How to Understand the “Market” in Marketing & How It Is Critical to Your Company’s Long-Term Success

Market Analysis Best Practices

                             Market Analysis Best Practice

 

 

 

 

 

 

 

 

 

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Effective marketing must include leveraging an array of holistic market insights

 

Market Assessment Components

                                Market Assessment Components

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Effective marketing leverages multi-dimensional market insights: Challenges, competition, customers, growth & trends, size/capacity, etc.

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The following is an array of insights that I created for a client who represents one of the top luxury resort companies in the world. These insights were designed to accomplish the following:

  • Develop Financial and market Insights to Increase revenue while decreasing costs

  • Increase standing in the marketplace relative to the competition

  • Help understand the market dynamics of the target market

  • Assist in identifying root causes for customer purchases, repeat purchases and the opportunity they have to boost customer loyalty

  • Improve the effectiveness of current marketing efforts by more effectively leveraging market insights

  • Develop a 5-year transformation plan to enable new capabilities that allow them to fulfill their future vision state

     

Best Practice Market Trend Analysis

                          Best Practice Market Trend Analysis

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Effective market analysis must include insights into market trends: Growth, Capacity and Expansion

 

Market Capacity Analysis

                                Market Capacity Analysis

Best Practice Market Capacity/Growth Analysis & Insights

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Best Practice Market Supply & Demand Analysis

                Best Practice Market Supply & Demand Analysis

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World-Class Market Supply & Demand Analysis including Market Trend Analysis

 

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Market & Competitor Price Analysis - Comparison

          Market & Competitor Price Analysis – Comparison

Market Competitive Pricing Analysis

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Competitive Pricing Analysis

                             Competitive Pricing Analysis

Market & Brand Competitive Pricing Analysis

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Brand Pricing Consistency Analysis

                             Brand Pricing Consistency Analysis

Company Net Daily Revenue Analysis

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Target Market Sizing Analysis

                                    Target Market Sizing Analysis

Market Profiling, Sizing & Penetration Analysis Example

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Market & Marketing Loyalty Analysis

                           Market & Marketing Loyalty Analysis

Market & Brand Loyalty Analysis: Likelihood to Purchase Again, Loyalty Opportunity

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Best Practice Marketing Effectiveness Analysis

              Best Practice Marketing Effectiveness Analysis

Marketing Mix Analysis & Marketing Campaign Effectiveness Analysis

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Return On Invested Capital (ROIC) Analysis

                   Return On Invested Capital (ROIC) Analysis

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Return on Invested Capital Analysis (ROIC): Spread Growth, Competition’s Return on Invested Capital, etc.

Cost of Goods Sold (COGS) Competitive Analysis

              Cost of Goods Sold (COGS) Competitive Analysis

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Company & Competitive Margin, Cost of Goods Sold and Selling General & Administrative (SG&A) Analysis

Cost of Goods Sold (COGS) Trend Analysis

                  Cost of Goods Sold (COGS) Trend Analysis

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Selling General & Administrative (SG&A) Projection & Trend Analysis

 

Revenue Target Analysis

                                Revenue Target Analysis

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Historical Revenue Analysis: Budget vs. Actual

Earnings Before Interest & Taxes (EBIT) Analysis

              Earnings Before Interest & Taxes (EBIT) Analysis

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Earnings Before Interest & Taxes (EBIT) Target & Margin Analysis

EBIT Scenario Projection Analysis

                        EBIT Scenario Projection Analysis

Market Strategy & EBIT Analysis

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Best Practice Transformation Plans

                       Best Practice Transformation Plans

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Best Practice Transformation Plans: Balances Capability Development with Corporate Vision & Reality

 

World-Class Transformation Plan Inputs

                   World-Class Transformation Plan Inputs

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A Best Practice Transformation Plan Includes a Multitude of Holistic Inputs

 

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The 80/20 Customer Profitability Rule

Develop intelligent customer service & customer management programs based on customer value insights…

Has your business ever performed an analysis of your customer base to determine any of the following:

1)      Which customers are frequent visitors and have the greatest repeat business?

2)      Which ones rarely do business with your company?

3)      Which ones are the most valuable and profitable to your company?

If you haven’t then you really don’t have the insights necessary to really develop an effective customer service, customer management and/or loyalty program.  In performing analytics and customer analysis for nearly 10% of the Fortune 500 companies in the United States, I have found a very revealing and astonishing pattern (rule) in this customer analysis that holds true company after company.  The pattern is as follows:

80% of all company profits are derived from ~20% of your customers

Take the chart below (Chart 1) from one of the top US banks that shows 20% of their customers are responsible for 82% of their profitability and that a full 47% of customers are actually unprofitable and not worth having as customer as each transaction costs the bank more than it is worth (each customer interaction/transaction actually drives the bank further away from profitability) {Click on Chart for a larger/clearer image}:

80% of all company profits are derived from ~20% of your customers

80% of all company profits are derived from ~20% of your customers

When I presented this customer profitability analysis to the bank, the bank executives were amazed at the results and of the customer profitability distribution. (Note – The deciles were developed using a SAS generated RFM analytics model whereby Recency (How recent customer have visited/purchased), Frequency (How frequently customers have visited/purchased and when they visited/purchased) and Monetary spend (How much they spend and on what types of products/services they spent their $$ on). The RFM model was then used as input into a profitability model, using actual profit data for each product/service/customer using a unique customer id to match the profit data to the RFM score.)Why are these insights and analytics so important and what might the bank or any other business do to manage customer relationships more effectively?  These insights are key in developing a customer relationship management (CRM) and loyalty program that is tailored and specific to each customer group. 

Note: The 80/20 rule applies to companies that have higher transaction volumes, a diverse set of product & services and a heterogeneous customer base.

Ask yourself the following questions:

  1. Should your company treat your best and most profitable customers differently than other, less profitable customers?
  2. Should your company develop special customer programs so that the 20% most profitable customers are not lured away by competitors?
  3. Do you think your company’s most profitable and valuable customers want to be shown appreciation for their repeat and profitable business in a way that makes them feel welcome and special?
  4. Is it in your company’s best interest to want to develop strategies and programs that turn unprofitable customers into profitable or at least revenue neutral customers?

The answer to all four questions should be a resounding YES!

Armed with the above insights and analysis a company can start to architect customer intimacy and loyalty programs such as the following:

  1. Offer most profitable customer special discounts or accelerated loyalty rewards earning rates
  2. Conduct special top customer, by invite only, appreciation events
  3. Deliver occasional special top customer gifts or recognition when they interact with you in-person or on-line
  4. Invite your top 1-5% of customers to participate in an invite only customer advisory board or insights group event every year at an exciting destination where most or all expenses are paid for by your company
  5. Develop unprofitable customer management programs such that these customers become more profitable, cost less per company transaction and/or they are effectively ‘encouraged’ to migrate to competitors.

Take the same chart above and now overlay customer treatment programs to each customer decile and sub-segment (Chart 2) {Click on Chart for a larger/clearer image}

Effective Customer Management Programs Based on Profitability Insights

Effective Customer Management Programs Based on Profitability Insights

Even though decile #1 (10% of all customers) has been identified as the most valuable customer segment generating 65% of all company profits, the decile can then be further sub-segmented based on further profitability analysis/decomposition.  In this particular case:

  1. The top 5% of the top profitability decile customers generated 42% of all profits
  2. The remaining 5% of the top profitability decile customers generated 23% of profits

As shown in the ‘golden’ box (#1) above and below, these top tier customers should be given special access and special attention and made to feel totally appreciated and a partner of the company. The golden box also demonstrates the types of special programs you might want to provide to this top profitability group. It is of your utmost importance to do everything in your company’s power not to lose these most valuable/profitable customers. These suggested treatments are just a sample, but ones I have developed for many clients in the past, including top tier banks, retailers, life sciences companies, telecommunications providers, etc. {Click on Chart for a larger/clearer image}:

Top 5% of Customers Receive Platinum Plus Customer Programs

Top 5% of Customers Receive Platinum Plus Customer Programs

The next (Green) group of profitable customers highlighted in box #2 (below) can receive special treatment as well, but not quite the golden treatment as the most profitable 5%. These next valuable set of customers would still receive top customer treatment, but not quite the platinum access that the most valuable 5% would receive. You wouldn’t want to lose these valuable customers either, so their treatment would still be special, memorable and differentiated vs. your competitors. {Click on Chart for a larger/clearer image}:

Next Top Set of Customers Receive Top Treatment, but not Special Access, Handling Like the top 5% (Platinum) Group

Next Top Set of Customers Receive Top Treatment, but not Special Access, Handling Like the top 5% (Platinum) Group

The blue box (#3) in the chart below speaks to customer migration programs that incentivize customers to spend more, visit your company (physical or online) more, purchase higher value items, buy in bundles, etc. {Click on Chart for a larger/clearer image}:

Effective Customer Management Programs Effectively Transition Customers into More Valuable Customers Over Time

Effective Customer Management Programs Effectively Transition Customers into More Valuable Customers Over Time

One very effective way to do this is to develop what I call modeled incentives. In that, if a loyalty program is to be effective there should be an incentive for the customer to model the behavior to achieve the next loyalty reward level and the following must be present:

1)      Every customer group must know what they need to do to achieve the next loyalty rewards level

2)      Customers need to feel the next loyalty rewards level is significantly more valuable than their existing level

3)      There should be prestige and/or notoriety associated with achievement of the next loyalty rewards level so that customers feel privileged, special and differentiated from regular customers.

Lastly, the red box (#4) below speaks to customer management programs that need to either turn these unprofitable customers into profitable customers or find ways to reduce the cost to serve these unprofitable segments. Some strategies including limiting these customers to self-service, providing incentives to transact during off hours, incentivizing them to seek lower cost providers, etc. {Click on Chart for a larger/clearer image}:

Effective Customer Management Program Also Address Unprofitable Customers

Effective Customer Management Program Also Address Unprofitable Customers

The bottom line is that, through customer insights and analytics, you will find that not all customers are the same in terms of profitability (the 80/20 rule), therefore it makes no sense whatsoever to treat all customers the same. Through a robust customer insights program you will then be able to leverage these insights and develop a sophisticated and custom loyalty and retention program in order to accomplish the following:

  1. Develop break-away tier 1 (Platinum) loyalty programs that stand alone in the industry such that your top 1-5% most valuable customers would not even consider defecting to another provider
  2. Develop programs to retain your most profitable customers and make them want to remain a loyal customer
  3. Develop a loyalty migration path for customers to want to achieve the next loyalty rewards level (Silver, Gold, and Platinum) so that they simultaneously feel more recognized/special/connected to the company while providing your company great value/profits/monetary return.
  4. Develop programs to mitigate expenses when dealing with your least profitable customers (more self-service, helping them ‘discover’ lower cost competitors, offering more limited services, etc.) (the other 80%)

Blow Away Your Competition by Replacing Your Old CRM Program with the New Customer Relevant Relationship Management (CRRM) Model

Blow Away Your Competition by Replacing Your Old CRM Program with a more effective Customer Relevant Relationship Management (CRRM) Model

1)               Introduction

  1. Do you have a robust CRM program in-place, but you feel you are still missing the mark in terms of delivering what your customers really want & need?
  2. Is your organization at risk of making market decisions that can cause a backlash and mass defection by your customers like the Bank of America $5 fee decision or the Netflix business split decision?
  3. Do you have volumes of consumer data and analytics, but sales are declining or flat and customers are churning at an increasing rate?
  4. Do you feel you could improve the quantity and quality of your customer insights including ascertaining critical consumer needs, preferences, likes/dislikes, interests, preferred communication channel for you to contact them, preferred timing and frequency for you to communicate with them, etc?

If you can say “Yes” to any of these questions, the rest of this post is a MUST READ for you and it is time to consider this more effective CRRM Model to replace your outdated CRM Model.

2)               CRM vs. CRRM Model Overview

The following diagram depicts the major differences between the old CRM Model and the new CRRM Model including the problems associated with the old CRM model and benefits of the newer CRRM model.

Old CRM Model vs. Customer Relevant Relationship Management (CRRM)

Old CRM Model (left above):

  1. Relies on historical data and analytics to determine what customers need, want, etc. by the analysis of sales history, types of products purchased, categories of products purchased, views on websites, stores visited, etc.
  2. Customer activity information is a proxy to what customers really want and need. Example, you will seldom learn that a customer hates an in-store or web experience through this proxy for what they are wanting, feeling, needing, disliking, etc.
  3. Companies are unlikely to gain insights into the impact that any future company decisions will have on customer loyalty, retention, acquisition.

New CRRM Model (right above):

  1. Takes a more direct approach with customers and utilizes a systemic querying method to ascertain exactly what customer want/need/prefer/etc.
  2. Embraces customer councils, customer forums, customer voting to drive future content, interactions, product/service offerings, etc.
  3. Activity solicits ratings from customers on many aspects (marketing materials, web experience, in-store experience, product usability, quality of customer service, etc.) regarding the health of the overall customer relationship and continually asks “How well are we managing our relationship”

3)               Example of CRM Model Gaps

To illustrate how companies are struggling to really determine the real needs of their customers, I took selected comments from interactions with senior CRM executives from major US Corporations based on consulting engagements, job interviews, speaking to them in passing, etc. The following charts are their actual verbatim comments as well as my read on their CRM gap that prevents them from developing world-class relationships with their customers.

Traditional CRM Programs:

  1. Organizational culture, operations, and go-to-market strategy does not put the customer and real customer insights into the center of CRM operations
  2. Relies on data, analytics, and customer history to drive on-going customer interactions.
  3. Puts the organization at extreme risk of missing the boat from a customer’s perspective – real needs, wants, concerns, preferences, experiences, etc.
  4. Companies that rely on this model are at-risk of customer defections, decreased customer spend/loyalty, etc.

New CRRM Model – with Customers In The Center of Customer Operations

New CRRM Program:

  1. The organizational culture, operations, and go-to-market strategy puts the customer and real customer insights into the center of CRM operations rather than rely on the proxies of what customers want, i.e. data, analytics, and customer history.
  2. The customer becomes the actual judge, ‘rater’ of whether you are delivering quality, value and a good relationship to them.
  3. The customer is put in charge of CRM operations and enables a bi-directional and on-going dialog with the customer whereby they tell you their real needs, wants, concerns, preferences, experiences, etc.
  4. Companies that rely on this model are more likely to develop products, services, offers, communications that delight the customer and whereby they are more loyal, greater brand advocates, and likely to refer your company to their friends as a company who listens, cares and empowers their customers.

6)             Companies That ‘Get ‘CRRM

The following are samples of companies that, in my opinion, get the CRRM model and details how/why each of them get this new go-to-market customer model.

Companies That ‘Get’ CRRM – 1 of 2

Companies That Get CRRM – 2 of 2

Phrases That Describe Companies who ‘Get’ the New CRRM Model

  1. We don’t hide behind data and analytics to drive our customer & CRM operations, but rather we ask our customers what they want.
  2. We are eager to ask our most disgruntled customers how we can improve our relationship with them and to determine who to improve our go-to-market strategy
  3. Before we make any major market-facing decisions, we ask a cross-segment of our customers what they think about each of our proposed decisions and then ask them how to improve upon how these changes are implemented so we ensure a continued delighted customer base.

The bottom line of this post is that, if your company relies less on historical data and analytics to determine what customer want and actually builds methods, processes, and systems to put the customer in charge of rating CRM operations in order to provide you with ongoing and valuable real insights (needs, wants, likes dislikes, preferences, concerns, etc.), the customers will feel more valued and connected with your brands. The benefit of adopting this new CRRM model will be more loyal, empowered and delighted customers who will be brand advocates and brand referrers that will increase shareholder and company value.

As I have now built this new CRRM model for several major US brands, my next blog post will be on ‘how to’ develop this capability at the enterprise level.

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