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:

Across the top: LOYAL SWITCHER COMPETITIVE

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.

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.

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.

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.