Customer Centric Marketing Seminar 4 04 06v3

Building Customer Equity in Your Organization Mark Price, Managing Partner April 4, 2006

Agenda ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

To start… ,[object Object],[object Object],[object Object]

Overall Objectives ,[object Object],[object Object],[object Object]

Data-driven Marketing and Customer Centricity ,[object Object],[object Object],[object Object],[object Object],[object Object],Not synonymous terms, but critically related. Both aspects must be in place to drive customer value consistently

Building Value the Customer-Centric Way Background and Approach

Customer-centricity in the news ,[object Object],Giving Voice to Customer-Centricity Reaps Big ROI for Barclays ( CRM Today) Whether bull or bear market, the Royal Bank of Canada is piling up the ROI; and its customer-based strategy gets all the credit. (Inc. Magazine) Best Buy has what it calls a "customer centricity" initiative, a strategy being rolled out that's designed to increase sales and market share. ( WSJ)

Customer-centricity On The Bookstand Angel Customers & Demon Customers by Larry Selden and Geoffrey Colvin © 2003 Return on Customer by Don Peppers and Martha Rogers © 2005 Managing Customers As Investments by Sunil Gupta, et. al. © 2005

Customer centric management – why? ,[object Object],[object Object],The only source of the “fuel that runs the engine” is revenue that comes from selling to customers Plants don’t make earnings for the company Products don’t make earnings for the company Locations don’t make earnings for the company Employees don’t make earnings for the company Consultants don’t make money (just kidding)

Customer centric management Customer Concentration ,[object Object],[object Object],% of Customers % of Gross Profit 20% 80% - 100%

Customer centric management Segmentation ,[object Object],[object Object],% of Customers 20% Heavy Hitters Stock-ups Shells & Line Hunters Anglers Camp & Hiking Boaters

Customer centric management Cost Allocation ,[object Object],[object Object],Customer-driven gross margin (really all there is) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],= “ True” customer-level P&L’s minus Forces all expenses through the lens of “customer value” and creates accountability to shareholders for spending

Customer centric management Valuation ,[object Object],[object Object],Price ------- Earnings = Expectation of future growth in customer-driven revenue streams ------- Current results from customer-driven revenue streams (less costs)

Implications Value comes from customer-driven revenue stream Most to all revenue comes from a concentration of customers That concentration of customers is made up of distinct segments The discounted customer-driven revenue stream can be directly tied to company valuation or stock price Customer focus is the most important function of a company That limited number of customers actually make up all of your company’s value Understanding those segments (and integrating a value proposition into those groupings) is critical ,[object Object],[object Object],[object Object],Implication Learning

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],How did we get here? Business Environment Once cost-cutting has been achieved, improvements in performance become increasingly hard to come by

How did we get here? Technology ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

How did we get here? CRM ,[object Object],[object Object],[object Object]

How did we get here? Data Warehousing ,[object Object],[object Object],[object Object],[object Object],[object Object],Customer-driven gross margin (really all there is) Costs allocated down to the customer segment = “ True” customer-level P&L’s minus

How did we get here? Business Process ,[object Object],[object Object],[object Object],[object Object],[object Object]

So what’s involved? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Organization ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Crossing the Chasm Early Adopters Early Majority Late Majority “ Never Mind” Need Mavens + Connectors to help bridge the chasm and let the Early Majority know the product is ready – “Social Networks”

Segmentation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What gets measured is what matters… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Customer-driven Business Processes ,[object Object],[object Object],[object Object],[object Object],[object Object]

Is Customer-Centricity Another Fad? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What Your Peers Say… ,[object Object],[object Object],[object Object],[object Object],[object Object]

Summary of Findings ,[object Object],[object Object],[object Object],[object Object],[object Object]

Usage of Customer Data by Type of Business ,[object Object],[object Object],Business to Consumers Business to Business All Respondents 3 No 7 No 6 7 11 No 15 2.36 2.79 2.43 2.50 2.50 Yes 1.79 We use customer segmentation for targeted campaigns to prospects We use customer segmentation for targeted campaigns to existing customers Our company uses customer data to target customers for cross-sell/up-sell opportunities Our company uses customer data to prioritize accounts based on overall customer value We use our database to guide us in making complementary product offerings to customers We have a customer database that consolidates basic transaction and other customer touchpoint data (call center, web, etc.) I am satisfied with how we use customer data to drive incremental revenue for our company 2.54 3.15 2.81 2.69 2.65 Yes 2.15 2.89 3.78 3.56 3.00 3.00 Yes 2.67 7 6 5 4 3 2 1

Usage of Customer Data by Type of Business ,[object Object],[object Object],Business to Consumers Business to Business All Respondents 4 8 No No 5 6 12 14 No 3.29 2.14 1.50 1.57 2.21 Yes We review marketing campaign results We change our customer campaigns based on customer response data We calculate our share of our customers' total category spending (share of wallet) and use this data in our campaigns We use attrition modeling to identify customers for special retention programs We use customer RFM (recency, frequency, monetary value) for specific campaigns We have established marketing roles responsible for specific customer segments 3.81 2.58 2.00 1.81 2.27 Yes 4.44 13 3.33 12 2.89 2.33 2.44 Yes 11 10 9 8

Question # 1 - I am satisfied with how we use customer data to drive incremental revenue for our company (all respondents) A significant portion of respondents are not satisfied with how their organizations are addressing the challenges of customer data 100% 26 Total 0.0% 0 Extremely Satisfied 7.7% 2 Very Satisfied 26.9% 7 Satisfied 38.5% 10 Somewhat Satisfied 26.9% 7 Not at all Satisfied % Count

Question # 1 - I am satisfied with how we use customer data to drive incremental revenue for our company (B2B respondents) The respondents that are not satisfied with how their organizations are leveraging customer data are primarily within B2B organizations 100% 14 Total 0.0% 0 Extremely Satisfied 0.0% 0 Very Satisfied 21.4% 3 Satisfied 35.7% 5 Somewhat Satisfied 42.9% 6 Not at all Satisfied % Count

Question # 1 - I am satisfied with how we use customer data to drive incremental revenue for our company (B2C respondents) In contrast, the B2C respondents have the only group that answered very satisfied with their use of customer data 100% 9 Total 0.0% 0 Extremely Satisfied 22.2% 2 Very Satisfied 22.2% 2 Satisfied 55.6% 5 Somewhat Satisfied 0.0% 0 Not at all Satisfied % Count

Preliminary Conclusions ,[object Object],[object Object],[object Object],[object Object]

Discussion ,[object Object],[object Object]

Roundtable Results ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Barriers to Customer-centricity Roundtable Results ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

What are the Barriers to Change? Recap ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Rate your organization ,[object Object]

Plan of Attack ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Build your own company plan ,[object Object],[object Object],[object Object]

Questions ,[object Object],[object Object],[object Object]

Thank you! Mark Price Managing Partner, M Squared Group 952-484-0501 [email_address]

Key Principles of Data-driven Marketing ,[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Benefits ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Differentiated Marketing ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Differentiated Marketing (cont’d) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Leaky Bucket Consumer Acquisition Consumer Attrition Expand the bucket ,[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Harnessing the power of RFM ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Harnessing the power of RFM ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Share of Wallet (SOW) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Share of Wallet ,[object Object],[object Object],100% 100% Today 2011 Share of Spending All Others All Others Share of Spending

Key Principles of Data-driven Marketing The Importance of Time ,[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Event-triggered Marketing ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Event Triggered Marketing (cont’d) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing Branding Implications ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Key Principles of Data-driven Marketing What about Consumer Loyalty? ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Consumer evolution and migration ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Marketing Targets Best Consumers High Potential Consumers Remainder of Consumer Base High Potential Consumers Remainder of Consumer Base

Data-driven Marketing Best Practices Review #1 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Data-driven Marketing Best Practices Review #2 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Data-driven Marketing Best Practices Review #3 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Data-driven Marketing Best Practices Review #4 ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Implications of Best Practices ,[object Object],[object Object],[object Object],[object Object]

Customer Centric Marketing Seminar 4 04 06v3

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Customer Centric Marketing Seminar 4 04 06v3