June 26, 2009 1 Comment
Driving CRM Effectiveness in a Recession (by Oracle)
Social Media / Social CRM
Modern Day Secrets for Increasing Profitability through CRM and Social CRM Initiatives
June 2, 2009 Leave a comment
Graham Hill presents some great points, and sage wisdom in his post “Six Proven Rules to Beat the Recession”.
I would contend that his advice is at the core of success in business, and just becomes more clearly defined when businesses are forced to be aggressively and desperately focused in a more challenging economic landscape.
To sum it up, “It’s all about value”. Focus on the value equation and then build/organize around it.
Point #3 below is where CRM takes center stage, though can be leveraged to execute on each of the strategic points outlined below.
Here’s to your profitability! Sound off and Happy Innovating…
May 30, 2009
Six Proven Rules to Beat the Recession
By Graham Hill, Customers & More
Type in the word “recession” into Google and at the last count, it returned over 62 million hits. Everyone is talking about the recession and many companies have already started to do something about it too. Often this means cutting swathes of staff without much thought to their long-term success: British Telecom announced it is cutting 10,000 jobs, Citibank that it is cutting 52,000 jobs and the City of London is forecast to lose over 370,000 jobs during the recession!
No Company Ever Shrunk to Greatness
Whilst job cuts are to be expected, they are by no means inevitable. Research by McKinsey showed that companies that beat the last recession in 2001/2 actually increased spending in key areas. The research tracked almost 1,000 US companies over 18 years, including during those all important recession years. The companies that emerged in the top quartile after the recession actually increased spending on sales, innovation and marketing. Although this reduced their cash reserves, the companies traded short-term profitability for long-term gain. And it worked; their book-to-market ratio was more than 25% greater than their less successful peers.
Understanding the Value Equation
The companies that beat the last recession understood the “value equation”. When times are hard, cash is in short supply and customers are in even shorter supply, you need to carry out a ‘strategic due diligence’ to understand how your company creates value. That means understanding what drives sales and margin growth, how core shareholders view the company’s prospects and how the company can return value back to them. That is the company-side of the value equation. But by itself it isn’t enough. You also need to understand the customer-side of the value equation too That means understanding who your company’s core customers are, what they buy, which channels they use, how much they are willing to pay, and what jobs and outcomes they are looking to achieve at different points in the customer experience.
Only by understanding both sides of the value equation can you beat the recession. And the value equation changes a lot during a recession; just think how people are now buying own labels rather than branded products at your local supermarket. It is critical that you spend enough time during the due diligence studying how your company delivers value to customers and how that creates value for shareholders. The recession is probably going to be with us until 2010, so it makes sense to do a proper due diligence before setting out to beat the recession. And it is no use just relying upon analyses from just before the start of the recession either. The world has changed in the last few months and it might never be the same again.
Six Proven Rules for Recessionaries
Although different companies should respond to the recession in different ways, there are a few general rules that they should follow. I call these the “Rules for Recessionaries”.
Rule 1: Protect Your Best Customers, Products & Channels
As George Orwell, might have said, “All customers are created equal, but some customer are created more equal than others”. You need to understand who your best customers are and to protect the revenues they provide. As pressure mounts to make cuts, it is essential that the cuts fall on the customers who don’t provide much revenue or who lose you money. You also need to protect the products the best customers buy, and the channels they buy them through from cuts too. Paradoxically, this may be the time to consider making strategic investments in your best customers. You can achieve much more ‘bang for your buck’ when your competitors are reducing their spending.
Rule 2: Refocus the Customer Experience Around the Value Equation
Knowing who your best customers are, what and how they buy, and what jobs and outcomes they are looking for, allows you to refocus the business and provide a superior customer experience that also delivers superior results for your company. This may require refocusing resources away from your worst customers towards your best ones. The deep understanding you developed during the due diligence will identify the core touchpoints in the customer experience and the activities which support them. And the focus on customer jobs and outcomes will ensure that you don’t forget about the product in use. This is usually the part of the customer experience where most value is delivered to customers.
Rule 3: Sweat Your Customer Management Assets
Now that you know who your best customers are and have refocused around value creation, you should look to gain the maximum from the customer management assets you have. This means squeezing a bit more value from each of the core touchpoints in the customer experience. Doing this requires that all the supporting people, process, technologies and other assets that deliver the customer experience are better aligned. And that they are used a bit more intensively to create value, whether this involves better sales calls, more targeted marketing, or products that are better at helping customers get the jobs and outcomes they want. As has been said elsewhere, a recession means doing BETTER, not just doing less!
Rule 4: Cut Non-value-adding Costs while Protecting Value
In parallel with using your customer management assets to the full, you should also look to remove all non-value-adding costs using the lean thinking approach pioneered by Toyota. By following a customer order through the entire delivery process, most companies are able to identify 20-40% of the activities that don’t add any value, i.e. that neither the customer, nor the business is willing to pay for. These are all candidates for cuts. This not only saves significant costs, it also speeds-up the business, reduces errors and increases the satisfaction of your best customers.
And don’t listen to the ignorant naysayers who clain that lean thinking only works in manufacturing. Just look at companies as varied as Vodafone, Ducati and Tesco, and of course, Toyota, who have all applied lean thinking with great success to improve their service operations.
Rule 5: Support & Incentivise Staff to Deliver Value
Tough times call for strong leadership. And not only from senior management. You should carefully assess your staff and select the ones who can help lead you through the recession. And then agree tough performance targets for delivery. That may mean upsetting the old order and hierarchy as young managers are promoted above longer-serving ones. It may also mean trouble with unions more interested in maintaining the job status quo than in your company beating the recession. You should be prepared to support, coach and mentor managers responsible for running key parts of the customer experience. It will be worth it. Not only will they feel empowered to deliver against their targets during the recession, they will also be much better managers once the recession is over.
Rule 6: Focus on the Long-term while Supporting the Short-term
Many companies make the mistake of just focussing on the short-term, particularly at the start of a recession. And you will certainly face pressure to be seen to be ‘doing something’ about the recession. The whole point of the due diligence and the previous steps is to enable you to understand what creates value for customers and shareholders over the long-term, and then to develop a plan to beat the recession. This will no doubt require some tough trade-offs. And sometimes you will be forced to make the wrong ones to placate senior management. That doesn’t mean that you should ignore the short-term, particularly revenue generation. But it will allow you to strike the right balance so that you can plan to beat the recession.
Are You Planning to Beat the Recession?
Try and answer the five questions below. If you can answer “Yes” to most of the questions, you are on the right track. But you still have a little work to do? But if you can only answer “No” to most of the questions, you had better look again at your approach to beating the recession. Your best competitors already have!
Question 1: Do you understand the total value equation?
Do you know how value is created for your company? Do you understand how value is created for customers? Can you keep abreast of changes in both as things change?
Question 2: Can you protect the value created by your best customers?
Do you know who your best customers are? Do you know what they buy, at what price, through what channels? Do you know what your competitors are doing to attract them?
Question 3: Are you using all your resources to create value?
Are you sweating your customer management resources? Are you cutting out non-value-adding costs? Are the resources aligned and integrated to let value flow seamlessly to customers?
Question 4: Are you supporting your staff and partners?
Are the right people in charge of customer management? Do they get senior management support when they need it? Are they incentivised to deliver value? Are you supporting & incentivising your partners?
Question 5: Are you focussed on the long-term?
Are you preparing plans to beat the recession over the next 1-2 years? Are you pro-actively managing customers for short-term value creation? Are you measuring the health of your business on a regular basis?
If you follow the six simple Rules for Recessionaries, you will be in a good position to put together a coherent plan to beat the recession. But if you are just intending to rely on aggressive cost cuts, or untargeted investments in the status quo to save you, then “Good Luck”. You will need it.
April 14, 2009 Leave a comment
Graham Hill presents a great framework for rolling out a Customer Lifecycle Management initiative. In the sea of opportunity and moving parts, the ability to execute the delivery of a focused project plan is key if you are to realize the unlocked potential that exists within your existing and future customer base.
One other key point that could go unnoticed is that you’ll see after the 100 day plan, he points to Kaizen, a method of continuous improvement, which surprisingly goes unnoticed in many CRM implementations. The initial launch is only the beginning of the journey towards increasing profitablity.
Customer Lifecycle Management in 100 Days!
By Graham Hill, Customers & More
The recession is forcing companies to rethink how they do CRM. Gone are the ‘big-iron’ CRM projects of yesterday with multi-million budgets, inflexible two-year project plans and ROIs that were little better than inspired guesswork. In their place is a new approach to CRM, based upon running projects as internal corporate ventures that deliver tangible results, at low cost, within 100 days.
To make internal venturing work for CRM, it needs to be based upon three parts, each of which supports the others.
- Proven CRM Theory – The first part is a thorough understanding of proven CRM theory. This provides a robust platform upon which to build an internal venture project. Without this platform, it is all too easy just to copy other companies’ CRM projects without understanding how they need changing to suit your company’s unique capabilities. Proven CRM theory provides the know what.
- Detailed CRM Practice – The second part is detailed experience implementing CRM projects and operating them afterwards. This provides a practical framework for planning the CRM project, piloting it in stages, implementing it and then operating it afterwards. But experience by itself is not enough. You also need to understand enough CRM theory to know how to adapt experience with other companies to your own situation, particularly during planning and early piloting. Getting it right at the beginning will mean that you don’t have to significantly change the project later on, when it is much more disruptive and costly to do so. Detailed CRM Practice provides the know how.
- A 100 Day Project Plan – The final part is a 100 day project plan, setting out how you will implement CRM and start delivering tangible results within 100 days. Obviously, you can’t deliver an enterprise-wide CRM programme, e.g. telco Billing & Collection, in 100 days. But you can break larger programmes down into smaller 100 day projects that you can more easily manage for results And by results I mean delivering project milestones, on-time, in-full, to-budget. Only by running projects as internal ventures can you ensure delivery of results, with whatever resources are available, at a minimum cost. A 100 day project plan provides the CRM blueprint to get started.
So how do 100 day projects work in practice?
Recently, I directed a small team that implemented Customer Lifecycle Management (CLM) for a national operating company of a major mobile telecoms provider, all within 100 days. The lifecycle of the 100-day project was broken down into five stages:
- First 10 Days – Feasibility – The first 10 days should be spent understanding the company’s current CRM capabilities, who the key resource holders are and planning the project milestones and costs in detail. The time should also be spend arranging for critical data required later in the project to be available just in time. One of the biggest problems in CLM projects is data not being available when required.
- Days 11-50 – Soft Pilot – The next 40 days should be spent developing and running a ‘soft pilot’ of CLM for the highest priority target customers. This includes gathering data, developing propensity models for e.g. customers likely to churn, creating attractive propositions, programming the campaign management system, developing marketing communications, arranging fulfilment for customers that respond and of course, reporting results. The idea of a soft pilot is that the CLM capabilities are tested manually to ensure that everything works as intended. Inevitably, some things don’t and soft piloting gives you the chance to fix them before they are automated in the next stage.
- Days 51-70 – Hard Pilot – The next 20 days should be spend automating the soft pilot once it is working smoothly and repeating the soft pilot process for next the highest priority target customers. Once the soft pilot from the previous stage has been run smoothly without any problems a number of times, it can be automated. This includes automating data feeds, customer scoring by the propensity models, offer selection for customers, the whole campaign delivery and fulfilment process and reporting. Early results should also be examined in detail and changes made to targeting, offers and communications to hopefully improve results. The soft pilot process should also be repeated for the next highest priority target customers. You may have decided that retaining customers likely to churn is the highest priority. These customers would have been soft piloted in the previous stage and hard piloted in this one. The next higest priority might be customers you think are likely to increase in value, or to take up a particular product. They would be soft piloted in this stage prior to being hard piloted in the next one.
- Days 71-100 – Implementation – The last 30 days should be spent hard piloting the next highest priority target customers from the previous stage and standardising the whole CLM process across the business. In the previous two stages, the CLM process has been systematically tested and automated across prioroty customers. In this stage, the process is standardised across the business so that it becomes daily business for all staff operating it in the future. This includes measuring, monitoring and managing the business by the results delivered. As this will form the basis for all future CLM activities, it is essential that this stage is carried out by the company staff who will operate CLM in the future. It can be challenging to get operational staff to change their emphasis from doing activities to delivering results, but it is essential if CLM is to deliver the results expected of it. Customers’ behaviour is continuously changing and CLM needs to continuously change with it.
- Post 100 Days – Kaizen – The post 100 day period should be spend further standardising the CLM process and in improving all aspects of CLM. This includes, improving the results of individual campaigns, improving underperforming propensity models and improving the operation of CLM. Although lean processes should be implemented automatically during CLM’s development, the pressures of managing internal ventures with a 100 day target mean that this is not always possible. Just applying lean thinking to business processes can reduce non-value-adding costs by up to 20-40% and process cycle-time by a similar amount.
This project delivered multi-million Euros of annual incremental revenue, on a total customer base of less than 5 million and a targeted customer base much smaller still. All for a total outlay of less than Euro 250,000. And all up and running by the telco’s own staff within 100 days. You can work out the ROI for yourself.
Find Out More, Get the Presentation
I have presented and run whole day workshops showing how ‘You Can Do CLM in 100 Days’ at a number of Telecoms CRM conferences over the past year. Send me an email to graham(dot)hill(at)web(dot)de if you would like me to send you the full presentation.
March 13, 2009 1 Comment
Customer segmentation is a big issue as companies look deeper at their existing customer base, and as Graham points out, not only are companies needing to readjust their strategic initiatives and sometimes entire operational models, the data that they have in their database may not mean what it meant just a few months ago:
The recession has resulted in a number of companies having to change their ‘business operating models’ and to switch their emphasis. Sometimes this can have unintended consequences . For example, talking to one telecoms executive, his company’s emphasis has changed from acquiring new customers, to retaining the ones it already has. This is quite a change for the telecoms industry, more used to spending huge sums of money acquiring new customers to replace the ones that it lost the previous year, than to keeping existing customers. This change applies to many other industries too.
As the recession evolves into something more frightening, I am sure that there will be many more of these ‘phase changes’, as businesses switch from their current operating model to a different one.
The difficulty with changing the emphasis from customer acquisition to retention, is that it requires very different business capabilities. Acquisition is generally done through mass marketing campaigns to the market as a whole. What is generally on offer is a bundle of product, service, even experiential components, that are almost identical to what competitors are offering. The emphasis is on competitive intelligence and mass marketing capabilities. Retention on the other hand is mainly done with a combination of mass-customised follow-on offers to individual customers based upon their recent behaviour. The emphasis here is on customer analytics and mass-customised marketing capabilities. Making the switch can be very difficult, as although most companies already have these new capabilities, they are not always there in the right quantities to deliver against management’s change in emphasis