Monday, July 25, 2011

Laying out the B2B CRM Roadmap , part III

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. Below are some types of information that may be required to build an effective allocation model:
• Company strategy and vision
• Target market
• Customer and market reach
• Definition of customer
• Go-to-market mechanism
• Activity based costing (or economic value added) analysis of the marketing, sales, and service processes
• Analysis of current and required customer knowledge, customer economics, and the technologies used to connect with customers
• Map of current market coverage with number of accounts (targeted, actual, and potential) by territory
• Understanding of account segment membership
• An account contact matrix model
• An account valuation/weighted potential model
• A volume/margin/duration model (to manage customer equity)
• Results from qualitative, directional research that includes marketing, sales, service, and the end-user customer (plus channels[s], if applicable)
• Data about customers: e.g., customer cycles (buying, budgeting, forecasting), number of contacts per site, key influencers by site in the complex selling decision, etc.
• Accurate time/responsibility mapping for field sales and service personnel
• The right set of metrics
Although the preceding list looks more like a laundry list than a practical approach, we can, in practice, proceed from the point of accumulating this knowledge to crafting an actionable coverage and resource allocation model for the company

The Building Blocks
The primary building block for moving forward will be an analysis of the current portfolio of your customers. Combining the knowledge acquired from the steps identified above together with the results of an analysis of the economics of sales, customer service, marketing and channel coverage, takes us to the point of crafting a final resource allocation model. One practical tool is to create a customer pyramid which analyzes value. (see familiar Rubik’s cube, illustrates both the architecture of the marketing database and the model for account penetration and cross selling. In other words, it emphasizes that the single biggest win from data-based marketing comes from penetration of existing accounts. The marketing database needs to track individuals by buyer group or functional need at the site level within the enterprise. The x-axis represents the functional areas within your customer’s organization. The y-axis allows you to track the value of the relationship with your customer (from suspect to target to trial buyer to buyer to apostle). The z-axis portrays the locations or street addresses of your customer’s various site locations.
And, while the marketing databases can be used to acquire customers, a much more profitable use for the marketing database comes from account penetration. This is, selling more products to additional buyers and selling additional products and services to all buyers.
In order to have a holistic view of the sales and marketing system, a closed-loop feedback system must exist. It is well represented by the familiar household funnel. We can use it to discuss the flow of data in a direct response, opportunity/lead management environment. The top half of the diagram portrays the flow and accumulation of the information, while the lower half shows the interaction with your sales group and channel partners. We can visually map the transfer of knowledge that can take place in an effective process of managing leads and opportunities.
Metrics is an additional benefit of using this graphic. One set of metrics measures the effectiveness of the communications stream. The second set of metrics measures the field’s effectiveness.
Keep in mind what relationship marketing is not – it is not direct mail nor is it telemarketing. It is the integration of all contact media to effect a measurable response that simultaneously manages the point of contact with the value chain.
The contact matrix, then, is a simplistic, activity-based costing model that incorporates three variables:
1. Account valuation or grading
2. Cost per contact medium
3. Cost of doing business as a percentage of revenue (E:R) by grade level and in total
Several things are worth consideration. Previously, direct marketers have judged success on a responsive rate. But response rate alone is a destructive measure that belies the workings of your marketing system. The preferred, more constructive, and more holistic measure is to examine the effectiveness of sales leverage to generate a return, balanced across all contact media. In other words, the contact matrix allows management a simple framework for managing cost to serve.

Friday, July 22, 2011

B2B Resource Allocation: Optimizing your CRM investment and coverage effectiveness, prt 2

If you watch the kids, they seem to be able to do everything simultaneously and to do so 24/7.
The rest of us have limitations. In business there are resource limitations - we can't do or be everything for everyone.
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.
Consider this quandary: If you have a million dollars, where do you invest it to maximize your return? How do you approach solving the problem and answering the question correctly.
[Personally, I always liked Len Schlesinger's 2 X 2 matrix he termed "the Marketing Optimization Model"].

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 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 corrridor, graphically illustrated above. In effect, this metaphor illuminates 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. This is a reflective exercise. The goal is to be in a position to produce cooperation and coordination across and between all functional areas that deal with customers and their issues. We need 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

Wednesday, July 20, 2011

Resource Allocation for the B2B CRM Practitioner

It’s no longer a secret. The evidence is compelling. It is well documented, both at the academic level and in practice. Enterprise-wide Customer Relationship Management (CRM and CEM) – when properly implemented - can achieve impressive results. The primary results:
• Increased sales Effectiveness and Efficiency
* Increased Profits
* Increase in customers served and products placed within customer accounts
• Increased Customer/Employee Satisfaction
• Decreased cost-to-serve
The second “secret” is that virtually every organization has limited resources: People, Money, Time.
Optimization of the respective coverage models - sales, customer service, marketing and channels - still has not been exhaustively studied. 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.
The third “secret” is that our customers represent a portfolio of assets that we must proactively manage in order to maximize shareholder and stakeholder value.
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. 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. 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 the characteristics of the target customer group can commonly be depicted visually as a pyramid, with the largest accounts at the top of the pyramid, and moving down through a group of middle accounts trying to grow larger and support the pyramid are "minor" accounts.
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

If, as has been suggested for the last 15 plus years, we elevate Customer Relationship Management, as core strategy, and Sales to a strategic boardroom issue, we can create the greatest synergy by applying the models of customer relationship marketing, customer insight, and knowledge management to the problem of resource allocation.
One Observation
In addition to the five key inevitable outcomes that result from a well-executed customer relationship marketing competence, other implicit problems are remedied:
• Increased sales
• Increased service levels
• Increased customer and employee satisfaction
• Increased customer and employee retention
• Decreased cost to serve
• 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)
The Thesis
The planning tools, operational models, feedback loops, and performance metrics of relationship marketing
are templates that create optimal resource allocation and coverage models. What we have created and replicated across multiple firms in the B2B realm is a roadmap for optimizing the allocation of resources, together with the attendant analysis and implementation.