When the vision of the organization remains focused, and the execution of the brand remains relentless, you find STIHL at the top. Since 1929, STIHL has steadily grown to one of the most revered brands in the world for hand held outdoor power equipment. AgAge CMO spotlight on STIHL’s Ken Waldron adds insight why they are America’s Greatest.
Brand Promise of Superior Product and Customer Service
January 26th, 2010When you are inside a Big Box, you feel small.
January 26th, 2010I like building things, trashing things, making things around the house. Sometimes I know exactly what to do, like keeping my yard up to snuff. In other cases, I have no idea what I am doing. And when I do not know what I am doing, my intent to build often ends up looking like trash. So typically, a consumer heads off like herd to the Big Box looking for answers. What can I do, and do it better than I am currently doing? So when I end up inside the Big Box, I feel small. No one with expertise to answer the question. In most cases, no one is around. I graze in the maze looking, searching, hoping. But I feel small…and alone. And for those that want to keep their yard up to snuff and still don’t have the answer, your yard ends up looking like trash. (harsh I know). Oh the envy of those neighbors who use the PROS, they are “yards” ahead. Luckily, STIHL avoids being sold inside Big Box, but rather they sell through independent dealers who give the attention, service and know how to help consumers who want the answers. Plus their products are awesome. I recently read a book, The Distribution Trap by Andrew Thomas and Timothy Wilsonson. Chapter 6 talks about STIHL’s dedication to its independent dealers and as important their disdain for ever wanting to sell through Big Box. An interested quote by Peter Burton, STIHL’s VP of Sales and Marketing, regarding why they do not do business with Big Box…”If you sleep beside and 8,000 lb gorilla, you don’t want to be caught underneath when it rolls over.”
Great news for consumers: You don’t have to buy the number #1 brand of outdoor power equipment in America from the 8,000 lb gorilla, because STIHL has 8,000 dealers to help and serve your needs.
See the work product that promotes this positioning.
Skipping to the mailbox
July 31st, 2009TransPromo is now the rage for any company that can build better interactions with customers (the ones that pay). What is TransPromo? Basically its when branding meets billing. It is when you get a bill and you see personalized messages to help you be better engaged with brand. I know. It’s not like my wife skips the mailbox anxiously waiting to pay her Telco bill just waiting to get yet another marketing message. But it works to the tune of 3X over traditional DM spam. But here is one challenge that faces marketers trying to get started. The enviable position of communicating directly with customers sits squarely in a place most people fear the most. IT departments. Why? They own the customer information when sending out huge batches of billing inserts or onserts (the online version of bill stuffers). Companies are starting to understand that utilizing this opportunity to inform, engage, cross-sell, etc. can be leveraged every month! (depending on your bill schedule). So what’s the big deal? It is because IT naturally is the protector, not the utilizer of important data. Once C-level executives understand that interacting with customers through TransPromo can actually reduce the billing cost (worse case), and actually generate revenue with existing customers (best case), the IT people will comply.
Check out this important and rapidly growing sales and marketing opportunity at the latest TransPromo Summit.
Interesting Paper from McKinsey on Sales Improvement
July 31st, 2009This report will help companies identify what is the proper sales structure to help identify the most effecient way to support new business and existing accounts while simultaneously reducing costs. One of their suggestions? Understand the customer portfolio. Portfolio doesn’t imply, but explicitly states understanding the economic profile of each customer.
“To gain a deep understanding of the needs and economic value of customers,
companies must analyze the size, service costs, and true profitability of deals, not just their gross margins.”
“Profiling” is hot topic these days in the general political scene, but when it comes to running a company, it is not taboo. Properly profiling and discriminating customers is OK, especially if you want to get more money from the ones that will affect the top line. Enjoy.
C-level executives are waking up
May 18th, 2009A survey by c-level executives reveals their renewed focus on customers. Some of the findings include:
- Acquiring new customers 4.22
- Retaining customers 3.90
- Increase lifetime value 3.7
Note: The above statistics are based of an order of importance 1-5, with 5 being most important:
Remember, your best customer of yesterday may not be your best one tomorrow. To focus your limited resources in any economy, understand the economic impact your customers provide to your bottom line. This will reveal the more profitable ones from the liabilities. Then understand the gap of what you have to offer and what they want to buy. You may be surprised to learn the marketplace shift has been quite dramatic over the past six months. To learn more, read the executive guide, How to build a customer-driven enterprise.
A Sneak Peak Inside Customer Economics
April 24th, 2009Here’s a sneak peak at how Customer Economics can help you.
First, the chart below demonstrates how to manage your customer’s.
The chart below outlines the process of customer centricity across all of the stages of the model.
The chartbelow shows how your customer attrition burdens the profitability of your best customers.
By segmenting your customer you can find who are your best customers, who are your worst and which customers will generate the most profitability for you in the future.
If that was not enough, this chart demonstrates the 80/20 rule in action. Your best customers create the majority of your profit.
It’s time to cut the fat, we can help.
A Story About Good vs. Bad Customers
April 7th, 2009Here is a slideshow that simplifies the story of customer management. Remember, not all customers are created equal. We thought maybe you would have fun by taking 5 minutes out of your day to watch the show. Enjoy!
Don’t Get Fired Over A Matter of Definition
April 7th, 2009You probably already know this, but it is worth bringing it back up, since almost every CMO today has a lifespan approximately the same time as the gestation period of an elephant. I wonder if those that do get the quick heave ho slant towards the academic way of thinking and acting. Consider this:
The American Marketing Association changed their 20 year old definition of “marketing” in 2008:
Older Version:
“Marketing is a process of planning and executing the conception, pricing, promotion and distribution of goods, ideas and services to create an exchanges that satisfy individual and organizational goals.”
Newer Version (2004):
Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.”
Latest Version (2008):
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
According to Nancy Costopulos, chief marketing officer of the American Marketing Association, “Marketing is no longer a function — it is an educational process.”
For the record, I am encouraged it took about 40 years to actually add the word customer into the definition in 2004.
With respect to the 2008 revision, the context from Ms. Costopulos follow-on quote is revealing. “Marketing is no longer a function” is the kiss of death. Body parts have functions; parents have functions, heck even the IRS has a function; but not marketing. It just kinda floats out there wandering around without purpose or a role. I’ll give her the benefit of the doubt but probably not a smart reference quote as CMOs are under scrutiny every day. By adding “society at large” along with context that marketing is an “educational process” is as close to getting fired based on fluff as I can think of. Lots of academic chit chat, white boarding and altruist on-campus atmosphere probably doesn’t arm CMOs what they need to live another day. I can imagine how the CEO of a company that is trying meet his/her business goals, thinks about this CMO’s chit chat:
“Well boss, things are going swimmingly well….my department is dysfunctional (contrary to the popular belief that all departments are functions) as I try and use shareholder’s money to educate the consumers why blue tinted bottled water is better than clear water. I suspect after about 4 years of our educational process, millions of dollars later, the consumer will “get it” and we will start to see some sales progress. Plus we helped’ society at large’.”
My advice? Stick close the customers and prospects that deliver the money, being the black ink; not the red kind. Or you may get “pinked”.
What is Customer-Driven Business Performance?
March 27th, 2009
The chart to the left provides the holistic view of understanding how to manage your business, with your customer at the core. At Winsper, we call this model Customer-Driven Business Performance. It established a simple framework yet the implications can have a profound effect on properly organizing sales, marketing, product development, finance and operations centered around your customers.
The overall benefits for senior executives are:
- Analyze customer profitability to drive increased shareholder value.
- Segment customers using Life Stage Models.
- Identifying the customer conversion.
- Understanding Net Present Value.
- Eliminate customers destroying company profitability.
- Measure Total Cost of Customer AcquisitionTM
- Reorienting customer value propositions to
increase customer satisfaction while reducing wasted costs. - Focus company resources to measure, manage and optimize
your customer revenue opportunity.
It starts with having a complete understanding of knowing your best customer from the perspective of value, revenue, profitability and advocacy. The chart below outlines the process of customer centricity across all of the stages of the model.
To read more about Customer Economics click here to download our fact sheet.
Say NO to your prospect’s revenue
March 25th, 2009Well, a fairly dramatic statement, indeed. But not all customer revenue can have a positive effect on your company’s bottom line. Some clients, well, are downright unprofitable. The psychology of sales people, being internal optimists, is hope. Hope that they will give you more money to offset the massive acquisition costs; hope that they recommend you to another prospect; hope they become great references. The last time we checked, hope can’t clear a bank account. It is worth nothing, and having an unprofitable customer being supported by help desk, key account sales force, accounting, etc. is a more of a liability than you may think. Let’s walk through an example of a basic, new business prospect qualification scenario.
The fundamental evaluation of any new business opportunity, especially for a B2B direct sales model is the BANT model – Budget, Authority, Need and Timing. There a dozens of variations off this theme, from Sirius Decision to salesforce.com. But the fundamental model of BANT should come no surprise to any sales manager or for the guy in the trenches. Win on all 4 of these pistons, and the deal is sealed. Knowing how much time and effort it takes for a sales person to first get the suspect, then the prospect to ultimately reach the pinnacle of this scorecard can take dozens, if not hundreds, of man hours. Add it up. Let’s say there are a few staffers required to channel the suspect through the process, from in-house lead qualification to inside sales qualifiers who then pass it off the field sales representative. So, that’s three people all at various compensation schemes. Let’s do some simple math to illustrated a what if scenario (and by the way, this does not account for the marketing dollars spent to get the suspect to show up at the front stoop (you can read about Total Cost of Acquisition in another blog post):
Prospect A:
Step 1:
Lead Qualifier: 1 hour phone call, and 1 more minutes to send “more information” – these prospects usually are classified as “seemore”. They always want more information to help them justify their next move. Add 10 more minutes to put information into CRM or a marketing database. The Lead Qualifier notices the same prospect decided to join a recent webinar posting, download a demo and one white paper. Not much to do here because the in-house marketing database works so well, it automatically tracks the user’s behavior and adds information into the unique ID of the prospect.
Hourly cost, including benefits, direct costs: estimated $100 dollars
Step 2:
In-house sales rep: tries 6 times to get the prospect on the phone through a variety of means, writing emails and voicemails, sends a personal note, a timely article and finally gets to spend 1 hour doing a deeper dive Web Ex presentation. After 2 months of chasing the suspect, the in-house sales rep eventually marks the opportunity as Level 2 prospect.
Hourly cost, including benefits, direct costs: $400 dollars
Step 3:
Just a mere 3 more phases to go before they become a Level 5 prospect, when there is a contract issued and much anticipation for a purchase order. Whew, the boulder is finally moving uphill. So the appointment is made, the sales rep flys out and does the dog and pony. Works the room at and after the meeting, spends exorbitant amount of time building presentation decks, internal IT for proof of concept model, plus using internal finance and legal support to review T&Cs, so on and so on. Chalk this up as great sales day and let the bell ring.
Hourly cost, including benefits, direct costs: $5000 dollars
T&E cost: $600
Estimated Total Cost for Sales Process (not including marketing support): $6,100.
Year One Contract amount: $30,000.
Job well done, right? Well you don’t know yet. While one would immediately think the cost of sale is about 20% of the revenue and that may be a fair assessment at face value. But the more important questions is if this customer actually going to drive the proper profitability for your company long term.
How do you know they will be a likely profitable customer before you expend all this company? It is quite simple. Evaluate your existing base of customers, identify which ones impact the most profitability, get a 360 view of them, and overlay that with your prospecting database. Pursue only the prospects that the same archetype and profile of your best customer. Forget the rest. A tough pill to swallow in a down economy, but only the ones with strong intestinal fortitude can say no to revenue at their door step.
Winsper Introduces Customer Economics
March 1st, 2009Executives today are challenged to manage a host of fiscal and operational issues. With issues such as declining margins, limited growth opportunities, raising capital, and decreasing points of distribution, both B2B and B2C companies alike are re-thinking ways to develop new and innovative ways to improve performance. The ones that are successful are taking a much closer look at one of their greatest asset, their customer.
Winsper provides economic impact by helping you find your best customer, and they find you while simultaneously reducing underperforming sales and marketing costs. With our Customer-Driven, Business Performance approach through the application of software, best practices and proven experience, Winsper can help you understand how properly manage the impact of customer value to your bottom line.
Below outlines just some of the recent success we have delivered for our clients:
- Identified $10M of unprofitable customers destroying company profitability
- Specifically identified sales cycle by client, by date
- Identified over 40% of customer attrition
- Increase of 30% over industry average for customer acquisition through automated campaign management
To learn more about our Customer-Driven Business Performance, please visit www.winsper.com
Your low hanging fruit may be rotten.
March 15th, 2009How do you know if the prospect you are chasing is worth the race? Is it the total revenue potential long-term? Is it the quick revenue burst to offset a big bogie number? Is that they may be a loss leader know but has the chance to be an elephant later? There are literally dozens of excuses to try and convert the sale. But there should only be one fundamental metric to use – customer profitability. The smarter question in the beginning is if this customer will make a positive impact on your bottom line? The mystery is how a company knows if they will be profitable or not while the prospect has yet to convert to a revenue generating customer. Unless one has a magic ball, it is almost impossible to know. Let’s face, it. This has been puzzling sales managers and executives for years (then again they get compensated on revenue and/or units sold, not whether they will be profitable or not). Demystifying the question: It answer is quite simple. Evaluate your existing base of customers, identify which ones positively impact the profitability, get a 360 view of them, and overlay that with your prospecting database. This is called predictability. And while it may not be 100% accurate all the time, it is most likely the smartest, most effective way to know the trend. If the prospect has the same archetype and profile of your best customer, then your fruit is probably healthy. If not, you run the risk of getting a bad apple. Why spend company resources to try and convert a customer that will adversely affect the bottom line? Now that would bite.
Does the answer sound simple? It is in theory, but in practice, most companies don’t strategies surrounding Customer Economics. A bit scary, indeed. Unless you have the proper customer data, getting to the answer could be challenging indeed or worse, impossible. Customer data usually sits right in your financial system – who, when, how much, and what they purchased. And if they continue to buy more and more, that information sits in there too. It doesn’t take a brain surgeon to start to build out a model that can start to track conversion, profitability, churn, attrition, value and a host of other segmentations. Customer Economics is currently one of the single most important measurements of success today. Points of view on how issues facing marketing people, how to get started, or the value of such from a shareholders perspective are starting to get the attention of senior executives. We suggest getting your best practices started today. You never know if the Board of Directors, or even the Government (yikes!) starts making this part of the compliance process.
Can customer information be the currency of business?
March 3rd, 2009Any smart CEO will say they make informed decisions based on fact, past experience and counsel form his peers. But if information is the currency of business, CEOs have limited or no access to the some of the most strategic required – the economic profile of their customers. The weekly schedule is set, daily meeting agendas are agreed upon, travel plans are booked. Ahhh, everything is going swimming well with time management. The sales forecast is in, operations brief has been supplied, the board meeting presentation is complete. Boy you are on a roll. You lost some customers, you gained some customers. No biggie, “customers happen”. As long as the new customer revenue is at or above the old, you should be covered right? Wrong.
Not all customers provide the same level of profitability to your bottom line. Measured just by quantity of total number acquired, or by the variance of new revenue is a flawed model. Organizations today have little or no insight into the economic profile of each and every customer. Because they are not all created equal, at least in terms of the impact they have on your company’s profitability.
Let’s take a few examples to illustrate the situation:
Tom buys flowers 1 time a year, and pays $120. Tom’s wife, Mary buys flowers every month and pays $10 a month. Each go to the same store (or e-store). Which customer is more profitable?
What if Tom no longer bought from the store, but along comes a brand new customer, Suzie, who also spends $10 a month? Is the company better or worse without Tom and now with Suzie? From a CEO’s perspective he/she may look at the sales reports, and sees the company still has 2 customers. And after reviewing the finance report, you actually increased your revenue. But what he/she doesn’t see is unfortunately the company is losing money on these two customers. They have spent as much time getting Mary to show up and buy once a month, and because their CRM system can’t identify Tom’s economic profile as the more profitable customer, spend less time trying to up-sell him. The cost to acquire Mary’s business is far greater as she continually received emails, catalogues, special discounts, thus even reducing the profit margins more as the cost of sales and marketing are higher as they are centered on Mary. What if the store reached out to Tom during some key seasonal peak seasons or special events, say Mother’s Day, or Birthday. What if they determined that Tom only goes to this store at Valentines but shops at others for other occasions? Thus, Tom, being most profitable customer is most likely not you’re your best customer because is also the most likely to leave the brand. Why? He is being recruited by others, has the money and means to do so, and he has a frequency of 1, thus little or no loyalty to the brand. But it is up to you to make him your best customer because he has the propensity to spend more.
Suzie just adds issues to what most companies do not realize. 80% of a company’s unprofitable customers usually come from the bottom 20%, relative to their peers, thus she is just costing the company more money.
With Customer-Driven Performance Management, you can build the economic profile of each and every customer, thereby having your company understand where to apply your most precious resources. We suggest you ask your finance department if they are in fact about to give you the information that’s worth money.
B2B Magazine and Customer Economics
March 17th, 2009B2B recently published an article mentioning our Customer Economics service, which you can read here.