking and tackling; in other ways, I think it is about “changing the game.”

At chrysalis marketing we focus on agribusiness. Our expertise is across distribution, sales, database marketing, marketing communications and call centers. We help our clients effectively build Customer Loyalty and Customer Relationship Management into their day-to-day operations and strategy.

AgriPassport is being brought back as an on-going communications journal in which we hope to explore the agribusiness customer business models and the issues surrounding customer loyalty, channel management, using call centers to support field sales and Customer Relationship Management. For this first “issue” I’d like to get us thinking about changing the game in agribusiness. Let me set the “intellectual stage.” The discussion is about “Value” and how our customer is the key.

In his 1987 work, Changing the Game, Larry Wilson coined the acronym T-A-S-T-E. It stands for Trust, Accountability, Support, Truthfulness and Effort. The work was aimed primarily at sales people. It called out the need to “change the game” in multiple contexts of sales as the world was changing. That message was vibrant in those days but resonates with even more clarity in today’s ”flat-world” that is defined in many ways by the web and the speed of light.

In 1996, Adrian Slywotzky wrote Value Migration in which he examined the destructive force of change. In his landmark book, Slywotzky introduced the concepts of “business designs” and “profit patterns.” He instructed us to stop thinking in simple sports metaphors of football and basketball for the “mental models” we use to describe “the game of business.” He reminded us that the best metaphor available is chess. Agribusiness would do well using a chess game analogue.

Examining industries as divergent as steelmakers, department stores and the computing industry, Slywotzky demonstrated that one reason why market leaders had lost their lead and with it their market valuation was that they had failed to manage the ever-changing nature of value. “Value”, of course, is a customer-defined concept, and one that changes virtually with each transaction a customer, or client, has with your firm. It was the failure of the automotives, companies such as DEC, US Steel, and so many others that failed to monitor the change in value and as a result found themselves 180 degrees from their heights and in some cases out of business all together. The value-delivery management “contract” failed in the customer contact efforts, in the efforts to create accurate single profiles of customers, prospects and in the sales effort. It is time again to “change the game” in CRM.

In the overall context of Changing the Game, Wilson was talking about the interaction between teams, leadership and their followers and by extension between “us” and our clients or customers. The theme for Wilson, however, was how the “game” is changing for salespeople and organizations that are trying to stay abreast of, and to (the extent they can) anticipate what their customers will need, want and expect: in other words, value

To Wilson, T-A-S-T-E requires 100% reciprocality between both parties. When applied successfully there would be between both parties 100% trust, 100% accountability, 100% support, 100% truth and 100% effort from both parties. In the context of account management or professional services, the value of this approach both for the team assigned to create and deliver the work as well as for producers, growers, and our channel partners more than likely is completely obvious, especially in today’s world. In a customer-based, customer-focused business model, one that effectively uses CRM as its underlying strategy , shouldn’t T-A-S-T-E be a primary principle and guarantee?

My simple answer is a resounding “yes!” In other words, in a successful creation and implementation of Customer Relationship Management, this acronym has a firm place as a prime operating principle. And, I submit that nowhere does T-A-S-T-E have as necessary a place than in CRM in the agribusiness world.

On the opposite side: if an agribusiness were to implement CRM incorrectly - especially without the foundation of T-A-S-T-E - wrongly or in reverse (let’s call it: “anti-CRM”) can we see in that failure to be customer focused and customer based some of the root causes of the current channel tensions?

CRM is a strategy based on customer focus, on customer knowledge, and on delighting the customer. CRM includes customer experience management, customer knowledge management as well as a portfolio management approach to customers. Additionally, effective CRM provides “value “ as defined by the customer - at each point in the customer’s lifecycle and allows multi-channel interaction (web, phone, in-person, social networking, etc).

CRM’s strategy defines how a company delivers value to its customers and profits and growth to the firm as it practices customer-based, customer-focused delivery of its products and services. Tied back to the strategy are issues such as business practices, training, communications, data, capture and use, business process, operations, compensation, etc. (viz., people, process, & data).

The benefits of successful CRM implementations are well documented. They include:

1. Increased sales

2. Increased profitability

3. Increased product penetration

4. Increased customer satisfaction and loyalty

5. Increased employee satisfaction

6. Decreased cost-to-serve

7. Increased retention of the existing customer base during times of economic uncertainty.

8. Increased likelihood of acquisition of new customers

T-A-S-T-E, I would submit, inherently lives in successful CRM practice.