Making the Leap – From Reactive to Proactive Sales

Businesses can no longer sit back passively and hope customers come a knocking. The proactive pursuit of potential clients must be made a part of any companies’ day to day sales strategy, and reflect in its activities.

In today’s competitive marketplace, in practically every sector, obtaining new business is more difficult than it has ever been. Numerous factors are behind this:

Number of Alternatives

Potential clients have more alternatives in terms of where they want to take their business to than ever before. The number of competitors, the channels they can be accessed by, and the products and services they provide have all contributed towards giving the potential client a wealth of options.

Example – Booksellers like Waldenbooks have faced an extreme growth in competition through the proliferation of the internet channel, where companies like Amazon.com and Wal-Mart have thrived in winning clients. This shift in channel usage has resulted in the closing of hundreds of Waldenbooks bookstores (2oo to close this coming month alone), and countless thousands of smaller shops across the United States.

Pricing

Winning on price has become extremely difficult, as competitors are now more than ever able to match any price offering. Companies must look to differentiate their offerings in alternative ways, as pricing advantages can no longer easily be conveyed to the potential client.

Example – Computer maker Dell used to enjoy a significant pricing advantage against its premium PC OEM competitors, particularly benefiting from its supply chain efficiencies and direct sales channels. This advantage, however, has since been stripped away by the likes of other premium brands like HP and Lenovo, who have copies some of Dell’s efficiency-driving tactics, and introduced some of their own.

Product / Service Features

Similar to pricing, competitors are able to rather easily replicate the features of any given competitors’ product or service. Unless a specific patent and its relevant protection is in place, very few companies can ensure their given product or service will not be duplicated by a competitor, thus killing its marketplace advantage.

Example – Splenda, the artificial sweetener, has recently lost considerable market share to a Chinese rival who copied every aspect of its own product. The company falsely believed no competitor could produce the sweetener’s core chemical sucralose on a commercial scale, a belief that was dispelled when they found the rival’s product available in Wal-Mart stores across the United States.

In light of these market dynamics, companies can no longer rest on their laurels – a passive approach to sales and customer acquisition simply will not work in most cases (surely not in a way that will allow companies to hit their aggressive sales targets). To succeed in such a competitive, consumer-empowered atmosphere, companies must take to the streets, literally.

 

Proactive vs. Reactive Sales in a Given Store in a Given Sector

Reactive Sales World

In a reactive sales world, a given company’s sales rep waits for the customer to come in through the door, and then tries to sell to that customer (who is likely going to buy something anyway, regardless of the sales rep’s support / service). In this reactive sales world, the customer drives the relationship, dictating what he or she may buy, determining the rules of the game. The sales rep is ultimately a passive bystander in most cases, and adds little value besides being an information provider.

Sales reps in a reactive sales world come and go, with very high turnover associated with the position. Minimal training is provided to such reps, and thus, they understand little about the needs of their potential customers. In this store, the sales rep can do little to win over potential customers who show resistance to a possible purchase – their ability and motivation to make the sale happen are limited.

In such a reactive sales world, a company’s ability to drive people to the store determines the overall possible success of the store, and as such, requires extensive reliance on advertising, word-of-mouth, promotions, etc. That is, no matter how proficient and savvy the sales reps are, there is a constraint, and that is total number of visitors to the store.

The measure of success of this store in a reactive sales world is total sales per square foot, and for the employee, number of sales registered to him or her (in more advanced worlds, their mystery shopping service score). In such an environment, a store can only go so far as increasing their conversion rate – the percentage of potential customers walking through the door that make a purchase.

With such an approach in place, the location of a store dictates the overall success of the store to a very strong degree. As goes the neighborhood, so goes the store – high foot traffic spells success, the reverse, failure. In a reactive sales world, companies open and close stores on a constant basis, assessing performance quarterly to determine which stores to keep open and which ones to close.

Proactive Sales World

In a proactive sales world, the employee spends a great deal of time pursuing customers, in the most efficient manner possible relative to their specific situation (via emails, phone calls, door-to-door visits, etc.). In this proactive world, leads are given to the employee, and he or she is responsible for pursuing these leads. The store and its employees are not limited to the business they can drum up from customers that visit their store, but rather, by the additional number of potential clients they can get in touch with in a given amount of time.

In this proactive sales world, the store is very well educated about potential clients in the area. They know at any given time their market share, what their competitors are doing and which customer segments they are succeeding with, and which potential clients they have the highest probability of winning over if visited.

In this approach, products and services are matched to potential clients before a visit is made, and pitches to win them over are also ready. Sales reps are no longer turnover prone, but rather, well trained and motivated through financial and other means. These sales reps know the products and services inside out, know the needs of their potential customers, and can convert resistors much more effectively.

Sales per square foot are still a measure of success, but are complemented by targets around potential clients visited, leads generated, leaflets distributed, etc. The store is no longer exclusively reliant on advertising, promotions, and word-of-mouth for new business, their location also no longer limits their potential sales.

Stores that succeed in the company now do so because of their sales reps’ abilities to win over customers, not just inside, but outside the store.  Reliance on location, advertising, and promotions becomes secondary to the ability of the sales force.

Proactive Sales Applicability

A proactive sales model is not applicable in every sector – sending out sales reps from a clothing store to visit potential clients, for example, will yield minimal results. Looking at this issue from the potential client’s perspective will point to the sectors that can benefit from this model.

For example, a small business opens up shop in a given neighborhood. The business is visited by an electronics store sales rep to discuss their computing needs. They then get a visit from a local bookstore that offers to bring a given set of business magazines and newspapers on a regular basis to their door. Then the local telecommunications dealer stops by to discuss their fixed, mobile, and internet service needs. A bank sales rep also comes by to open up their business checking account. Finally, an insurance sales rep comes by to discuss the businesses overall insurance needs.

This is only a scenario centered around a new business that only gives some examples of sectors than can benefit from using a proactive sales approach, similar scenarios can be built around new residents, existing residents, existing businesses, etc.

 

Leads

Leads are not always required to visit a potential customer, but they go a long way towards driving efficiency in the proactive sales effort. Leads can be obtained in numerous ways:

• Through a listing of newly opened businesses published by city / government entities
• Through realtors who can provide this information for a fee
• Through searching on the internet for directories
• Through using actual phone directories

 

At a minimum, companies in sectors that can benefit from such a proactive sales approach deserve to try it out as a pilot. This requires minimal training, with a focus on just one store, to see if the benefits derived are of a sufficient level to scale out the approach to the entire sales network. Companies ignoring considering the utilization of such an approach are doing so at their own peril, as their competitors likely will not.

Consumer Segments of the Middle East Part II – Leisure and Business Visitors

The second in a series around the most common and important market segments observed in the Middle East and strategies / tactics to acquire and serve them effectively…

Our second market segment studied in this series is visitors, comprised of leisure and business travelers. This segment is a substantial and valuable one, particularly in places like Dubai and Qatar that have become business and tourism hubs in the region.

Acquiring the Segment

Although the length of relationship with customers in this segment is significantly shorter than with those in other market segments (thus calling for a cost-effective, mass acquisition strategy), these customers can be identified and targeted in groups in a relatively easy manner.

A couple of opportunities for targeting them along their visit cycle are:

• Before Arrival: Almost all visitors look for information about their new destinations before arrival through both offline and online means. Companies can tap into this opportunity by advertising on popular travel sites, participating in discussion forums about the country, becoming more active on social media related to the country or even building their own content that provides valuable information for tourists.

An example of this is the One & Only Royal Mirage hotel advertisement on Google search for keywords ‘travel Dubai’. Utilizing a similar approach, companies can build strategic partnerships with leading tour operators to pass on their marketing messages and promotions to the upcoming visitors.

• Flight & Arrival: Similar to the expat community, mentioned in our first article, air travel is an ideal medium for gaining access to hundreds of visitors arriving to a new country at once. These visitors are already segmented by value, via their choice of airline and flight class, thus allowing companies to target their ideal base of potential customers. Via partnerships with airlines, airport taxis / limousines, or through opening a booth at airports, it is possible to reach out to this segment as soon as they arrive.

An example of this in action is the in-flight NTT Communications SIM Card sales on Japanese Airlines flights, allowing the telecommunications giant to make a sale to the visitor before they even land in Japan.

• Accommodation: One of the easiest methods of accessing both leisure and business visitors in mass is through hotels and serviced apartments, as most visitors will be utilizing these types of accommodation. Similar to the case with airlines, visitors have segmented themselves based on their value to a certain degree (price of hotel, room vs. suite, etc.), again allowing companies to target their desired potential customers in an efficient manner.

An example of this method of targeting visitors is visible in Dubai, where most major malls offer shuttles to and from the major hotels (as tourists are a critical segment for malls, some go as far as offering shuttles from the mall to the airport, catering to last-minute shoppers).

• Transportation: Temporary transportation is an additional primary need of most leisure and business visitors. By advertising on metros, buses, and taxis, and partnering with leading car rental agencies, companies can gain access to visitors during their visit.

A relatively more advanced example of this in action is the TaksiPOS service by Vakifbank, which provides POS functionality for paying for taxis with credit cards, and gives information about the city on LCDs, in taxis in Istanbul.

• Communications: As the third basic need most visitors will have, the communications platforms – especially mobile and internet – provide opportunities for acquiring the visitor segment. Today, some telecommunications operators in the Middle East, such as du, provide tourist packs, which are valuable means for promoting any product or service relevant to the visitors. Similarly, partnering with the mobile operators, companies can gain access to those which are roaming or using prepaid tourist SIM cards for communications and send SMS or MMS messages to them. 
• Leisure: Malls, tours and touristic spots are effective locations for reaching out to leisure visitors, which can be done through partnerships, billboards and distribution of brochures. Especially in smaller countries that have a relatively smaller number of popular touristic spots, visibility can generate handsome returns on investment. Alternatively, companies can organize their own leisure events to get these visitors to come to them.
• Business: Similar to the leisure visitors, business visitors can be reached out to in masses during certain events, such as exhibitions, seminars and trade shows. By sponsoring these types of events, or partnering with their organizers for direct access to the attendees, companies can market their services and products to white-collar business visitors.

Serving the Segment

Although their visit cycles have resemblance, the needs and expectations of the leisure and business visitors have significant differences, as does their motivation for using different products and services. Hence, companies should focus on understanding and serving each of the visitor community sub-segments based on their differing needs:

Leisure Visitors

• As potential customers in this segment are traveling for leisure, one of the key needs that should be satisfied to address them is access to up-to-date information on key touristic spots, entertainment events, and activities. An example service for serving this specific need is provided by Globe Telecom of Philippines, which provides Tourist Information Services as a hotline for inbound roamers, including information on food & entertainment, festivals & calendar of events, all of which are provided through an IVR system.
• Most tourists seek to avoid hassle when they travel to a new destination, making all value propositions providing convenience for them more than welcome. Any service provided by companies to make their day-to-day routines easier in this new environment can gain their full interest. A sample of such a service is the Thailand Dial-a-Service provided by DTAC, which allows inbound roamers to dial the name of international corporations by dialing their first 3-6 letters (e.g. AVIS-2847) after which the system connects to the companies’ customer service hotline in Thailand.
• Since leisure tourists are usually one-time or infrequent visitors to the destinations in the Middle East, they are more interested in immediate benefits rather than promotions they may benefit from once they get back to their home countries. Traditional loyalty-building promotions such as free minutes for the next 12 months, or long-term offers such as a car raffle to be announced two months down the line, are less attractive than discounts or freebies they can get immediately.
• Access to financials is one of the key requirements and challenges most tourists face in a new country. Not sure whether they will be able to use their overseas credit card or not, and not willing to carry around high amount of cash, tourists would welcome any alternative means for payment, such as mobile payment options, or the prepaid card offered by The Malaysian Bank Islam, Tourist Friend MasterCard, which not only allows customers to get a local fully-functional card immediately, but also provides discounts of up to 70% across hundreds of merchants.
• Last, but not the least, some of the tourists have language barriers, not only against Arabic or other local languages, but also English as well. Any service which can help them in overcoming this barrier, such as the multilingual call center (with English, French, Flemish, German, Persian and Russian) of Turkcell, and its dictionary applications for roamers, would increase their likelihood of preferring a local company to another.

Business Visitors

• Unlike the leisure visitors, business visitors are more likely to return to their destinations in relatively short-time intervals. Some even relocate after a while, making them attractive targets from a lifetime value perspective. As a consequence, for the business visitors, companies can focus on longer-term promotions, which are valid for months to come, making sure that the visitor comes back to the same company on the next visit.
• Similar to the information about touristic destinations in the case of leisure visitors, the business visitors are in need of information on the local economy, business events, different sectors, companies and entities such as the chambers of commerce. As an example value proposition, some business hotels in the region deliver local financial newspapers, magazines and even annual sector reports to the rooms regularly, which can be extended across other sectors.
• These visitors need not only information about the local economy, but want to keep in touch with the developments in their home markets. Some companies, such as Le Royal Meridien Beach Resort and Spa provide international news kiosks which print out and deliver the latest version of international newspapers from various countries, serving such need.
• In addition to information, business visitors also need business facilities, such as fax and e-mail, to stay in touch with their overseas business contacts. Most hotels already provide a decent level of service, with a business center or in-room facilities. Yet, other industries can also tap into this opportunity, like the SingTel’s Wireless Surf offer, where inbound roamers can use hotspots all over the island and charge it to their mobile lines.

With millions of visitors flying in every year, most Middle East markets present sizable opportunities for companies which are willing to focus on the leisure and business visitor segments. Companies should research the culture and needs of visitors to their own countries, as each attract a different mix of nationalities and life-styles and develop specific value offerings based on them that differentiate themselves from the competitors. The opportunities listed in this article are just a few examples to begin with. Still, a good start for many…

Consumer Segments of the Middle East – The Expat Community

Market segmentation is a relatively common practice, executed over and over by most leading companies around the world, conducted in order to understand the needs of different segments and target them effectively. Yet, only a handful manage to put the findings at the heart of their business model and use it in devising effective strategies and developing targeted products and services.

In this series, we discuss the most common market segments sought after in the Middle East market, their needs and key strategies and examples of actions tied to their most significant expectations.

Our first market segment is the expatriates, including both the white and blue collar, together which create the substantial customer base in some Middle Eastern countries, such as the UAE and Qatar.

Acquiring the Segment

Compared to rest of the market segments, this community is relatively easy to get access to, as its members are usually clustered throughout their lifecycle, giving opportunities to market to in masses. A couple of practical tactics for tapping into such opportunities are:

• Before Arrival: Most expatriates review blogs and web sites discussing the work opportunities and lifestyles in their home-to-be. Banners on these web sites about offerings for expatriates, especially when complemented with value added information about the country, can be an effective means for early awareness and acquisition. An example is the HSBC ads published on www.expatriates.com.
• Arrival: Air travel creates an ideal medium for gaining access to hundreds of potential customers arriving to a new country at once. By targeting flights based on whether they are low cost or premium airlines and their departure countries, companies can get direct access to the expatriate segments. Via partnerships with airlines, airport taxis, and limousines, or, by simply opening booths at airports, it is possible to reach out to this segment as soon as they arrive. An example is in-flight NTT Communications SIM Card sales on Japanese airlines flights.
• Government Activities: Recently arrived expatriates go through a number of government departments to get their residence visas processed, their newly-bought apartment registered, and complete their relocation. As this guarantees that the expatriates physically visit certain destinations, it provides an opportunity to use billboards, brochure distributions, and similar location-specific marketing activities for direct and early access to them.
• At Work: Although the expatriate community blends in with the local community in terms of where they work, there still exist certain business environments where the blue and white collar expatriates are more likely to work at. For example, construction companies and temporary staffing firms can provide easy access to their blue collar expatriates, whereas the investors and managers in free zones would most likely be the white collar expatriates, who are nicely clustered physically.
• At Home: Similar to the working environments, expatriates are usually nicely clustered at certain compounds, freehold properties or ethnic districts, which make it effective to use door-to-door sales and billboard advertisement for acquisition. Based on the rental prices in targeted area, it is also possible to identify whether the occupants are white or blue collar expatriates.
• During Entertainment: Due to language and cultural differences, the media viewed, read, or listened to by different expatriate communities are easily distinguishable. Companies can use this to their advantage across various media, such as having commercials in movie theatres during certain foreign movies, or advertisements in newspapers publishing foreign news. Similarly, certain events target specific expatriate communities, such as those arranged by the embassies during national holidays, or certain community gatherings and club events, which also give vast opportunities to reach out to the right targets in masses via sponsorships and traditional marketing tools.

Serving the Segment

The needs and expectations of the white and blue collar expats are quite different, as is their affordability and motivations for using different products and services. Yet, both segments start their lifecycle in their new country with the same need – need for information and support in settling into their new homes. Companies can and should start serving the segment from this moment, as Citibank in India does. In order to provide a value add to potential customers on their first day in the country, Citibank provides support in registration activities, in helping to find a new house, and in helping their children get admitted into schools, in addition to providing orientation sessions through cross-culture training and networking events.

After the settlement phase of a potential or new customer, companies should serve each of the expatriate community sub-segments based on their differentiating needs:

Blue Collar

• The traditionally main reason for relocation of this segment is to earn wages higher than that which they find in their home country. As a consequence, any promotion or price discounts are attractive for this segment. Yet, to keep the segment profitable, companies need to only provide such benefits in return for long-term loyalty, possibly attached to commitments. For banking this could translate into lowered account charges for a guarantee to keep the account open for at least a year, and for telecommunications, this could mean an annual mobile plan commitment.
• Most customers in this segment have limited monthly budgets and face difficulties in making bulk upfront payments. This makes installment based payment plans and small packaging more preferred by this segment. An example, offered by du in the UAE is monthly installments, replacing the one-time joining and renewal fees. Propositions of small packages include Airtel recharge cards for 50 Rs with 3 days validity, and 10 SAR recharge cards by STC with the same validity period.
• Many individuals in this segment have considerable language barriers, in terms of both English and the local language, especially when they first arrive to the country. This necessitates the preparation of marketing communications and product / service information materials and forms in the sub-segment’s mother tongue as well. Touch-point employees’ ability to communicate with such sub-segments is also critical, which requires multilingual call center agents as well as other frontline personnel.
• Most of these customers live away from their family and try to support them from overseas. This especially makes international communications and financial services a key priority in their needs. As these customers need to communicate with their families overseas and have relatively smaller social networks in their new country, mobile plans which have preferential rates, possibly during off-off-peak hours and charging by the second are attractive offers to serve their needs. In finance, any offer that would make it more convenient and cheaper to get their savings to overseas would be effective, such as the remittance debit card offered by Wachovia, which is delivered to family members overseas for withdrawing money.

White Collar

• The main reason for relocation of individuals in this segment is to further increase the quality of life for themselves and their families. Hence, the entire family, and in particular, the children can be targeted here, as the potential value extends beyond the one individual. Family calling plans in telecommunications, such as the T-Mobile Family Time plans, and children’s bank accounts, such as the Kumbara account by Isbank, are attractive means to address the family as a whole.
• Most of these customers have their extended families and friends overseas. Hence they still need to communicate and transact with individuals and entities abroad from time to time. And, with the relatively higher affordability level, this segment is likely to travel overseas during national holidays and their vacations. These facts make specific services such as mobile roaming and international credit cards attractive offerings for this segment. Other services such as toll-free international dialing from certain countries can be considered here as well.
• The average time spent by this segment in the new country, when compared to the blue collar expatriates, is relatively shorter. As a consequence, although the short to medium term loyalty is important for this segment, investments in their longer term loyalty can prove to be futile. Packages with shorter term commitments, and shorter contract terms, such as the expat package offered by Singtel, are effective offerings for the segment.

The blue collar expatriates, with their size in numbers, and the white collar expatriates, with their value per customer, are two of the attractive segments in the Middle East market. Companies should have specific value offerings that differentiate themselves from the competitors for both of these segments. Those listed in this article are just a few examples to begin with.

What You Don’t Know About Your Competitors May Sink You

What?

According to a study by the Society of Competitive Intelligence Professionals, about 90% of the Fortune 500 companies in the US are conducting competitive intelligence activities. A majority of large enterprises, according to another study (about 70%), believe that having competitive intelligence in the past would have increased the effectiveness of their campaigns. Yet, many companies, including some market leaders in the rest of the world, do not have well-defined competitive intelligence plans. They evaluate their strategies and tactics in isolation, without taking into account what the competitors are up to or how they could react to them. 

Competitive intelligence is one of the key success factors in today’s highly competitive and dynamic marketplace. Companies need to continuously monitor their competitors, especially before making key strategic decisions and investments around new product and campaign design, price and promotions plans, and branding and repositioning decisions. 

But, Why? 

If not proactively managed, one of your competitors may launch a similar product to the one your R&D Department was working on just before you. Another competitor may apply deep discounts the same week you were planning to increase your prices. Any such actions by your competitors can and will go a long way towards negatively affecting your market share and brand image.

To address such risks, companies need to take into account not only their own strategic priorities and voice of their customers, but also what their competitors plan, develop and offer to the market, in order to have the complete picture for their strategic and tactical investments. This is why, according to the respondents of a recent Outward Insights survey: 

• 83% consider competitor intelligence important in business development & sales
• 79% consider competitor intelligence important new product launches
• 71% consider competitor intelligence important R&D planning and execution

Unfortunately, most companies that do competitor research perform such activities only on an ad-hoc basis and do not follow a structured process or plan. What’s worse, such research often gets lost on the desktop of a few specialists and never sees daylight again. Effective competitive intelligence with high ROI requires the right focus and utilization, which comes with good planning and dedication.

So, How?

The obvious, but not so commonly covered, first step in competitive intelligence is the identification of competitors. Unfortunately, most companies assume only their usual rivals create competitive risks and fail to recognize a potential up-and-comer, or a complete newcomer until it is too late. For example, Xerox failed to recognize Canon as a potential threat before it entered into its market and US car makers considered Honda as only a motorcycle manufacturer and did not consider it as a future competitor at the time. Identification of the competitors requires ability to foresee who might enter into the market, as well as who has substitute offerings stealing market share from them, such as a speedboat company stealing customers from Ford, or 3G mobile operators stealing share from the traditional ISP market. 

Once the current and potential competitor list is defined, companies should set-up operations to regularly follow news and continuously gather intelligence about their:

Although information about all these items should be collected continuously to facilitate quick responses and opportunistic actions, regular reports should also be compiled quarterly or semi-annually to create an archive on the competitor profiles, to use as an input in the strategic planning and key initiatives such as new product launches. 

Sources which can be used to gather such information are numerous, with different levels of cost (difficulty), content, and depth:

All the information collected about competitors should be action oriented, creating immediate responses upon learning or critical inputs for decisions in the future. Hence, companies should also pay attention to measuring and evaluating the value-add of each source and category of information collected to maximize return on their competitive intelligence investments.

What Next?

In order to start structuring and regularizing competitive intelligence, companies should establish an external or outsourced team of specialists or allocate part-time responsibilities to their existing resources to initiate and plan intelligence gathering activities. In this plan, the sources, content and frequency for intelligence gathering should be well-defined and supported by a knowledge management platform to keep the information manageable and accessible by the right parties over time.

To learn more about gathering competitor intelligence and how we can help, please contact info@forteconsultancy.com.

Finding Diamonds in the Rough – Are Some of Your Worst Current Customers Your Future Cash Cows?

The oft-neglected customer who represents little value today could be an important asset for your company tomorrow – the trick lies in identifying them.

Companies in the telecommunications and banking sectors that have begun managing customers based on their value have taken that first important step in effectively dedicating their resources proportionately, providing a higher level of service to more valuable customers. This is often reflected through the offering of dedicated customer service representatives, tiered loyalty cards, and personalized products and services, among other practices.

The reason why this is considered only the first step, however, is because one segment of customers is often neglected by companies and not treated in a differentiated manner – this segment, for this article’s purpose, will be called the “future cash cow” segment.

Customers in the future cash cow segment can be identified as follows:

• The monthly or annual value they generate through the products or services they currently purchase does not warrant their being identified as high-value customers.
• They have the potential to:
  • Spend more in the current assessment period and thus could become high-value customers (current share of wallet – short-term potential cash cow).
    • An example of this is a prepaid mobile phone subscriber that splits his or her spending with different telecoms – if he or she chose one provider, their spend would be significant enough to be deemed a high-value customer.
  • May spend more in future assessment periods to become high value customers (future share-of-wallet – longer-term potential cash cow).
    • An example of this is a banking customer that currently generates little value for the bank, but in the future, as his or her wealth and needs change, will generate enough income for the bank to be deemed a high-value customer.

This article will address the identification of short-term potential cash cows, customers which can be targeted through various campaigns and outbound sales efforts to rapidly acquire substantial assets for your company. How longer-term potential cash cows can be identified will be addressed in a future article.

Identification of Short-Term Potential Cash Cows

Among your customers are a significant number of them who don’t give you all their business, for one reason or another. These customers split their category spend in one of two ways. The first, splitting spend vertically inside one product line – an example is the above mentioned case where a customer splits his or her spending with different prepaid mobile phone service providers. The second, splitting spend horizontally across a range of products – an example of this is where a customer holds his or her current account with one bank and his or her mortgage with another.

While there are numerous ways to identify these customers, we will highlight some of the main methods that can be used…

Telecommunications

• The customer generates significant value in one product or service line but does not own other products or services, and, has similar demographic characteristics to those of high value customers. An example of this would be a fixed line subscriber who generates relatively significant value and lives in an apartment building or neighborhood where a majority of his or her peer residents (those of a similar age, gender, household size, etc.) have ADSL packages and mobile phone lines with the company. There is a strong likelihood this customer is splitting his or her spend horizontally among several telecom companies and is a good candidate to pursue as a short-term future cash cow.
• The customer has a disproportionate inbound – outbound rate, receiving a significant level of calls (a level those who are high value customers exhibit) but making few. This may be an indication of the customer using another provider for a majority of outbound calls. Analysis among high value customers to determine a relative corresponding outbound rate to a given inbound rate can help identify such customers.
• The customer has exhibited behavior at any time in the past that corresponded with an annualized behavior which would qualify the customer to be a high-net worth customer. An example of this would be a customer who met the threshold requirements of the telecom operator to be considered a high net worth customer for a short-term period (a month or quarter), but, did not exhibit this behavior over the course of the required period (usually a year). Odds are, this customer has churned some of his or her business to another operator, and, if won back, could join the high value customer segment.

 

Banking

• The customer is receiving a relatively significant salary payment (similar to those deemed as high net worth and only holding a current account with the bank) to his or her current account but transferring it out soon after it arrives every month. These customers are ripe for the picking as their potential value is self-evident.
• The customer is making monthly mortgage payments out of his or her account in installments that can then be used to estimate the value of the mortgage he or she is paying off. Based on the value of the customer’s current account and mortgage, his or her likelihood of being considered a high-net worth customer can be easily calculated. A similar observation can be made about credit card product ownership – electronic fund transfers to accounts in the customer’s name at another bank are a tell-tale sign.
• The customer has characteristics which deem that he or she must be holding other products with the bank, but has chosen not to do so and opted to work with another bank. Customers with similar salary payments, living in a similar neighborhood, of a similar age and household size stand to own a similar set of banking products. Those characteristics common in the various high value customer sub-segments should be identified through analysis. This information can then be used to identify potential high value customers.

 

To effectively be able to do the above, extensive analysis will need to be conducted by a data mining expert. Based on the data on hand regarding the customer, the query criteria will need to be fine-tuned on a case-by-case basis to ensure the most optimal leads are produced, leads which yield the highest possible return.

Generating leads is the first part of the effort in obtaining short-term cash cows – effective sales pitches, product / service bundles, discounted pricing, customized campaigns, etc., will likely need to be utilized to convince the customer to give full share-of-wallet to the company. As it stands, he or she already has a reason for not switching their alliance over to just company.

Understanding the reasons why any given sub-segment of customers has chosen not to give their full share-of-wallet is needed here to ensure the right offer is made to the right customer. Testing offers will be an effective method to determine the right mix of product & service, price, and pitch. Looking at competitor’s offerings is another, particularly around those products or services least held by these short-term potential cash cows.

Utilization of the above listed methods for identifying potential high value customers should become a standard marketing practice in telecoms and banks. Such methods to acquire business and increase the high value customer segment base are extremely cost efficient, and, if tried and tested, very effective.

Ensuring an Effective and Consistent Customer Experience to Realize Improved Retention

Companies need to realize the single greatest asset they have aside from their product or service portfolio are their customer-facing employees, and, accordingly, ensure they are equipped and measured in the best manner possible to satisfy customers to the greatest extent possible.

Think about it – aside from the products or services a company sells, what defines its brand image and perception in the marketplace more than anything else are its customer-facing employees. The depth of a customer’s relationship with a company is to a large degree and extent defined by the experience they have in their interactions with the company’s sales and service representatives. Once a product or service is acquired, these employees are the ones who are responsible for maintaining and enhancing the customer’s relationship with the company.

Yet, time and time again, in every country and sector around the world, it is these same employees that drive customer churn – a recent report estimates that 2/3^rds of customers who sever their relationships with a company do so due to poor customer service[1]. So what’s a company to do?

Get it right through running a project with a three-step approach:

1. Identify existing deficiencies around the sales and service model
2. Make the needed enhancements to the system
3. Ensure consistency through the utilization of effective measurement and rewards mechanisms

 

Identify Existing Deficiencies Around the Sales and Service Model

The first step to take in enhancing the customer experience is to understand the existing pain points – that is, to identify the specific factors causing customer dissatisfaction, or moreover, churn. There are two key tasks here – the first, to identify all customer interactions points, the second, how those interactions are in terms of service quality.

In identifying the pain points, every single customer interaction channel must be examined – i.e. call center, dealer / branch / retail outlet, website, email, etc. – any method in which a customer could experience a letdown and feel the service they are receiving is inferior to what they might find elsewhere or feel undervalued.

To determine what to examine in these channels, the existing level of service must be understood. The most effective way to get this done is to talk to the customer base to understand how they perceive their interactions through these channels. Surveys should be conducted with existing and former customers to understand statistically what exactly is driving their dissatisfaction related to service. This should be complemented with focus groups, aimed at understanding in a qualitative manner what they expect vs. what they received in terms of service. Finally, existing complaints (if captured through recorded calls, for example) should be examined to ensure customer viewpoints are captured to the greatest extent possible.

Separately, management and front-line employees should also be interviewed. They may give insight into why there are customer service-related issues, and could point out root causes which customers may not be able to identify.

Chances are, the findings will show the root cause of customer service dissatisfaction lying in one, if not all, of the following areas:

• Inadequate or Unclear Processes
• Poor Expectations Setting
• Lack of Problem Ownership
• Excessive Processing Delays / Wait Times
• Unfriendly / Indifferent Service
• Giving of Incorrect Information
• Lack of Convenience

 

Make the Needed Enhancements to the System

Once the problem areas have been identified, actions need to be taken to close the existing gaps. Based on the identified root causes, the resolution may lie in improving trainings or findings new ways to motivate employees, in changing certain processes, in modifying specific policies. Regardless of what needs to be done, utilizing best practices will help in ensuring the right actions are taken.

If other companies around the world have been lauded around their excellence in customer service, there’s no need to recreate the wheel in looking for solutions – identifying what they’re doing right around the things you’re doing wrong will help in deciding the course of action to take in determining which changes to make.

More often than not, the root cause of problems will lie within training and motivation. Lack of effective training, particularly around helping employees see how the service they provide to customers affect’s that customer’s perception of the company, likely lies behind much of what is leading to customer dissatisfaction.

Other common problem areas are processes – processes which are not designed with the customer and service in mind, but rather stress security and drive micromanagement. Lack of empowering front-line employees to make a decision on behalf of the customer will definitely come up here – few companies seem to be willing to trust their employees to make a decision without approvals from authorities higher on up.

Ultimately, it is recommended here that changes be made in gradual phases, allowing employees to acclimate themselves with the modifications, and allowing the company to make sure it got things right – a test and learn environment, if you will, should be what’s set up.

 

Ensure Consistency Through the Utilization of Effective Measurement and Rewards Mechanisms

The final phase to enhancing customer experience comes through making sure the changes are effective, are working, and have been accepted across the front-line and by the customers. One method to ensuring consistency in the quality of service delivered across all channels is mystery shopping – a practice which should be business-as-usual in those companies that truly care about the service they provide their customer base.

Mystery shopping (the use of a third party company and its employees who pose as customers to interact with one’s own company’s front line employees to determine the level of service being provided at varying frequencies and in different channels) can also be used to reward excellence in service – recognizing those employees that are truly making a difference in the service they are providing their customers. Random spot rewards (gifts, cash, etc.) should be handed out to such employees, reinforcing the fact the company truly values its employees and their dedication to caring for the customer base.

Other methods of measurement should also become common practice – number of complaints, number of customers elevated, number of appreciation letters, etc. A reduction in complaints will be a tell-tale sign things are headed in the right direction, but should be reinforced with quarterly or bi-annual surveys. For companies in those sectors that can (i.e. banking or telecom), exit interviews should be conducted to continually identify what may still be lacking in terms of service quality.

 

If the above phases are handled effectively, the ultimate measurement will come in terms of seeing a reduction in the company’s churn rate. By getting the basics right around customer service, companies should see an immediate change in their bottom line.

 

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[1] http://crmweblog.crmmastery.com/2008/11/customer-service-not-price-remains-top-cause-of-customer-churn/

Reselling in Line With the Technology Adoption Curve

Sales and Marketing functions in technology-based product / service companies need to understand their customer base as related to the technology adoption curve and strategically plan their reselling activities around the concept.

For every new product that comes out that can be considered ground-breaking or trend-setting, there is a pace at which customers acquire the given product. This concept, called the “technology adoption curve” is defined as the adoption or acceptance of a new product or innovation, according to the demographic and psychological characteristics of defined adopter groups.

These adopter groups can generally be classified as follows:

Innovators: Wealthier clientele, seeking out and acquiring products as soon as they come out

Early Adopters: Young, well educated and market-savvy, with strong social networks

Early Majority: More conservative, wait for social acceptance of products before jumping on board

Late Majority: Older, less educated, fairly conservative and less socially active

Laggards: Very conservative, technology-shy, traditional

To put this concept into perspective by using an example, when Nintendo Wii was introduced into the marketplace, there was a major rush to purchase it. Those purchasing it on day one were the Innovators, standing in line to be the first to get their hands on the product. The Early Adopters likely purchased it over the first few months of its introduction, quickly sharing their experiences across their vast social networks. The product is likely now in the late stages of adoption by the Early Majority group, influenced by its social acceptance and spurred on by the satisfied Innovators and Early Adopters. In the coming year, the Late Majority will begin acquiring the product, and eventually, few, if any, laggard will join the frenzy.

For every product, the length of this cycle, as well as the percentage of customers who fall into each adopter group, varies. Some products gain immediate widespread acceptance across the marketplace, others take years to.

The purpose of this article is to bring attention to the relation between this adoption curve and reselling. Companies that are able to identify when exactly each of its specific customers purchased a given product or service in the past along the technology adoption curve can then target the same customers with one-to-one offers at the appropriate time along the next product or services’ technology adoption curve.

To be able to effectively resell along the technology adoption curve, a company needs three specific pieces of information around the product / service they are about to release:

1. What the adoption curve for the given product / service will look like (based on similar products or services released in the past as well as sales projections, a company can hypothesize around this, and, accordingly, estimate sales over time periods).
2. Which adoption group its existing customers fall into (again, matching customer purchase timing over the adoption curve of past similar products / services, a company can make assumptions regarding when each of these existing customers may purchase the new product / service).
3. Customer contact information (critical, as no communication can be made, nor past purchases tracked, without it – loyalty programs, warranties, etc. are methods of obtaining such information for retail-based companies – service-based companies should likely have such information on hand).

With analysis around points 1 and 2 completed, a company would then need to devise a contact strategy around its ex-customers, matching the message and offer to the specific adoption group at the right time. The key point is to ensure that the potential for new sales to existing customers is maximized in as rapid and efficient a manner as possible.

A different tactic needs to be followed with each of the adopter groups. Some suggestions:

• Customers in the innovator adopter group should be contacted even before the product or service is released, with offers of trial usage (the first to try it out), pre-ordering services, home delivery, etc. Capturing this trend-setting group’s imagination and interest early-on is the key here.
• With the early adopters group, contact should be made with these customers soon after product / service release. Capturing as large a resell rate as possible to this group is critical – the social networks they influence can greatly impact future sales. To that end, offering discounts, value-added services, and free complementary gifts should be considered.
• The early majority group is a segment of customers which will wait for general social acceptance of the given product / service, and as such, generally do not need to be contacted immediately. However, as this segment is much larger than the innovator or early adopters groups, their importance on the bottom line is significant. Thus, customized offers should be prepared to capture the interest of this group, focusing on the widespread usage and acceptance of the product / service, coupled with some exclusive benefit.
• The late majority and laggards groups come into play usually years after a given product / service’s release. As such, the focus of such an effort should be minimal on these customer segments – predicting their purchase timing is extremely difficult, yielding low response rates.

Companies undertaking such efforts should be careful not to “cannibalize” sales – some early adopters and early adopters will make purchases on their own, with no contact / offer from the company required to trigger the sale. Accordingly, it is important to be careful not to contact customers who the company has already resold to.

Some examples of companies /sectors that stand to benefit the most from such an endeavor:

• Technology Retailers – For example, selling a new version of a given Nokia phone the E71 – to past purchasers of the Nokia E70
• Telecoms – For example, selling a new maximum capacity ADSL bandwidth speed service to those customers already subscribed to the current maximum capacity bandwidth service.
• Banks – For example, selling a WAP-based service it is about to release to customers who are using its online banking services.
• E-service Providers – For example, up-selling to-be released enrollment options offering added value or services to its customers based on their prior enrollment timing and behavior.

Such a concept can be used outside of the technology realm as well, applying to fashion, furniture, airlines, etc. – ultimately, analyzing customer purchase patterns around timing as it relates to any given product or service can greatly help a company in reselling similar new products / services to those same customers.

One final note – the output of such an undertaking should be reflected in the company’s segment-based strategies, in the behavioral dimensions of the customer, alongside his or her value and needs properties. Which segment your customers fall into along the technology adoption curve should be clearly defined, ensuring the information is used on an ongoing basis by segment managers.

Bundling Your Way to Success

Working hand-in–hand, Sales and Marketing teams of companies can generate significant cross-sales / up-selling by bundling products / services together. Of critical importance is piloting the concept to determine the best mix and to ensure revenue optimization.

In almost every sector, there exists a great, relatively untapped opportunity for generating cross-sales. The opportunity – bundling – is the concept of putting complementary products and/or services together and selling them as a package to the customer base. The critical point here is that some type of value is created for the customer, be it a discount, convenience, etc.

Some companies have for years been practicing bundling, and have even been defined by the concept – case in point , Microsoft’s Office software bundle. Their strategy to offer a package of solutions (Word, Excel, Powerpoint, etc.) rather than standalone software has been pointed to as one of the key reasons why companies like Novell or Wordperfect failed with their offerings.

The software sector is only one example – bundling can be seen in practice in other sectors such as retail (i.e. toothbrush packaged with toothpaste), hospitality (i.e. discounted breakfast if packaged with the room reservation), and telecom (fixed-line, mobile line,  internet, and IPTV packaged together), as the concept knows no boundaries. It cuts withing and across sectors as well, as companies can team up to offer bundles (i.e. instant coffee bundled with coffee creamer).

The concept can support numerous strategies, and accordingly, the reasoning for using it should be well defined. The most common reasons include:

• Generating cross-sales: By using the demand for one product to boost the sales of another. An example – bundling a printer with a  laptop in order to boost printer sales, playing to the printing need of laptop purchasers that will develop sooner or later.
• Up-selling: By generating demand for a product through incentivizing the customer base. An example of this – bundling free basketball tickets and free monthly magazines with upscale VIP season tickets for a football club, hoping to drive up demand of more expensive tickets through offering additional benefits in the form of a bundle.
• Product uptake: Bundling a new product with an existing one to generate customer trials and then hopefully future purchases of the product separately. An example of this – a shampoo bundled with a new soap for free, generating trial usage and then uptake in the future.

When designing a bundle, there are two critical pitfalls to be wary of. First and foremost, the bundle should not strip away brand value – customer perception is critical and must be considered when designing the bundle, otherwise, it can harm the overall company value and have lasting consequences. Any cola brand, for example, would have to think twice about bundling its product with an alcohol brand – while there could be a positive increase in sales in the short-term, the long-term harm that could come to the cola brand for being associated with an alcohol brand could be overwhelming.

Second, the bundle should make sense financially – extensive analysis and piloting need to be conducted to ensure this is the case. A certain degree of revenue cannibalization will take place, and could ultimately hurt the bottom line rather than help it. A scenario of such a case can help bring clarity to this point:

In the above case, despite a 1% increase in sales, there is a drop in net profits due to the pricing discount offered to the customer. The reason for this in that cannibalization has occurred – meaning customers who were already going to purchase the two products separately were given a discount that was not needed – they would have bought the products without any incentive anyway. Launching such a bundle would cause detriment to the bottom line rather than helping it, and is a common mistake made by many a company. The best way to avoid committing such a mistake is to conduct extensive piloting to ensure a financially sound bundle has been designed before mass roll out.

In the pilot, the following should be assessed, monitored, and fine-tuned:

• Cannibalization Effect: The correlation between the packages sold and its effect on standalone product purchases, specifically to see the financial impact and the effect on consumer behavior.
• Customer Perception: The perception the bundle is creating with the consumer – is the package “cheapening the brand,” does the created value come across to them?
• Employee Performance: The scripts the employees are using, the messages that work best at selling to customers, the most effective way of convincing customers to make the purchase.
• Packaging: The physical packaging of the bundle, the marketing communications in place to promote the bundle, the location of the bundle.

The importance of conducting thorough piloting cannot be stressed enough around bundling. Only when the value proposition is well designed and the bundle solidly tested and determined to be financially sound should it be rolled out across all sales channels and further supported by more mass-scale marketing communications.

Turning Your Customers (and Non-Sales Employees) into a Sales Force

In a day and age when acquiring a customer is getting more and more difficult due to increased competition and slashed sales budgets, customer referral programs can be utilized to generate significant sales growth in a very practical and effective manner.

Word-of-mouth referrals have been looked at over the years as a key means by which to acquire new customers. The activity of promoting a given product or service to a friend or family member has a significant impact on that person’s likelihood of purchasing said product or service. Inversely, and logically, detraction has the opposite impact, leading to a loss of potential new customers.

A recent study examined the effect of customers who advocate or speak out against companies in the wireless GSM sector in the United States. The findings – customers who promote their wireless company attract a half new customer each on average, and, generate $1700 for the company. Those who speak against their provider cause the company to lose 1.3 potential new customers on average, and generate a net loss of $300 .

Clearly, referrals are an excellent means for generating new business . That said, companies need to proactively push their customers to generate these referrals, but rarely do. Few have successfully tapped into this ever-important lead generation mechanism.

A new and ever-burgeoning means of doing this is through the use of customer referral programs. These programs can be simple or rather complex, rewarding customers with prizes, products, cash, etc., for each referral / lead that turns into a sale. Some examples from different sectors include:

• Bank of America – Rewards both the referrer and referred with up to $50 in cash for the referred opening a new checking account .

• DIRECTV – Rewards both the referrer and referred with a $50 discount on their next bills for the referred subscribing to satellite television services .

• Vonage – Rewards both the referred and referred with two months free Vonage services if the referred subscribes to their fixed line service.

A variation of this program involves opening up the referral program to the company’s own employees, turning all non-sales employees into lead generators. One company that excels at this is PNC Bank. Through their “Chairman’s Challenge” program, the company has brought in over $440 million in new demand deposits and generated $1 billion in deposit and loans balances. The program rewards employees with points for every account that is opened through a referral they submit, then, the points accumulate and can be turned into numerous different prizes .

Companies, particularly those in the service industry, stand to reap significant benefits from setting up a referral program of their own. Some critical principles that need to be adhered to when doing so:

• Simplicity – The program should be easy to understand, easy to use, and easy to process, from both the customer and employee perspective. Over time the program can evolve but should start with a focus on the referral of one product or service, with one prize associated with said referral.

• Financial Feasibility – The rewards provided to the referrer and referred should be financially in line with the profits to be generated from the acquisition. This may be secured through a requirement of some minimal commitment from the new customer (i.e. minimum 6 month contract). Otherwise, in the lack of a contract, the reward can be given out once a certain time requirement has been met by the customer.

• Strategically Sound – The business activity being promoted should be among the company’s strategies, and, should not reward an activity which is likely going to happen anyway. For example, a bank could consider rewarding customers who refer others and set up online banking with their new account. By doing so, the bank would ensure a lower rate of churn (as online banking has a significant positive effect on retention), and would promote an activity they may have a hard time convincing customers of doing.

• Cyclical – Such programs are more effective when they have time periods attached to them, a specific start and end date – thus driving customers and/or employees to take action and make referrals. Setting the program up to be cyclical additionally allows the company to make alterations to the program over time aimed at enhancing its attractiveness.

Certainly, these programs make sense, and will likely evolve and multiply over time across many sectors and countries. Through rewarding its employees, customers, and new customers, it’s the company itself that benefits the most in the end.

Quintupling Your Churn Prediction Performance

As real business cases demonstrate, the performance of predictive data mining models drastically improve when information about historical customer behavior and real-time interactions are put together. Companies with traditional churn prediction models should realize the opportunities they are missing…

What?

Real time business intelligence and data analytics is becoming popular among most leading companies. More and more, focus is being put on the ability to react to customer interactions the moment they occur, rather than later when the real opportunity is lost. Yet, very few blend the benefits of traditional data mining models with real-time analytics. For example, the accuracy of a data mining model that predicts the likelihood of customer churn the next two months can drastically improve when combined with the complaints information during those two months. A red flag should be raised when a customer who is identified to be at risk by a predictive model takes a certain action that is also identified as a customer churn trigger.

But, Why?

In predictive analytics, there is always a balance between how early the model predicts and how recent data it uses as input. The former is a requirement by the business, as it leaves enough time for taking preventive actions. It is also, usually, required as the ETL and scoring processes take too long and can not be repeated frequently over time. The latter, however, defines how accurate a model can be, as the customers usually show their signs of disloyalty when they are just about to leave. The common approach to balancing these two has been coming up with two sets of analysis:

• One for dealing with the real-time churn triggers to handle the recent customer interactions – such as setting warning mechanisms for high-risk complaints.

• Another for predicting customer churn a few weeks – and sometimes months – earlier, using predictive data mining models.

However, these two approaches can be utilized perfectly, to develop data mining models, incorporating the benefits of both. The performance of such mixed models beat both alternatives as standalones, and, in fact, can even multiply their accuracy. A sanitized case demonstrates the impact of mixed-models:

Company X – Middle East – Leading Telecommunications Player

• The company has performed an analysis on the customer complaints and found out that customers making certain complaints have a risk of 7% churn in the same month.

• The company also developed churn prediction models, which identify a relatively high churn risk group, which is likely to churn by 10% after 2 months.

• Putting the churn model and complaints data together for a mixed model yield to identification of the highest churn risk groups, which are likely to churn by 50% after 2 months, if they make certain complaints.

Incorporating the real-time data with longer-term predictive models can save millions of dollars for companies trying to decrease their churn rates, by letting them focus on the best target groups.

So, How?

We recommend three main steps towards building a mixed model for accurate prediction of churn, cross-sales or any business problem of a similar nature:

• Prepare Data: Unlike regular data mining models, the data required for mixed models include both historical and most recent data. While certain customer behavior dimensions should take into account the state of customer a certain time period back (e.g. customer value, product ownership, etc. 2 months ago), the triggers which should be incorporated should be recent (e.g. complaints last week).

• Perform Preliminary Analysis: The preliminary analysis should be conducted to identify the triggers which are relevant for the business problem. For example, if the company wants to predict churn, complaints which are most critical should be identified analyzing their correlations with customer churn. The preliminary analysis should be also performed to understand the correlations between customer behavior dimensions and churn as well (e.g. customers with short tenure are more likely to churn).

• Build the Mixed Model: The approach to building the mixed predictive model, once the data is ready and selected, is not very different from building a regular data mining model. Variables related to churn, from different timeframes, are put together and fed into any of the predictive modeling techniques that are available (e.g. logistic regression, decision trees, neural networks). The result will be models which identify customers at high risk, utilizing both recent and longer-term profiles (e.g. customer who has decreased usage in last 6 months, has short tenure and made a complaint last week regarding prices).

Once the model is ready, it should be put into practice across channels, where they trigger certain business actions, when the customer interaction leads to a significant increase in churn risk, as scored by the model.

What Next?

Gaining ability to accurately identify which customers will churn and taking reactive measures to prevent them is an effective means for customer retention. However, for the best solution, companies should focus on a more pro-active approach and develop solutions for the churn triggers identified during the churn prediction analysis.

To receive more information about our recommendations, and learn about related Forte Consultancy Group service offerings, please contact: info@forteconsultancy.com.