DAEMON QUEST - Rafael Mombiedro

Customer Adquisition

Wed, 18 Oct 2006 17:36:56 +0200

Keys for designing Profitable Acquisition and Selective Prospecting Strategies.

Abstract:

The great majority of companies are immersed in indiscriminate, mass obtainment tactics of a short-term nature.
The challenge is not to obtain customers at any price, but rather acquire them intelligently by using targeting strategies that allow us to know who is joining our portfolio, what they are able to offer us, how long they might stay with us, and what they can generate during that time.
The principal objective of every Obtainment Strategy must be profitability, defining how much to invest in each segment of potential customers, what channels to use, and what sales and Marketing resources.
In order to obtain customers intelligently and profitably, companies must establish Selective Obtainment Plans in which the focus is on each segment’s value.
Alongside Obtainment Strategies, there must be Re-activation Strategies that “wake up” inactive customers and allow us to “re-obtain” them.
Every Obtainment Strategy must be joined by proper Channel and Retention Strategies that seek the optimization of resources and maximum profitability.

Every company enjoys communicating their increases in new customers. Obtainment figures and increase in market share always figure among the most prominent aspects in any company’s annual statement. Incorporating new customers into the portfolio in a hyper-competitive market, in which acquiring new accounts or new consumers almost always means taking them away from the competition, is always good news. And that’s true. New customer acquisition is a symptom of good business health, since no company grows healthily without regularly increasing its market share. However, precisely because new customer acquisition is the vital engine for business growth, intelligently managing obtainment is a complex challenge.

Because the unanimous orders in every company are to sell more and steal customers from the competition, the great majority of companies are immersed in indiscriminate, mass obtainment tactics of a short-term nature, which focus more on volume than on value; on quantity rather than quality. And these actions, taken outside the framework of correctly designed strategies, can clearly affect any company’s profitability in the long-term.

Obtainment at any price?

The true challenge, then, is not to obtain customers at any price, but rather acquire them wisely, knowing who is joining our portfolio, what they are capable of offering us, how long they might stay with us and what they can generate during that time, how much to invest in obtainment strategies, what resources to rely on, and what channels to use. Customer obtainment must not be a term that stands alone; rather, it should always be accompanied by the adjective “profitable”.

There are several reports that show that companies that have slowed their rhythm and investments in customer obtainment have nevertheless been able to increase profitability and profits. This is the case for a well-known insurance company in the United States that, aware of the fact that its obtainment costs were above average for its market, asked its agents to grade the probability of acquiring each new policy according to specific factors. If it was below a certain level, the instructions were to abandon the process. Paradoxically, the company saw a decrease in sales, but a clear increase in its profitability ratios and its Customer Equity.

This is a clear example of how many customer obtainment strategies do not count profitability as an essential element, as an increasing number of studies are showing.

Targeting: What customers to obtain?

The end of Product Marketing. Companies face an organizational shift toward the customer

Wed, 11 Oct 2006 19:25:40 +0200

Abstract

For decades, the product and its promotion have been the foundations on which companies have developed their sales strategies.
Currently, there is a confrontation in the business world between policies that are oriented towards the product and strategies oriented towards the customer.
The companies that put the focus on the product manage the different areas of their organization according to their offer, and focus their attention on product managers for the design and commercialization of their products and services.
It is imperative for the culture of “product managers” to be transformed into a culture of “customer managers”.
A company’s profitability, however, depends on its customers, and especially on the value those customers offer the organization.
The customer’s potential value is the key to profitability, because it takes the customer’s lifespan and share into account.
Knowing the customer in-depth allows us to structure the offer according to the different market segments, adjusting products and services to their needs and optimizing costs by reducing the risk of failure.

The traditional focus on the product is being questioned. Companies are facing the challenge of changing this business perspective and opting for a strategic orientation towards the customer.

1. The decline of product Marketing

Throughout history, many commercial successes have base their strategy on a great product. The accuracy of certain designs and their practical application in wide-range environments has led entrepreneurs, small, medium, and large companies to success on the market, generating millions in profits. Post-It notes, mobile telephones, or tissue paper (originally sold under the brand name Kleenex) are some notable examples developed throughout the last century, in which the preliminary work on an idea and a project played a decisive role in what would later become true blockbusters.

FedEx: how to obtain profitable customers

Sat, 02 Sep 2006 19:33:13 +0200

Making mistakes in the obtainment process leads to treating companies with very different returns at the same level. FedEx took note in order to better select its customers and attract the most profitable ones.

Technical Data:

Company: FedEx.
Objectives: Raise customer profitability and optimize the resources dedicated to each profile.
Solution: Portfolio segmentation according to customer value, proper assignment of resources and launching of selective obtainment processes.
Results: Increase in the value of portfolio customers and sustained growth of revenue year alter year.

Segmenting, analyzing, selecting, and totaling new customers are not exclusive tasks for companies in the growth or expansion phase. Even the most powerful companies on the market are forced to make decisions geared towards improving obtainment mechanisms, even if its consumer base is in the millions.

This is the case FedEx, the world’s largest messenger company, had to face a few years ago. It doesn’t seem like a firm with the capacity to operate in more than 200 countries, with a staff of more than 260,000 employees and contract employees, would need a plan to improve its customer obtainment strategy. However, an exhaustive analysis of the companies in its portfolio showed that, until then, they had not done the homework they should have done.

Analyzing its relationship with about 30 of its large accounts, FedEx discovered that a considerable part of them were not generating the initially expected revenue, especially those that had negotiated a high volume of residential deliveries. In this case, the problem was that the company had valued customer size above everything, and not customer value and capacity for lifespan. The result of this mistake was that FedEx treated companies with very different value returns at the same level and with identical resources.

The awareness of this situation led FedEx directors to modify the way they made offers to potential customers, and to take measures with those customers who had not met initial expectations. For those customers, it raised prices – in some cases very significantly – even at the risk of losing them, because their presence in the company resulted in revenue loss, a noticeable inefficiency in its own resource management and, moreover, an insulting comparison with truly profitable customers. Concerning the presentation of offers to new “prospects”, the company improved its segmentation, adjusting aspects such as discounts, sales, and available means for each customer profile.

In the last five years, FedEx hasn’t stopped growing exponentially in both revenue and net profits. In the last half of 2001, the company reported a 54% decrease in profits, but one year late it had turned the situation around with a growth of 109%, reaching 236 million dollars. In the last quarter of 2006, the firm raised its revenue to reach almost 8.5 billion dollars, with a net profit of 568 million dollars, more than double that of five years previously.

In the development of its new products and proposals, FedEx takes very much into account who it is best for them to target, and how to do it. This year, it launched its Critical Inventory Logistics Program, geared towards companies that need to manage their inventories more efficiently, taking advantage of the synergies among the group’s different companies, from those dedicated to parts and equipment transport, to those that deal with express deliveries. Assigning resources and optimizing the management of customer obtainment and maintenance are always the objective.

Segmentation: The most critical decision in Marketing

Tue, 18 Apr 2006 11:57:32 +0200

What is the use of having the best product or service on the market if you don’t know with complete certainty who will buy it and whether its commercialization will be profitable? Only a proper Segmentation Strategy can precisely determine which profiles to direct the offer to, with what resources, with what sales and Marketing actions, at what prices, and through which channels. Segmentation Strategies constitute without a doubt the most critical decision in Marketing.

Many of the mistakes and failures associated with the launching, repositioning, or any other commercialization formula for products and/or services have their origin in a poor Segmentation Strategy. The majority of the critical decisions General Directors and Sales and Marketing Departments face daily derive from the segmentation of the customer portfolio or the potential market. That is why it is vital to segment intelligently and profitably.

‘Churn’: How to reduce client abandonment

Sun, 16 Oct 2005 19:06:20 +0200

Abstract

Churn is skyrocketing. Abandonment is no longer a phenomenon that affects only certain sectors and companies.
Unviable strategies. Companies must not resign themselves to high churn rates. This strategy is as illogical as it is unallowable.
Retention, more profitable than obtainment. It’s easier and more profitable to retain a client than to obtain a new one. However, companies opt more often for obtainment.
Analyze and understand. Abandonment maps are essential in creating alarm systems that alert you to abandonment risk. However, it is not only necessary to analyze which clients leave and when, but also why.
Price is not the enemy. Price is no longer the biggest abandonment driver. Service is
the key.
Client value is key. Retention plans must be based on the causes of abandonment and the client value in order to be profitable and meet the needs of each client.
Facilitate the exit. When a client abandons, companies must try to recuperate them, if the client’s value is strategic, and if everything is lost, do not impede their exit.

Abandonment rates are skyrocketing

Churn has gone from being a familiar term only in the Marketing environment, to being a prominent word in any company’s strategy. The reason is as simple as it is worrisome: abandonment rates are skyrocketing to alarming levels in all industrialized countries, in all sectors, and in all companies. The activity, profile, and size are not important anymore. Churn affects all companies, and they still do not know how to react to this phenomenon that weighs down their results.

Customer Intelligence - the brain of CRM

Tue, 20 Sep 2005 12:06:21 +0200

Knowing customers is without a doubt the key to a company’s success. And that is why the different techniques that help carry out an appropriate management and in-depth researches of customers are being generalized in the business World. CRM has been a first step, but customer intelligence can go much further and convert into a sure success an investigation which, otherwise, would be excessively poor.

While the majority of companies are obsessed today with finding the true key to the indicators of their customer’s behavior and their marketing projects, the truth is there is no correct path to measure the health of relationships with customers. Some companies opt for relying on a handful of ratios to measure it, for example, the degree of satisfaction the clientele attains and its market share. Others prefer other behavior that is also frequent, such as carrying out an in-depth analysis of the details that indicate how a customer became a loyal buyer.

Advanced Customer Management

Mon, 21 Mar 2005 17:13:57 +0100

Abstract

Customer Intelligence is still a pending challenge in too many organizations that fail to recognize the growth potential of their current customers.
Before considering the launching new products and services, and consequently the segmentation of the potential market, every company must ask itself whether it is more effective and competitive to analyze and take advantage of their current market’s possibilities.
Developing an accurate customer management is critical in optimizing cross-selling, up-selling, and loyalization opportunities.
The criterion on which any advanced customer management should be based is value; as much current value as potential value.
Applying Customer Intelligence techniques allows us to geometrically increase the potential value of customers.
One of the maximum objectives of advanced customer management is to contribute to quantifying a company’s “customer equity”; to “monetize” the net value of its customer portfolio.
Analytical techniques such as Data Mining, commonly used in scientific fields, are fundamental to customer portfolio analysis.
An accurate customer intelligence facilitates customer allocation strategies - that is to say, correctly assigning human and financial resources -, marketing and sales action strategies, and strategies for finding the appropriate sales channels for the right customer segments.

Why throw ourselves into conquering the potential market, with all the investment resource it requires, when we still haven’t taken advantage of the immense possibilities of current customers? Advanced customer management, grouped under the terms Customer Intelligence or
Marketing Intelligence, provides an exhaustive knowledge of the customer portfolio, and it is winning by a landslide among companies with a large amount of consumers. Its benefits are clear: it optimizes costs, increases satisfaction levels and consumer loyalty, allows us to sell more and better, and favors the maximization of sales channels and strategies.

1. New Marketing is based on differentiated management according to segments

Distribution giants, such as Wal-Mart; financial entities as global as American Express or Mastercard; insurance companies as powerful as Lloyd’s; colossal software and e-business companies like IBM or Microsoft; airlines such as Iberia or British Airways, and telecommunications operators like AT&T or Telefonica have several million customers worldwide. How do companies like this get to know all of their customers? How do they organize themselves in order to know who they are and what the needs are of customers who are increasingly demanding, well-informed, and willing to change providers with increasing ease? Customer Intelligence is becoming the necessary solution for all those companies that want to know who their customers are, how they behave, and what they demand.

High-Tech Marketing. The New Era of Scientific Marketing

Sat, 12 Mar 2005 11:22:00 +0100

Abstract

Sales and Marketing directors are overwhelmed by the information on their real and potential customers.
This overflow is creating a new generation of “info-addict” and “infoxicated” executives who face tremendous difficulties in distinguishing between useful and useless information.
Based on conventional scientific applications, new techniques are emerging which allow us to obtain meticulous information on the customer, based on rigorous and reliable data.
Neural Networks, Artificial Intelligence, and Data Mining allow us to obtain all the information on a customer, filter it, analyze it, and interpret it in order to transform isolated data into a real strategic decision-making support.
Applied to the marketing field, these types of techniques allow us not only to understand current customer behavior, but also, and even more importantly, to predict how they will behave in the future.

It is time for science to be applied to marketing, as is already happening in other business fields. Knowing who the customer is and what their habits are, and predicting their behavior is only possible by implementing strategies based on exhaustive gathering, filtering, analysis and interpretation of data on real and potential markets. Only by adopting Scientific Marketing can we transform information into knowledge that supports the company’s strategic decision-making.

1. The information era: “info-addicts” and “infoxication”

A simple Google search for the word information gives an Internet user 347 entries. This is only one indicator among many of the level of information bombardment the average individual experiences. If this average individual is also a company director, the degree of the information barrage skyrockets. Currently, executives are going through the highest levels of information flow in history. A study recently carried out by the University of California (UCLA) concludes that in the last 30 years, Humanity has generated more information than in the previous 5,000 years.

Is it viable to focus on the customer? Companies are facing enormous challenges in changing the traditional focus on the product, towards the new focus on the consumer

Sat, 01 May 2004 18:13:26 +0200

Abstract

• There is a conflict in the business world between policies of focusing on the product and strategies of focusing on the customer.
• Companies that focus on the product manage the different areas of their organization according to their supply, and they have a “product manager” to design and commercialize it.
• However, a company’s profitability depends on its customers, and especially on the value those customers have for the organization.
• A customer’s potential value is the key to profitability, because it takes the customer’s path and quota into account.
• Knowing the customer in-depth allows us to structure our offer according to different segments and categories, fitting products and services to their needs and optimizing costs to reduce the risk of failure.