Posts Tagged customer profitabilty
Customer Dissatisfaction Hurts Your Bottom-Line
Posted by Cordi in Practical Advice on March 25th, 2010
There are two absolute truths in sales and marketing that impact a company’s Bottom-Line Profitability.
- 20% of your customers are likely to produce 80% of your income
- It costs 4 to 5 times as much to acquire a new customer as to keep an existing customer
In the light of those truths it is hard to argue that excessive or unnecessary customer churn (i.e. customer turnover) does not hurt the Bottom-Line. And what single factor accelerates Churn faster than any other –? Bad customer service — unfulfilled expectations, promised benefits etc.. drive churn.
I was the principle consultant on a global telecommunications study a couple of years ago that demonstrated that an improvement in the customer service process and related technology upgrades could reduce annual Churn by 20 to 30 (depending on the country etc..). The longer credit worthy customers remain your customers, the more profitable their businesses become.
- Fewer sales people and more less expensive post-sales support personnel can better manage the business at a lower personnel cost
- More opportunities for service and product upgrades with a positive image of your company. Less pressure on existing prices.
- Fewer “loss leader” promotions
- More predictable revenue stream
- Equipment can be fully depreciated etc..
There have been hundreds of text and business books written on this subject but some consumer product household name companies have obviously never read them. High on my list of companies that just don’t understand how important managing customers’ churn can be, especially among their multi-year customers, is Direct TV .(]http://www.directv.com/DTVAPP/index.jsp)
I have been without cable television for two weeks now – despite the fact that I have paid Direct TV a monthly fee to maintain and service the required equipment for more than 5 years. Not even a threat to call Comcast could get a service technician out to fix(what they have already acknowledged is their) problem in less than 2 weeks. The long delay seems to be due to a backlog of new dish installations for new customers with a special introductory rate of 20% of what existing customers pay.
The only reason for such a steep discount is to maintain Direct TV’s market share in a competitive market place?
I think DirectTV is a great product. But I am going to be shopping for a new television services vendor just as soon as I finishing watching the 11 HD episodes of Fox’s series “24″ that I have recorded over the last couple of months. Only one simple reason to leave — their customer service and customer attitude are so poor!
Based on their currently advertised first year pricing, it will take 5 new customers to equal my one bill. Think of this as CHURN THEY CAN USE as an object lesson!!!
The Bottom-Line for Direct TV is either going to be insolvency or a hostile takeover – neither of which can be defined as a success!!!!
@CORDI AND ASSOCIATES – all rights reserved.
Selling Technology Solutions to the larger SMB market place
Posted by Cordi in Methodologies, Practical Advice on March 24th, 2010
Every major technology company client we have worked with during the last 5 years has asked one question – how can we sell to the Small and Medium (SMB) customer segments? This increased interest in the SMB market place is born of self interest.
- For every enterprise client (revenue >$2B), there are 144 potential customers with revenues <$250M
- In the US, alone, manufacturing firms with <1000 employees generated close to $1 trillion in revenue in 2009 – down significantly from 2007 but still substantial.
Multiple business data research firms have documented the fact that SMB firms spend a larger percentage of their revenue on technology but spend more carefully. Our research finds that as a group they –
- Value technology solutions not technology tools
- Suspect that existing technology solutions do not address their specific business challenges
- On the surface, face the same challenges as enterprise customers. However when examined more closely, SMB challenges are more compelling and require different solutions
- Trust their peers more than technology professionals
- Are lagging adopters
- Buy when they feel a “direct relationship” to the vendor –
Feel the vendor is invested in them!
Technology vendors who want to have a successful Go-to-Market strategy need an approach that is specific to the SMB market segment they want to penetrate. This begins with a solid understanding of the market segment – issues and opportunities, total market size, competition, cross industry alliances and existing suppliers, etc.. Next, a great Go-to-market-Strategy is only as good as it’s implementation plan —
- A tailored product offering and the value proposition
- A multi-channel marketing strategy
- A multi-channel sales strategy
- An effective executive to executive communication plan
- A best-in-class post-sale customer service and technical support capability
- A strong set of ROI measures
- A set of well-defined plan milestones
- An extra dose of patience to sustain a longer selling cycle
Technology vendors who master the differences in selling to the enterprise and the SMB market space have a great opportunity to increase their own market share and to improve their Bottom Line by developing a new and loyal customer base.
@Cordi and Associates
All Rights Reserved 3/2010
Our research proves that an effective WIN/LOSS ANALYSIS process IS the 21st century “CANARY IN THE COAL MINE”
Posted by Cordi in Methodologies, Practical Advice on March 24th, 2010
Want to know how your business plan is working? Our experience shows that competing effectively in a fast-paced global economy requires a disciplined win/loss analysis process that takes into consideration every aspect of sales effectiveness. Win/loss analysis should be conducted at least quarterly and in the current economic uncertainty preferably on a monthly basis. Sales, Marketing and Operational Management should examine all aspects of the Go-to-Market process.
- Measuring the health of the sales pipeline
- Calculating the return on marketing investment
- Segmenting customers and then targeting specific customer segments
- Discovering early indicators of shifting demands – product-based or market-based.
- Managing and sharing internal sales best practices
- Conducting a forensic transaction analysis on so-called “big deals” after their close.
By comparing the results of the win/loss analysis to the revenue plan management can quickly determine whether they are on track to meet or exceed their plan or need to make adjustments to that plan immediately –
- Increasing or slowing manufacturing to meet product demand
- Speeding or slowing new product introduction
- Expanding or revamping advertising
- Adjusting sales personnel etc..
An effective win/loss process is an essential tool in the quest to maintain focus on Bottom-Line Excellence even in the most challenging of economic conditions – just as the 19th and 20th century coal miner was warned by the canary of unseen danger below — .
@copyright Cordi and Associates
ALL RIGHTS RESERVED 3/2010
Marketing By-The-Numbers
Posted by Cordi in Methodologies, Practical Advice on March 2nd, 2010
The Marketing Executives Network (MENG) released the results of its annual member survey today. As a participant in the survey, I selected Marketing ROI as the “concept of the year”. It appears that many of my colleagues felt similarly – making Marketing ROI number one this year over Customer Retention and Brand Loyalty.
This ranking does not diminish the importance of Customer Retention (based, of course, on segmentation and customer profitability studies) or the importance of “living” and enhancing the Brand. What it does reflect is a new appreciation for the “business of marketing” over the classic “art of marketing”.
The majority of respondents believed that 2010 will be a “better” year than 2009, even as the economic facts point more to “hope” than “expectation”. In such a fluid situation, the best marketers are going to spend marketing dollars carefully and where those dollars have the most impact. They can only spend as wisely as they measure well.
Determining the Return on Marketing Investment does not have to be complicated and difficult to implement. It can be as simple as measuring the cost of new revenue from existing customers compared to new customers. Detailed analysis should be done only as a pattern emerges – and the pattern will be different in different business segments and different companies within a segment.
Measuring the effectiveness of marketing, also, helps executives to understand the impact of larger economic forces on their business – so that they can make choices in their tactical approach to their Go-to-Market Strategy earlier and more surgically than in the past. This, in turn, leads to sustainable bottom-line profitability and long term business success.
The Importance of Customer Segmentation
Posted by Cordi in Practical Advice on February 3rd, 2010
Washington Post Technology Page (2/3/2010) ran the headline “AOL posts profit, but subscribers dwindle”.
Disciplined customer segmentation and analysis will help a struggling company to reduce their operating expense by prioritizing their marketing and selling activities on the limited number of customers who produce the most revenue. The analysis may not provide an exact statistical 80%/20% breakdown but it won’t be far different.
When a company focuses on its most valuable customers it accomplishes two things:
Improves customer loyalty and, potentially, wallet share
Creates a model for increasing the total number of high value customers
$50M companies that aspire to be $1B companies need to build processes to continually monitor who their key customers are and why they are key customers