Customer On The Edge

Lately, I have been involved in a number of conversations regarding segmentation and targeting. I state it this way, segmentation and targeting, as if it were one topic with two words in the name because that is how many folks I have been interacting with refer to it. Combining the two terms, as if one, is a bit like giving this the status of something like gin and tonic. Gin and tonic water are two uniquely different things, but when mixed together they become a single, recognized entity. Segmentation and targeting are two uniquely different things and when combined together don’t become an entity, they remain two different things.

Now, the first thing you might ask yourself is, what possible difference does it make if people refer to these two things as if they are one thing? My answer is simple. They serve two different purposes, and if they are mixed up, there is a good chance you are getting the benefit of one and ignoring the utility and benefit of the other. I think it is important to get the benefits of both. If you mix gin with tonic (and add a wedge of lime) you get the benefits of both. But if you mix up segmentation and targeting, you are probably assuming they are the same thing and you are accomplishing only a portion of the value of what each can bring to your CRM program.

My here plan is to offer up my definition of each topic plus make some effort to show how they might be connected (but not synonymous). However, without doubt, I will define them incorrectly according to one of your favorite marketing reference books. Likewise, I will define them in reverse according to some of you – this I know because I have already engaged in that debate. No matter, I stick with these definitions, and I think you can find them useful. Here goes.

Segmentation – this is the process of differentiating your customer and prospect base into discernable categories, which aid in positioning the correct resource with the correct segment. Mostly this helps determine who talks to whom and who gets the priority attention. My customers use segmentation most often for territory management and channel assignment. For example, A customers get top coverage by the field sales force, B customers get secondary coverage by the field and primary coverage with tele-sales, and C customers get covered through the web and by tele-sales if they come through a campaign. You can use a number of different criteria for segmentation. Consumer banks use socio-economic status. Many B-to-B companies use factors that indicate buying potential. Some companies just follow a simple formula based on size (revenue, employees, customers, etc.).

Targeting – this is the process of selecting customer or prospect segments or sub-segments for the purpose of a specific activity, such as a campaign, messaging, or promotional program. Targeting is all about rifle shooting versus the shotgun approach – getting the right message or offer to the right customer at the right time. Typically, targeting takes the basic categories of the segmentation structure and then divides up the population by another characteristic such as buying behavior, purchase lifecycle stage, customer base, or other trait. While there are a handful of common segmentation criteria, there are literally hundreds of thousands of criteria for targeting, all industry specific.

So, what is all the fuss about getting these confused? They serve a different purpose. Segmentation is really critical for building account strategies. Targeting is really critical for building marketing plans. Yes, they have a key overlap. Targeting typically takes into account the segmentation structure as one dimension, but it is usually more refined – there are more target groups than segments. Account planning can also include targeting strategies, and are best if done in collaboration. But, if you mix them together and think they are the same thing, chances are you are leaving out something.

Relying only on the process of segmentation probably means your messaging is only as refined as your segments. Relying only on targeting probably means you are focusing on the messaging process, but not on differentiating your focus on territory management and the prioritization of your reach. One crude distinction that I tend to make is that segmentation is a sales process and targeting is a marketing process. But, that is a dangerous simplification as they really need to be well integrated. Unfortunately I have seen too many companies where sales uses one segmentation structure for managing accounts and marketing uses a completely different targeting structure for programs. This is a disconnect that promotes the typical issues we see between these two functions. Targeting and segmentation have to include some element that links the targets to the segments. A lot of budget can be wasted on campaigns otherwise.

Mix up those gin and tonics, but keep your segmentation and targeting integrated not mixed up.

Posted by Matt Johnson at 05:50 PM | Permalink | Comments (0)

The news from Tehran is quite compelling. A nation is rising against tyranny and we are watching it live rather than reading about it in history books decades or centuries later. More importantly we are watching stuff happening that is at the absolute core of the human spirit play out in prime time, and it is not reality TV. I wish reality TV would go away, but that is the topic for a separate posting.

One of the aspects of the story of the current Iranian drama is that drama is what exactly it is. We don’t know how the story is going to end. And, we know there are a number of different endings where this can lead. The tearing down of the Berlin Wall was one story we witnessed through the news that ended in an amazingly positive outcome. The democracy protest in Tiananmen square came to a less desirable conclusion. As I write this, we do not know the outcome (but it will be shortly determined following this posting I suspect).

Certainly we can speculate and compare the situation in Iran to that in East Germany and China. In the one situation, the social movement and momentum carried by the people was stronger than the political will of the government. As a result the Wall came down and the Eastern Block crumbled. In the other, the political (and military) will prevailed and Communist China remains. Although I am certain others may argue that there is a new revolution afoot driven by capitalism instead of protest. The outcome in Iran will be determined by this set of competing forces – social versus political will.

What can tip that balance and drive the outcome one direction or the other? I suspect we could find a number of variables through a study of history, but I am certain that the variable this time is going to be the infamous Web 2.0.

CNN is getting its best evidence of the protests from sources such as Facebook videos posted by everyday folks using mobile phones to shoot the history they are in the process of making. The Iranian government is doing its best to squash the formal journalists from reporting, but the virtual reporters, numbering in the thousands, have taken over the process. As long as the internet remains available in Iran, this revolution may have legs.

This is serious, serious stuff – human dignity, freedom and lives are at stake. The same technology that helps us sell our used goods on Craig’s List is fueling something phenomenally more significant. And it is even more amazing that we watch it all unfold while we are sitting at the dinner table.

At the risk of trivializing what is unfolding in the Persian Gulf, I have to draw a correlation. It is what takes place on this blog site after all. This same software that is facilitating a nation toward the brink of something extraordinary is in use every minute of every day potentially assisting the nation that might be described as your customer base to travel a similar path. Today, while you read this, there are customers of yours sharing their views of your product. They may not be posting videos (or in fact they may) but the process is the same. They are either endorsing your rule or trying to tear it down. They may be revolting against you, but it may not be reaching a threshold of interest that it is making the news (yet).

What is your web strategy? Are you monitoring the appropriate sites for content related to your brand or products? Do you have a user-driven content function on your site? You might ask in return – if you were to enable your upset customers to drive content on your site, wouldn’t that be the same as the Iranian government promoting Twitter for their angry citizens? The answer would be, yes.

But, if the Iranian government were to do something so bold, it would come from a strategy and policy driving other behaviors not in parallel with their current path. They would not rig elections; they would be taking stronger action to serve their citizens according to need; they would be using the media to monitor opinion, not to snuff out dissent.

Dissent is equal to failure in government and business. If you have a rebellion by your customers you have done something wrong. What you want to do is find out if that sentiment is growing before it becomes significant. You don’t want to learn about customer dissatisfaction on the news. You want to find out in time to take action (not to jail your customers but to learn from them). If you are getting signals of dissent, you need to embrace it – listen to it carefully so you can take corrective action before it is too late.

Social networking sites are one of the best places for you to manage the process of customer dissent and it needs to be a significant component of your customer strategy and customer feedback process. Or, you can take a lesson from history and follow a different policy.

Let them eat cake.

Posted by Matt Johnson at 03:49 PM | Permalink | Comments (0)

This is the time of year for graduations. And, it is the time of year for graduation speeches. One of my favorite stories about graduation speeches was something that ran a circuit through the web a few years back. Apparently, the highlight of a graduation address made by Kurt Vonnegut Junior at some nameless school was the recommendation to wear sun block. Ultimately it turned out to be a misrepresentation, and Mr. Vonnegut, one of my favorite authors, never actually delivered the much acclaimed speech. I wish I did not know the truth – because I thought it was a really great recommendation.

This year I have heard my share of speeches. One of them was along the lines of what is probably the ultimate graduation speech cliché – this is not the end of something, but, rather, it is the beginning. That was all fine and well and I could have done a cliché blog entry as a follow up, but it was the last of the addresses that I sat through that I enjoyed the most. When a student is selected to address their own graduating class, there is a very good chance that this person earned that honor based on their academic record, and the correlation with being a bit of a nerd is, therefore, pretty high. Because of that, it was all the more poignant that this speech came from the very mouth of someone who fits in that demographic classification.

After being in a school gymnasium for already much, much too long, this was not a monologue I was looking forward to. And, it started out predictable. Then, all of a sudden, this individual with a GPA higher than statistically possible makes a personal disclosure. If you are nice to other people, she learned in the last weeks before graduation, they will be nice to you in return. Then, amazing revelation that it was, she declared it is actually possible to have fun and be a brainiac at the same time. Outstanding.

I am not altogether sure if everybody in the school gymnasium was hearing the same thing I was hearing, but this 18 year old was confessing in front of 2000 members of her community that she just figured out how to be a happy functioning member of that same community. Wow. It turns out that is not all about performance. Her summary advice to her peers – make sure you balance enjoying life with working hard. The message wasn’t the revelation. The fact that this was such a recent revelation to her was the revelation.

Conveniently for coming up with blog material, two of my clients at the same time were reaching a similar conclusion. Being nice to customers causes good things to happen – you can have fun and perform effectively.

Much of the focus of my work with clients is centered around strategic planning. You have read previous entries on this site referencing my recommendation that CRM programs should target growth, efficiency or customer experience as a primary direction. Without question, the extreme majority of programs focus on growth or efficiency and seldom do the programs I encounter target the improvement of customer experience. Fun does not pay the bills.

A number of years back I did some research on the origins of CRM. There is a bit of variation in the general history, but there are roots in the three primary functions, sales, marketing and service. Each root of this family tree seems to take credit for the genesis of CRM. From a customer service perspective, some of the original focus on improving customer interactions was given life from the quality movement of the latter part of the previous century. The whole value proposition in that argument was that an improvement of customer service quality would lead to increased customer satisfaction. Interestingly, at that time, an improvement in customer satisfaction was viewed as something to pursue.

For the last decade, the concentration has been on the other two potential business outcomes. CRM investments must to lead to improved revenue growth or decreased cost of commercial activity or it would not get funded. What happened to the good old days of the quality movement? Is customer satisfaction no longer a viable business benefit?

Then out of the blue, two clients want to use CRM to improve the quality of the customer experience, with the belief that doing right by the customer will do right for the company. Next, I hear a speech declaring the importance of balancing high performance with fun. All the while we have things in the news about the need for bringing back business ethics to combat our economic problems – the era of “greed is good” is finally over.

Are these things related? I’ll let you decide. My advice?

Wear sun block.

Posted by Matt Johnson at 03:41 AM | Permalink | Comments (0)

There have been a number of things I have been hoping to make happen in an effort at putting that proverbial silver lining on this nasty recession. One of these has been an attempt at finding a vacation deal. So, I contacted the travel agency that I have been using lately and told them what I wanted to do. They gave me back some options and some prices and I was surprised. What I wanted to do was not being discounted all that much. There are some serious deals out there. The cruise lines are just about paying passengers to get on their ships in the Western Caribbean right now, for example. No deals for me. So, I asked the travel agency to monitor the situation and let me know if a deal comes along. They said no. What? I know that the software exists to set this up easily – most of the dot.com travel companies make it available. I was flabbergasted.

This is the same thing as approaching an intersection late at night when there are no cars on the road and having to sit at a red light while all the other lanes, with no cars, get their turn at green. The invention of the smart light has been a great thing for people like me with no patience. Why should I sit and wait for absent cars to pass the intersection? The smart light solved this problem – it detects my presence and knows I am there alone and allows me to pass blissfully through. My travel company needs a smart light (in fact I bet they have one and choose not to use it). With little effort they can program my interest and when what I want comes along they can let me know – and they don’t need a traffic cop at the intersection to figure it out – it can all be done with automation.

This is great stuff for the consumer e-commerce space and I believe it has served as a significant component of the web 2.0 revolution. Now it is time for the B2B folks to get on board.

The smart light is also the roadway analogy to the concept of trigger marketing. When I approach an intersection a magnetic sensor buried in the pavement senses my approach. It sends a signal to a computer chip that has been monitoring all the lanes, including turning lanes, and determines if I should have the opportunity to go out of order. There are certain rules programmed into the decision making, and if I meet the criteria, I got a green light, literally. I can’t tell you how much I value this invention. The same exists for your marketing department, if you set up your intersections with smart lights.

Trigger marketing tools monitor your customer traffic. They detect certain traffic situations, such as do they stop at a white paper and then do they stop at a webinar? If so, you might set up your sensor in the road to trigger that behavior and send a lead to the sales person who would manage that account. Nobody has to wait for anybody. The trigger does the work of letting you know about the traffic. It is just as fantastic as the smart light. I really dig this stuff.

Of course, there is the challenge of driving the traffic. I find that triggers are easy to explain and convince my clients of their value. The harder topic is the effort needed to drive traffic to the intersections where the triggers are buried in the road. This requires campaigns.

It is still somewhat of a mystery to me why so many organizations resist the concept of conducting marketing campaigns. Some believe it is only for consumer marketing. Some think that their customers won’t respond or don’t read e-mail (you have got to be kidding). Some have tried a campaign but have experienced poor success. My perspective is that these are all unsatisfactory reasons for not using the marketing function to drive customer interest and enable the customer to tell you when they are ready for contact on a topic that fits their needs. Campaigns that drive traffic (to a website, to an event, to reply to a survey) are an extension of the company’s ability to deliver messaging to customers and prospects about your products and services that they require. The great advantage of the trigger is that it allows your customer to determine when they are ready for a contact.

Then there is the marketing function that is fine with running campaigns and regularly sends leads to sales, but the leads are largely ignored. This is another great value that can be derived from the use of triggers. With the creation of a bit of sophistication, such as through behavior scoring, you can set up the triggers to only detect interest after all the required criteria is reached. This scoring approach increases lead value and ultimately sales acceptance. No more leads based on who stopped by the trade show booth just because they wanted whatever free goods you were pawning.

The next time you are sitting at a stoplight and getting irritated with the delay, think about that missing sensor in the road. If you are not using trigger marketing, you are basically doing the same thing with your marketing function – unnecessarily delaying traffic.

Happy Driving!

Posted by Matt Johnson at 02:39 PM | Permalink | Comments (0)

As we think about Memorial Day Weekend and the official start of summer here the states I have to reflect back on Labor Day Weekend last year, the official end of summer, and the official end of our boat of 19 years. We gave it a proper burial over the winter and then followed the rite of spring by shopping for a replacement. Having narrowed it down to two previously skippered vessels, we set out one Saturday morning in late March to examine the finalists up close. We had looked all winter long, made a number of flip flops, and finally settled on a particular model that seemed to fit our needs. Within a couple hours radius of our place there were two that seemed to stand out.

The first was waiting for us lakeside, just having been unwrapped from its winter blanket. It was spotless and gleamed in the early spring sun even while there was still a bit of rogue snow on the hillside overlooking the marina. Nevertheless, the prospect of summer enjoyment exuded from this candidate. It had everything we wanted and was in pristine condition as if just from the factory.

Our second visit was to the sister ship sitting curbside a few towns away - the exact model and color, just in a different setting. However, immediately there was an obvious difference. The proud owner offered up a tour and explained every critical customization that lurked around each corner. We were flabbergasted. Why had he done these things? It was like having your teen come home with a nose ring or a tattoo covering an entire limb. We ran from this boat as fast as we could politely end our inspection.

Certainly one of the most significant learnings about CRM we have reached as a company is that customization can be fraught with danger. For many of our clients it really seemed to make sense at the time - building a cozy little addition to the code that made something easier or made it seem a bit better of a fit to an existing work process. But the dangers lurk and eventually emerge with time. Something changes, most likely a process, and you want to use the system a bit differently. However, that nifty little customization is now in the way. Your flexibility has been reduced and the repair will include a huge price tag – if it can be undone. When we stepped on that second boat, this was all I saw – those small changes that were irreversible and made the boat seem tainted.

This CRM technology snag seems to catch our SaaS customers most often. These systems can be appealing for their ease of administration, but there is a risk that too much is modified. Many of my clients wish they had not made some of the changes that seemed like such a good idea at the time. The system gets clunky and the costs add up. Ironically, these same packages often come with a boat load of applications readymade to satisfy those needs that otherwise would have required some custom bit of coding. Want to capture training requirements within your CRM platform? Would it be great to include expense tracking? Feel the need to do something really fancy regarding territory assignment? You will most likely be better off with the app that somebody else already built and tested. Some of them are even free!

Yes, we are back on the water again, and, yes, we went with the un-customized watercraft. There is one change we did choose to make, although there is a bit of a risk associated with this particular customization. Folklore dictates that changing a boats’ name brings bad luck, unless you through a coin in the bilge. With my luck, I should probably use a Krugerrand.

Posted by Matt Johnson at 10:46 PM | Permalink | Comments (0)

Reportedly, of all the many quotes from his father, the favorite of T. Boone Pickens is: “A fool with a plan can outsmart a genius with no plan.”

Now, a guy like me has to like a quote like that – it is helps give my job some credibility (my official title with my employer is Chief Strategy Officer after all, and that does involve a bit of planning here and there). There are actually a number of “fool” quotes that I have collected over the years, but this is probably my favorite.

Mr. Pickens is a pretty successful dude, but he is very much not satisfied with that success. Making billions from oil has not satiated his desire for achievement. But it is what he has set his sights on next that has really caught my attention. His desire is to help our country become independent from foreign oil (which means becoming independent from petroleum products in general). Most importantly he has a plan. His vision is huge and the challenge is daunting, and he is somewhat going it alone. Yet, he is doing it nevertheless.

When he demonstrates some success others will jump on his bandwagon and the greater initiative will prevail. We will have wind farms and hydrogen cell technology, and we will burn a lot less fossil fuels. At the moment his plan is a bit out there and there is the question of fool or genius?

I quite like it and I encourage you to consider this as a model for your CRM program planning. There are a number of elements to T’s situation that I think are worth emulating. First, he is not resting on his laurels. Many of you have run successful CRM programs and could stop now and declare victory. Don’t. No matter how successful you have been with your program, there is more to get back and you should go after it.

Second, he is taking on a big challenge. So what? Automating a salesforce is a big challenge as well. You don’t have to do it all at once, but you have to do it. We need to wean ourselves from hydrocarbons, but we will have to do it with a bunch of smaller connected initiatives, not just one big one.

Third, and most importantly, and this may be where the fool part may seem to appear – he is offering up his plan and going after it, even though he does not have a backing from the government or the oil industry or any other significant body. He is doing it anyway, but I believe others will join him eventually. Over the last quarter of a century I have worked with many divisions and business units of larger organizations who were paralyzed with the absence of a higher level corporate strategy. The more successful organizations finally break free of those perceptual chains and plow forward with their plan. This has been done not in defiance of corporate direction, but rather, in order to support it the best it can in the absence of a clear direction.

It is a common occurrence to be in a situation to build a plan when the direction is otherwise unclear. I suggest going forward, but I also encourage that you involve folks to provide input on that direction. Having consensus on what you are attempting to achieve is the number one predictor of program success – even if that consensus does not involve the highest levels of the corporation. Work toward a clear vision, demonstrate success, and you will achieve what I have seen happen many times. The folks from the corporate office will want to learn what you have that is working so they can import it back to the home office.

The one risk in all this is that you may have to spend a period of time appearing as the fool.

Posted by Matt Johnson at 04:01 AM | Permalink | Comments (0)

Recently, during a family holiday trip, I had the pleasure of visiting a corner of the world that is all about lemons. There is lemon in much of the cuisine. The local digestif is made from fermented lemon and is available on every corner. Chocolate often comes lemon flavored, which does not always work. Lemon trees grow like weeds, depositing their fruit casually here and there. Some of the orange trees grow lemons (really!) Lemons are even used as projectiles on occasion. But, I have to confess, after a while you start getting to a point where there is too much of it.

This can happen to anything, even some items that we might assume you can never get enough of. In the business world one interesting topic that is now popping up as being overdone is 6 Sigma, the management philosophy of continuous improvement. I was surprised when I first ran across this, but if you dig into it a bit there is something to it.

Apparently some very visible 6 Sigma programs have yielded some very non-positive results – continuous un-improvement. As a result, some case studies have emerged in an attempt to explain what not to do with this type of program. The pattern in the case studies looks something like this:
- The initial deployment of 6 Sigma yields the resolution of some low-hanging-fruit-type problems.
- The initial success reinforces the belief that the methodology / paradigm makes strong business sense leading to an expansion of the program to a broader focus within the company.
- The large scale effort leads to short-term improvement in operating margin.
- This real bottom line impact causes more reinforcement of belief that the paradigm works, so the company then goes through a culture change to embrace yet more continuous improvement.
- Then, an interesting thing happens – a focus on cost-cutting as a chief strategic focus takes over and begins to negatively impact morale and customer satisfaction (which reinforce each other).
- Revenue and stock price begin to drop (even though margin remains decent).
- The CEO gets fired and the 6 Sigma thing starts a slow death.
This quick synopsis is a bit over-simplified, but the pattern has emerged with a number of prominent companies. So, my conclusion is, too much of a good thing reduces the value of the good thing, until it loses its value altogether.

I have worked in client organizations where 6 Sigma has been deeply rooted in the culture. And like the root word in that term, it is somewhat cult like. I have always been a bit skeptical of such a strong force. I guess a second conclusion is that we need to approach everything in moderation.

Balance is a key aspect of getting the CRM strategy to work best. Too much of a focus on one type of outcome versus another can be very problematic. We have the ability to derive three types of business results from our CRM program investments: growth, efficiency, and customer value. Programs that go over the top seeking one outcome in a cult like fashion cause an imbalance. Too much focus on efficiency causes growth and customer value to be squashed (poor revenue earnings and customer satisfaction).

The 6 Sigma example is very relevant to how you might pursue the business results from your CRM program. I have seen some companies blindly pursue improved customer experience as a driver for their CRM, but often to the detriment of efficiency. Likewise, I have seen the same abandon thrown into the pursuit of revenue, often at the expense of customer satisfaction. It is a balance thing. I am not proposing that your CRM program should focus equally on growth, efficiency and customer experience. Attempting to go after everything usually results in gaining nothing. However, like the whole death-by-lemon thing, too much focus on one item at the expense of the others is also the wrong pursuit.

Good luck with your balancing act. Care for some lemonade?

Posted by Matt Johnson at 01:02 PM | Permalink | Comments (0)