Monday, May 17, 2010

A 2010 Loyalty CRM Strategy Roadmap, prt 2

A Strategist’s Business Issues

A strategy can only be executed with focus and choice. It must operate with , what Rich Horwath in Deep-Dive calls, “the discipline to intelligently allocate … resources.” Whether the resource is time, money, or people, the optimal allocation of resources is a critical issue, a critical challenge, for almost every business organization that wants to execute its strategy successfully. Since no enterprise has unlimited resources, it is worth investigating how customer relationship marketing models can provide a critical key to unlock the answer to this problem.

In no functional area of business is this resource allocation problem more true than in sales, marketing, and servicing customers and/or prospects – a market-coverage model, if you will. In fact, the search for the optimal allocation of resources in these functional areas is something akin to the search for the Holy Grail.

In business-to-business marketing (B2B) the characteristics of the target customer group can commonly be depicted visually as the familiar pyramid. Largest accounts on top, smallest on the bottom. The shared, common problem of a target universe, the pyramid graphically shows how, in most mature, competitive industries, the sales function (together with service and product marketing) is faced with:

· Price and margin pressure at the top of the pyramid, where the size of the targeted accounts is the largest

· Margin (cost-to-serve) pressures at the bottom of the pyramid, where the largest number of accounts exist

· An eventual overabundance of competition – once all your competitors realize where you are making your money - in the middle, where the most profit is initially available

· A shrinking middle layer

More than a decade ago Adrian Slywotzky suggested in an article that we elevate sales to a strategic boardroom issue. There never has been a more critical time for many businesses to recommit to elevate Loyalty and CRM to the boardroom level.

I do not presuppose a cookie-cutter approach. But, simplistically, I do believe that building a strategic roadmap for CRM in 2010 should be much like the childhood dot-to-dot challenges, which captivated our imaginations for hours. Especially if we guide our thoughts with the words of philosopher, Jacques Derrida, namely “that the answer is always already there.” In other words, through analysis, diagnosis, business intelligence, customer insight, we can uncover the “dots” that we need to connect in order to drive our Loyalty CRM Strategy towards success. Loyalty CRM: doing business with the right core customer. The roadmap requires discipline, focus, choice, and selectivity. Customer insight, business intelligence, process optimization, communications, and training are the primary ingredients the relationship marketing executive adds to the traditional 5 Forces analysis. Judicious use of these tools together with our marketing imaginations will allow us to uncover the roadmap for our particular company and target universe.

This approach requires cooperation and coordination across the entire company and your “value chain”. As a Loyalty focused CRM strategist you can create great synergy and operational effectiveness to your Loyalty CRM Strategy by applying the models of customer relationship marketing and knowledge management together with a modified activity-based look at resource allocation – your customers as a portfolio to be managed.

The Thesis for identifying the 2010 Loyalty CRM Strategist’s Roadmap

The planning tools, operational models, feedback loops, and performance metrics of relationship marketing are templates that create optimal resource allocation and coverage models. What follows is a guideline for optimizing the allocation of resources, together with the attendant analysis and implementation.

Why do we need a roadmap?

In order to “keep our eye on the ball”, in order to maintain focus on the desired end-state of our strategy, is the simple answer. The 3 primary results executives should expect from a well executed, loyalty-focused CRM Strategy are: Increased sales Effectiveness and Efficiency; Increased Customer/Employee Satisfaction; Decreased cost-to-serve

In addition to the three key very desirable outcomes that result from a well-executed customer relationship marketing competence, other implicit problems can be remedied:

· Increased sales, both volume, margin, and breadth of offerings

· Increased service levels

· Increased customer and employee knowledge sharing

· Increased customer and employee retention

· Customizable coverage

· Faster product introduction, i.e., speed to market

· More controlled management of product migration by targeted segment

· Decreased cost of doing business as a percentage of sales, i.e., sales expense to revenue ratio (E:R)

Customers as “a portfolio of assets”

We live and work in a time in which each of us faces allocation constraints pertaining to use of money, time, and people. Furthermore, the competitive arena we operate in is wholly unlike that of just a few years ago. We have a rare opportunity in today’s struggling economy if we are disciplined in our choices, focus, and resource investment/deployment.

Consider this quandary: If you have limited resources, where do you invest them, and how, in order to maximize your return? Professor Len Schlesinger – who brought “us” the Service-Profit Chain – used to lecture using a 3 X 3 matrix:


Down the left side: LARGE MEDIUM SMALL

Using this simple framework, that he called “the Marketing Optimization Model”, Professor Schlesinger would challenge his audience and students to solve the problem all strategists face, the resource investment and allocation dilemma. While a 9-box matrix perhaps overly simplifies the coverage and investment challenge, it gets the CRM strategist thinking in the right general areas.

Our customers represent a portfolio of assets that we must proactively manage in order to maximize shareholder and stakeholder value. A complementary truth is that virtually every organization has limited resources. So it is vitally important to invest those limited resource in direct proportion to the return we expect to receive from our investment in our primary assets - our customers.

The marketer’s Holy Grail is to get the right message, product, and/or service to the right person, at the right time, in the format that customers have indicated they prefer. In fact, this is the primary goal of an optimal allocation model.

An optimal coverage model would also:

· Support a retention – and loyalty-focused, customer-based business design

· Make effective use of the organization’s limited resources

· Make investment decisions based on reciprocal commitment or mutual interdependence of your Ideal, Best customer and channel partners

· Establish integration and synergy across the three functional areas responsible for servicing the customers: i.e., product marketing, sales, and customer service.

Stepping Back: there are two reasons that customer relationship Marketing is so powerful when implemented properly. First, the firm focuses on acquiring the Ideal, best customer, and, second, the company manages its customers as a portfolio of assets – investing its limited resources proportionately to the level of commitment that customers and prospects make to the organization.

My contention is that there is a fairly well-defined path the enterprise can take when analyzing and assessing its allocation challenges. This path is mapped out through the use of the tools, templates, and planning by the insightful, analytical, data-based, relationship marketer.

Resource allocation must also bring to bear the relationship marketer’s theories about managing the point of contact, managing the customer across their lifecycle of interactions with the company, managing the value of the customer portfolio, and managing knowledge across the company and across the value chain. Fred Reichheld called it “the customer corridor: it is really mapping the touch-points between your firm, your target universe and customers, as well as your value chain members. In today’s 24/7, always-on, flat-world seemingly driven by social media, just mapping these touch points and then aligning your company for total cooperation and coordination across the value chain is an immense undertaking. Creating the graphic, however, will serve as a powerful icon inside your firm and will illuminate the challenge of resource allocation relative to your customers’ lifecycle relationship with your firm.

Specifically, there is a spectrum, or “continuum of relevant customer contact activities,” that needs to be mapped to create an optimal and effective resource allocation model.

The first step many organizations will need to undertake is to conduct an audit of their marketing, sales, and customer service activities so as to surface the key interdependencies between them, as well as with site logistics. Think of it as “the programming” phase of dealing with an architect. The Master Builder will want to know how you want to live and function in the new space. The audit seeks to:

· Make visible and apparent where integration between the functional areas is necessary

· Make apparent where non-discretionary accountability must reside

· Revisit the current account selection process

· Revisit key account management practices

· Objectively verify whether an account is relationship – or transaction-oriented

· Assess the skills, training, and behavioral components of the relevant customer contact people in each of the functional areas

· Assess degree of cooperative, cross-functional teamwork along with supporting account planning, communications, and contact management tools

The Determinants

What is needed is a framework for determining how to allocate resources. There are a great many steps involved, yet, in some ways, creating this framework is much like connecting the dots.

A 2010 Strategy Roadmap for CRM, prt. 1

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2010 Strategy Roadmap for CRM, part 1.

Strategy is choice. Choice tied directly to Mission, Vision, Values, and Purpose. Choice, Selection, Focus and Differentiation are critical components to any successful strategy.

Customer Relationship Management (CRM), is a strategy based on customer focus, on customer knowledge, and on delighting the customer. CRM is real-time, actionable, customer knowledge management. The best CRM approaches are holistic, involving all facets of your business and demonstrating accountability for results. CRM becomes a guiding philosophy and framework for doing business and includes:

• differentiating and optimizing the customer experience
• building customer knowledge to provide value to both the customer and your business
• taking a portfolio management approach to customers –investing in direct proportion to the expected return from each customer, while realizing that not every customer is worth keeping!
• delivering “value “ as defined by the customer - at each point in the customer’s lifecycle and with all of your customer contacts

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, of the strategy to differentiate your offerings from your competitors.

Sadly, “something like 90% of companies fail to execute strategies effectively.” Often, the failure to realize a strategy success results from taking your eye off the ball. (In other words, something came up and we paid more attention to that blip than to the strategy). Successful strategy execution will/should allow your business to create a sustainable competitive advantage, to optimize its market-coverage models, to optimize its customer portfolio, to anticipate the shifting nature of value, and to realize loyal customers.

One primary constraint to successful execution of your strategy is that virtually every organization has limited resources: time, people, and resources. Choice, focus, and selection are critical. With today’s business intelligence tools, your firm can easily achieve Optimization of the marketplace coverage models - sales, customer service, marketing and channels. The models and tools of the eCRM practitioner provide almost a dot-to-dot like template with which to assure coverage optimization and hence optimal use of the firm’s limited resources.

A second realization we must still embrace is that no company can be all things to all people. Your customers represent a portfolio of assets that must be proactively managed in order to maximize shareholder and stakeholder value. As strategists we believe that our best customer investment and market strategy would be to invest our limited resources in direct proportion to the expected return on investment

Again, choice, selection, focus, and purpose must serve as constant monitors. While CRM “implementations” still fail – at disappointing level - to achieve what executives expect, It’s no longer a secret, the evidence is compelling and is well documented, both at the academic level and in practice. A strategy of Enterprise-wide Customer Relationship Management – when successfully implemented , whether in the clouds or on-premise- can achieve impressive results.

The most easily measurable results include:

· Increased sales Effectiveness and Efficiency

· Increased Customer/Employee Satisfaction

· Decreased cost-to-serve

In fact, there are 8 benefits. The EIGHT BENEFITS of successful CRM implementations are well documented. With a well-executed strategic CRM program, you can experience and measure:

1. Increased sales
2. Increased profitability
3. Greater product penetration
4. Growth in 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 new customer acquisition

These maxims are independent of the enabling technology. Successful strategy implementation has more to do with aligning people, processes, and information (yes, data) to the mission/vision/values/ & purpose of the business, to the strategy, than with what software package or cloud-computing platform chosen.