Kamran Qamar » cracking the code

Broader market coverage

Kamran — Fri, 06 Nov 2009 06:46:03 +0000

The Elephant Model

If your business goal is to reach diverse markets and increase your market share with moderate margin improvement, then the elephant model is the answer. Many leading companies such as Microsoft, Oracle and Intuit use this approach to reach the small- and mid-sized businesses market. The key to the success in this model is "business partners". There are many variants of this approach, one of which is shown in the figure below:

Figure 2.7: The Elephant Model

In this approach, low-cost channels like telemarketers, direct mail, and websites are used to generate leads that are passed to channel partners who qualify them, place a bid, negotiate—sometimes with the help of account managers—and close deals. Partners also fulfill the order. Low-cost channels like call centers and the Internet are used to provide after-sale customer support and services.

This approach offers several benefits. First, like a sharp prod with a tusk, the partnering model offers the opportunity to penetrate the market aggressively. Second, the generation of leads for partners marching through low-cost channels will increase both revenue and margins. Finally, this approach has a hugely beneficial impact on the recruiting and retention of top business partners.

Partners' largest area of dissatisfaction often centers on a lack of leads and sales opportunities. Like the elephant, who roams on two continents, they want their reach to be wide. Partners's most serious area of skepticism is whether a vendor offers serious growth opportunities. This is particularly true with smaller, local resellers and distributors.

A steady supply of high-quality leads can create a powerful incentive for good partners to get and stay on board. In short, aggressive generation of leads on behalf of your partners will guarantee that the best available partners become, and remain, interested in working with you. With the elephant model, one hand. . . er, one trunk. . . washes the other.

In the end, this approach will solve a range of indirect channel issues, from partner morale and retention, to per-partner sale productivity, to overall sales growth and margins.

Rapid revenue growth

Kamran — Fri, 06 Nov 2009 06:44:17 +0000

The Net Model

The best—though perhaps not the most profitable—approach for companies that are primarily concerned with quickly finding and penetrating new markets and driving top-line sales results is to use a lot of different sales channels to attract, reach, and penetrate a broad base of customers. One example of this approach is illustrated below. It is called the net.

Figure 2.8: The Net Model

Figure 2.8 shows the usage of a wide assortment of channels, aimed at capturing the maximum possible number of sales transactions taking place in the market. In some cases channels may work together, and at other times they may work independently.

These channels are cast in search of leads like a fishing net: They capture everything in a given area, somewhat indiscriminately but effectively nonetheless. Needless to say, this is a very aggressive channel approach, aimed not at simplicity or the lowest possible selling costs, but at the highest possible top-line results. This approach will undoubtedly capture the maximum number of sales transactions and revenue. The complexity associated with this approach will open the possibility of channel conflicts and reduce margins. Finally, this approach requires great effort and costs lots of money to build all those channels and keep them working together effectively.

It may be worth the effort and cost if maximum growth is the most important go-to-market goal.

Improved margins

Kamran — Fri, 06 Nov 2009 06:41:09 +0000

The Whale Model

Squeezing out maximum selling margins means moving as many tasks as possible to lower-cost channels. There could be many, many variations on how to achieve this. Figure 2.6 shows the whale model illustrating two such variations:

Figure 2.6: The Whale Model

The blue path is modeled after successful software companies like Google that are using the Internet to generate leads. Next, these leads are qualified by account associates over the phone. Qualified leads are then handled by dedicated account executives that handle complex bidding, proposals, and negotiation. Google uses the Internet to allow its loyal customers to promote its offerings.

This model has allowed Google to generate a huge amount of leads, allowing it to swallow the competition. With touch points available both above- and below-the-surface, the whale model offers a truly effective route to blue ocean opportunities!

The red pathway, on the other hand, is a typical distributor model where a manufacturer sells through wholesale distributors. It uses the Internet and/or call center to generate leads that are handed over to the distributors who handle the deals, from bidding to negotiation to fulfillment.

In both cases, customer support is provided by phone through a call center. For example, American Express uses this model to sell its credit cards, either directly or through co-branded deals e.g., Delta. In both cases, the call center provides all the support.

This is a complex model to implement. Making a splash with this approach requires much up-front design work to identify the appropriate channels to assign to each task. Further work is then needed to monitor channel performance and ensure that a "seamless" face is presented to the customer. Nonetheless, it is a model that can send your company to the top of the food chain.

Companies that move to a profit-seeking multichannel model, such as the one illustrated above, have achieved cost-of-sales reductions of 20 percent or more; immediate reductions of 10 – 12 percent are commonplace and typical. The secondary benefit of this approach is the increased coverage that comes with more expansive use of low-cost channels to reach customers early in the sales cycle¹.

Reference Material:

Go To Market Strategies by Lawrence Friedman

Reduced selling costs

Kamran — Fri, 06 Nov 2009 06:34:03 +0000

The Wing Model

Many businesses use the traditional direct sales model, where every task in a relationship lifecycle, from the generation of sales leads all the way through to customer support and care, is performed by a single channel, i.e. sales reps.

Figure 2.4 illustrates this using a simple matrix where the y-axis represents the costs of sales for a few common channels—the field sales force, value-added distributors, volume distributors, call center, direct mail, catalog and the Internet—arranged based on their relative cost-of-sales. The x-axis represents typical stages in a customer relationship lifecycle. The canvas shows the pathway that channels use to move a prospect from one task to another.

Figure 2.4: Single Channel selling model

The pathway in this matrix shows that, in a typical direct sale, all sales tasks are performed by the sales force, which results in high selling costs. A migration of any selling tasks to lower-cost channels will provide margin improvements, as well as the means to reach more customers, in more markets, more efficiently.

Salespeople usually spend anywhere from 20 to 30 percent of their time in prospecting i.e., finding and qualifying new leads by cold calling, networking, trade shows, etc. This is an enormously expensive and wasteful way to generate leads. Just about any other channel can generate more qualified leads at a lower cost than field sales reps.

Figure 2.5: A Wing Model

Thus, if the responsibility of generating leads is taken mostly or entirely out of the hands of expensive high-touch channels such as field sales reps, and transferred to low-cost, high-reach channels like the call center or the Internet as shown in the "wing model" in Figure 2.5, a business will:

Increase its field sales reps' selling time by at least 20 – 25 percent (Imagine the top-line impact of a 20 percent increase in selling time. Like an eagle who has spotted its prey, a salesperson will be able to nab the best pre-generated leads with very little wasted movement i.e., close more deals!)
Decrease the cost of sales by at least 10 – 15 percent, causing its profit margins to soar
See the total volume of sales leads take flight
Ultimately increase the volume of profitable sales, allowing everyone to feather their nests with a new-found profitability

This is the simplest form of an integrated multichannel selling model, and it requires relatively little effort. If you are not using this approach, do it! Implementation of this model could be as simple as hiring a few telemarketers or, even better, outsourcing the effort to a telemarketing firm and/or building a new website. For this low investment, you will get an increase in sales as well as significant improvements in selling margins due to a reduced cost of lead acquisitions.

In Conclusion

Kamran — Fri, 06 Nov 2009 06:01:57 +0000

The secret is finally out: We now know that world-class companies are beating us left and right because they are innovating in ways they are providing a complete customer experience that is hard to beat and repeat. The real secret is in the way multiple channels are integrated to complete a single sale. This integration gives you maximum flexibility in providing the best customer experience, reaching diverse markets, and increasing revenue growth at minimum costs.

We also saw four archetypes of integrated multichannel selling models i.e., the wing for efficient lead generation, the whale for maximum profitability, the elephant for broader market coverage and the net for rapid growth.

In the next section, I will walk you through an implementation plan that will explain how you can create integrated multichannel selling models for your own organization based on your unique products, markets, and business objectives.

Customer Relationship Lifecycle

Kamran — Fri, 06 Nov 2009 05:51:58 +0000

A customer relationship lifecycle is made up of all the touch points between you and your customers. In most companies, a customer relationship lifecycle consists of four to nine stages, starting with awareness building and lead generation and ending with support, long-term care and advocacy. Every company’s customer relationship lifecycle is different, so to keep our discussion focused on the solution at hand, Figure 2.3 provides a pretty typical customer relationship lifecycle, consisting of eight stages. The white titles in the figures show the customer’s intent at every stage and the black titles are the business’s intent at the same stage of the customer relationship lifecycle. Let see each stage in detail:

Figure 2.3: A typical Customer Relationship Cycle

Awareness – Branding
The customer relationship lifecycle starts when a prospect realizes that she needs or wants a service. Companies that are able to communicate the ability to potentially address this need create awareness for the prospect. A company usually achieves this through brand-building activities like PR, advertisements, etc.
Investigation – Lead Generation and Qualification
After realizing her needs and becoming aware of a company, a prospect seeks more information about the company, its products and services. Prospects may also look for alternative solutions or the best solution. A company can provide passive information e.g., website, marketing collateral, videos and publications or it can provide active information that may help prospects make up their minds to consider the company’s offerings, hence generating leads.
Consideration – Bidding and Proposal
As the prospect weighs the available knowledge of various solutions against her criteria and hierarchy of needs, she develops a concept of the ideal solution for her needs. In consultative selling, the goal of the salesperson is to either understand the prospect’s concept of the ideal solution, or help the prospect create one and match the business’s offerings with that concept.
Purchase – Negotiation and Close
A prospect makes the final selection based on how well an organization’s offerings meet the hierarchy of her needs and align with her concept of the ideal solution. The organization, on the other hand, customizes its solution and negotiates the price and other components with the prospect to close the deal.
Use – Fulfillment
At this stage the prospect becomes a customer. In sales of simple commodity products, fulfillment may merely consist of shipment and delivery of the product to the customer. However, in more complex sales, fulfillment could be a major component including customization, configuration, and installation, etc.
Satisfaction – Customer Service
The customer goes through the learning curve of using the product and sees firsthand what the brand is about. If the solution meets or exceeds expectations, she becomes a satisfied customer. This satisfaction could be the combined result of excellent products and equally exceptional support, training, and customer care.
Loyalty – Retention and Up- and Cross-Sales
A highly satisfied customer shows her loyalty to the brand by buying the same, similar, or additional offerings from the same brand. A business offers special loyalty programs to increase customer satisfaction levels. Using customer satisfaction as the driver, a business maintains the relationship with existing clients and fulfills their unmet needs through additional offerings.
Advocacy – Word of Mouth and Referral
Not many customers reach this stage. However, those who do become completely vested in a brand, paying premium prices and recommending it to friends and foes alike. Hence, they contribute significantly towards a business’s growth.

We understand that a customer relationship lifecycle is composed of multiple stages and that each stage can have multiple touch points. Now, let’s see how multiple channels can be integrated to provide the best customer experience at each stage, hence achieving business objectives.

Integrated Multichannel Selling Models

Kamran — Fri, 06 Nov 2009 05:44:00 +0000

The exciting thing about integrated multichannel selling models is their flexibility. Multiple channels can be configured thousands of different ways to suit any business objectives. Multiple channels can be integrated to cost-effectively deliver your business objectives, be they reduced costs, improved margins, broader market coverage, or fast growth. This flexibility is also the reason that many businesses are still struggling to get it right. The situation is somewhat like a fast food restaurant with a menu full of hundreds of tasty items, making it hard to decide what to eat. By contrast, when you walk into a In-N-Out, things are neatly grouped together in "combos" that are easy to understand and order.

Let’s see how integrated multichannel selling models look like for four key business objectives: reduced costs, improved margins, broader market coverage, and rapid growth.

To comprehend the beauty and simplicity of these models, let’s confine our discussion to above-the-surface touch points where a business can directly influence a customer. This portion of the customer journey is called, conveniently enough, the customer relationship cycle.

Benefits of Integrated Multichannel Selling Models

Kamran — Fri, 06 Nov 2009 05:31:52 +0000

The four characteristics of integrated multichannel selling combined provide the best total customer experience, which in turn gives a business the following key advantages:

Increased sales - Integrated multichannel models increase sales revenues, as well as revenue-per-customer, in several ways: by using low-cost channels to reach more customers early in the sales process; by providing a more flexible customer experience that makes it easy and more convenient for more customers to do more business; and, in the case of business-to-business sales, by freeing up the time of high-value channels such as your field sales force to focus on closing larger deals in strategic accounts. Most companies that move from a single channel model to a multichannel model achieve an overall sales increase of 15-20 percent or more within a year.
Improved profits - An integrated multichannel model is perhaps the single most effective tool available for increasing company profitability. This approach enables you to offload expensive sales tasks to lower-cost channels, thus decreasing the overall cost of sales. Many companies achieve a 20 – 25 percent reduction in selling costs within a year of implementing an efficient multichannel model.
Increased coverage and market share - A third benefit of a multichannel selling model is that it makes possible a deeper penetration and coverage of a market or group of markets. Multiple channels working together cooperatively can always cover more customers, more thoroughly, than a single-channel approach, or even an approach in which multiple channels exist but operate more or less independently of each other. This is because channels operating on their own have limitations that aren’t present in an integrated multichannel model. Low-cost, low-touch channels such as the web, phone and mail order are great for reaching customers but poor at negotiating and closing complex deals. Expensive high-touch channels can handle very complex transactions, but cannot reach as many customers due to their high cost. When low-cost and high-touch channels are combined, however, every single customer in a target market can be reached and served. As a result, an integrated multichannel model is always the most effective way to deepen penetration and increase your share within a market.
Increased customer loyalty and retention – Finally—and perhaps most importantly—integrated multichannel models can have a huge impact on customer satisfaction, retention, and long-term loyalty. The reason is that a multichannel system aligns well with how customers prefer to do business. This approach gives them the right channels at the right touch points in the buying process, more purchasing options, more efficient service, and often lower prices as a result of the decreased cost of sales. What customer wouldn’t want that? Companies have seen their customer satisfaction rate increase by double digits and their loss rate decrease by 40 percent or more within a year of implementing an integrated multichannel model¹.

In short, there are lots of sound business reasons to take your go-to-market efforts to the next level by building an integrated multichannel model to penetrate and serve your key markets. But what do these integrated multichannel sales models look like?

Reference Material:

Go To Market Strategies by Lawrence Friedman

From Multiple Channels to Integrated Multichannel Selling

Kamran — Fri, 06 Nov 2009 05:13:56 +0000

The solution is right before our eyes: Manage our selling costs.

Now, I am not suggesting that you cut your channels or fire people irrationally. I am suggesting that you do what the world-class companies are doing:

Integrate multiple channels into one relationship cycle.

There are two things to notice. First, instead of taking a limited view of marketing through the sales cycle perspective, take a broader view of the whole customer journey and manage both marketing and sales costs together. Second, recognize that each channel has its own associated costs. For example, the cost for your sales force could include salary, commission, traveling, and entertainment expenses. Partner channel-related costs may include discounts, management expenses, sales and marketing promotion allowances, etc. The Internet channel may include website building and maintenance, product discounts, promotional expenses, etc.

Figure 2.2: Transaction costs per sales channel

Figure 2.2 compares the fully loaded per-transaction cost that a manufacturer of a typical $5,000 – $7,000 industrial product incurs while selling through different channels. In the next chapter you will find a detailed model to calculate channel costs for your business.

As the chart shows, for the same deal, sales force costs equal $1,000 or almost 20 percent of the deal, value-added partners cost $500 – $600 or 10 percent of the deal, and volume distributors cost 8 percent. Meanwhile, direct channels like telesales cost only 3 percent, whereas the Internet costs less than 1 percent. It makes sense on the high level to employ low-cost channels—and that’s what most of us did.

Figure 2.3: Strengths of Sales & Marketing Channels

However, as Figure 2.3 shows, not every channel is suitable for providing the best customer experience at every level to make a sale and retain the customer. For example, salespeople are very good at relationship-building and consultative selling, but they despise generating new leads. Depending upon the complexity of your product, a telesales channel may be very good at providing customer service and generating new leads, but may be unable to close sales and may not be the best way to increase customer loyalty. The Internet may be an excellent source for generating leads or providing self-help customer service but prove to be a difficult channel when it comes to quoting a custom price. Therefore, expecting that a channel should complete sales and deliver the cost savings promised above is an unrealistic expectation that has been hurting many businesses for a long time.

So now that we understand that:

Per-transaction costs for each channel vary.
Not every channel is good for providing the best experience at each touch point in the customer journey.

How about using multiple channels working together so that only the most suitable and most cost-effective channel is used at a touch point, in a way that can provide the desired customer experience? That way, your business will enjoy the savings generated by low-cost channels, and customers will be served by the channel that they desire most and that has the strength to fulfill the function. This is called an integrated multichannel selling model (IMSM), which gives a powerful, winning, total customer experience that will:

Attract, win, and retain the most desirable customers
While driving high sales and market share growth
At the lowest possible cost.

This is the open secret of the world-class companies. Instead of using a single channel such as sales reps at all touch points, they assign appropriate channels to each specific touch point. For example, instead of asking sales reps to generate their sales leads, they are using the Internet to generate leads, telesales channels to qualify them and sales reps to close them.

There are two other key pieces to this puzzle. First, an integrated multichannel selling model targets a specific market. For example, Google sells its online application suites to individuals and businesses through its website, but uses the web only to generate leads for schools, ISPs and large business markets. Those leads are followed up on by account reps, who gather detailed information to suggest and sell a fully customized solution to the customer. Second, information technology is the underlying enabler of the integrated multichannel selling model. Since models use different channels to perform different selling tasks, there is always the potential for chaos and poor coordination at the interfaces between channels, such as lost or mishandled sales leads, conflicts between channels and problems with customer service. IT systems prevent these kinds of problems and make possible a seamless, channel-transparent customer experience.

The four basic characteristics of an integrated multichannel selling model are:

Multiple channels work together to make a sale.
Multiple channels such as field reps, partners, call centers, and the web work together to generate leads, close deals, and serve customers.
Multiple channels take on specific roles within a single relationship cycle.
Each channel takes on one or more specialized roles, such as lead generation, negotiation, or post-sales support. In other words, not every channel performs every selling task; rather, individual channels are assigned to specific tasks for which they are most suitable.
Multiple channels serve a specific target market or group of markets
Different markets usually require different channel mixes. Therefore, any company that sells into a variety of markets will require different multichannel selling models to serve those markets.
Multiple channel integration is achieved through information systems.
Coordination and collaboration are the key success factors for integrated multichannel selling models. IT systems help achieve seamless interactions among channels and customers.

Next chapter discusses benefits of the Integrated Multichannel Selling.

Customer Engagement Channels

Kamran — Fri, 06 Nov 2009 03:27:56 +0000

Channels—pipes that connect offerings to customers—provide the necessary touch points to market, sell, and support products and services. Channels could include field sales reps, strategic allies, business partners, master or local distributors, integrators, value-added resellers, manufacturer’s agents, brokers, franchises, telemarketers, telesales, agents, television, websites, email, extranets, e-marketplaces, social media and, depending on your market, ten or fifteen other channels. These channels can provide three kinds of touch points:

One-way channels
These are static channels where information flows from a business to customers e.g., direct mail, promotion, advertisement (TV, radio, newspaper, Internet), products, etc.
Two-way channels
Channels where actual communication happens i.e., information flows between you and your customers, allowing you to make a sale. These channels include: sales reps, call centers, partners, distributors, value-added resellers, retail stores, your service team, social media tools, etc.
Multi-directional channels
These are the channels that not only provide a link between you and your customers but allow your customers to spread the word about you, reach other customers, and build a clan. These channels also allow you to reach friends of your customers, hence building word-of-mouth marketing. These channels include: blogs, emails, demos, videos, social media, forums, web, mobile, etc.

Implementing all or even a handful of these channels will extend the reach of your business to a diverse customer base. For example, if a business is selling only through its field sales force, its reach is limited by how many salespeople it can support and how much it can sell. Now, if the same business also starts selling over the Internet, it can suddenly reach the whole world! While the business is at it, how about setting up a call center in India, so it can provide the best customer support at a fraction of the cost?

Such was the rationale behind many channel initiatives that started as a direct consequence of the relentless pursuit of owning the total customer experience. The result: maximum flexibility for the customers, hence increased revenue growth for world-class companies.

As we know, for every world-class company that gets it right, there are 10,000 companies that are not cutting it. The telltale signs are familiar: slow sales growth or increasing sales costs, or both; an inefficient distribution network in which only a tiny fraction of partners do any real selling; poor results from web initiatives; conflict between channels; "dormant" go-to-market IT solutions, such as ineffective and incorrectly used CRM packages; and an ever-expanding inventory of products and channels that generate few, if any, tangible business results¹.

It is not that we laggard companies are not doing their best, it’s just that they overlooked one key point: The quest for owning the total customer experience is not about building as many channels as possible and throwing them in the marketplace for customers to use as they see fit. It is about providing the right experience to the right customers in the right markets.

Most of us didn’t do this, so now we are in a situation where we have multiple channels—salespeople, Internet, distributors, partners, etc.—that are not producing results. Our selling cost is hitting the roof, and our profit margins are shrinking. On top of it all, we are in the midst of recession. What’s the solution?

Next chapter "From Multiple Channels to Integrated Multichannel Selling" discusses it in detail.

Reference Material:

1. Go To Market Strategies by Lawrence Friedman

Kamran Qamar » cracking the code

Broader market coverage

The Elephant Model

Related:

Rapid revenue growth

The Net Model

Related:

Improved margins

The Whale Model

Related:

Reference Material:

Reduced selling costs

The Wing Model

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In Conclusion

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Customer Relationship Lifecycle

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Integrated Multichannel Selling Models

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Benefits of Integrated Multichannel Selling Models

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Reference Material:

From Multiple Channels to Integrated Multichannel Selling

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Customer Engagement Channels

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Reference Material: