Using Sales to get Market Information

Accurate, real-time information about your customers, markets, competitors, and so on, is the sine qua non of everything that management does. Without it, you cannot make rational strategic product/market investment decisions, you can’t develop products/services that meet market demands, you can’t promote effectively, and you can’t sell effectively. Everything depends on a clear, in-depth understanding of what we call Environmental Influences.

It can be a lot of work to acquire all of that information continuously. But there’s a tremendously under-used resource at your disposal: your field sales force. Yes, we are always warning clients to not believe everything their sales force tells them about customer needs (the answer is almost always “cheaper”, and is always short-term focused.) But if you train your sales force to spend a little time asking forward-looking questions about customer needs, competitive moves, market shifts, and so on, you have a ready source for the information.

Now, you want your sales force selling, not doing market research, right? Well, maybe no. Maybe—in the big picture—the availability of such rich information from customers so easily through a channel (the sales person) that already has a relationship with them, is extremely cost effective. If that’s the case, how do you get your sales people to ask the questions and get the information back to you? Well, how do you get them to do anything? You pay them; you incent them! It really is simple.

Breaking News: Results Actually Count!

We read in the September 6 issue of Business Week that researchers form INSEAD and MIT have discovered that the “traditional” metrics of team performance—how well team members get along, communicate, team spirit, etc. —are actually not all that useful  The new research indicates that teams with excellent internal metrics such as these often fail, and that external metrics—such as how well the teams communicate with other groups, how well aligned the team’s goals are with their management’s, etc.—are actually a better measure of success.

 

Wow!  If he were still alive, we might nominate this research for one of Senator William Proxmire’s Golden Fleece Awards.   Now, to be fair, when the emperor has no clothes, when management seems to think that team building exercises an effective team will make, some one—usually an academic—has to actually do the research and determine that yes, in accordance with all life experience, common sense, and what we all learned in Management 101, “liking each other” is not a results strategy. By contrast, having goals and strategies and tactics to achieve these goals, all aligned with the reality of the external world, all managed to metrics, and all changed in real time based on feedback from the real world, is.  In other words, having a stable, adaptive management process functioning is! 

But we knew this all along, didn’t we?

 

Ralph

Should you bother with customer retention?

For years experts (us included) have written about the value of customer retention. The idea is that retaining customers is more profitable than creating new ones and that profitable growth comes from keeping your existing customers while working to add new ones as well. Seems logical and reasonable … but maybe not. 

We have noticed a confusing trend among some very large, and supposedly smart companies, that belie the idea that customer retention is critical. Two specific examples come to mind to share: Cell phone companies and banks.  

As you probably know, now that cell phone #s are portable, customer turnover is fairly high since “new customers” are given the best possible deal from a cell phone company. If you are an existing customer it is up to you to figure out if you could save money by changing your plan with them. The latest statistic we have seen is 2%/month in customer turnover. 

Recently, we found that banks appear to be doing the same thing. (The statistics we have seen indicate bank customer turnover is approaching 20%/year). One of my CDs was coming to the end of its period. The bank sent a notification that I could take the money out, move it, change it, or simply let it roll over to a new CD period. They gave me my window of opportunity to do this based on the maturity date of the CD. I called the bank to inquire about the new interest rate, which they could not quote but indicated that it would be similar to the current rate. 

I then went on-line and found that I could get an “on-line” promotional rate that was 2x the interest rate I was likely to get if I did nothing. I called back and asked the customer service rep if he could help me and he said no that is an online rate only and that I would need to call during the maturity window and get them to move the money to the promotional rate. I pointed out that the effort to do that was similar (or less) to moving the money to another institution. That didn’t seem to matter. 

In reviewing these and similar situations, I had to ask myself, “Why is it ok to run customers off, while working so hard to attract new customers?” Then I understood the reason (at least I think so). Once you become a customer the company can abuse or overcharge you for as long as you let them, that is where the profit is. Keeping you appears to only be profitable if they can overcharge you compared to new customers.  

Odd business model, but I guess it works … until somebody figures out a better way.

Intentions Do Not Necessarily Lead To Actions

 

Many marketers have been mislead by research that tries to understand what people will do in the future regarding purchase of a new product or service. I have read of studies that purport to show that people do not do what they say they will do when asked. (No I can’t put my hands on this study at this time.)

However, I do believe that people’s stated intentions and their actions are not in alignment too often to be a reliable predictor of future behavior. I was reminded of this yet again by a new report from USA Today.

They report that Eindhoven Airport in the Netherlands did a survey that found that 75% of passengers in the airport stated they would pay an extra fee if the money went to reduce greenhouse gases (so-called global warming offsets).

The airport then instituted a voluntary program to allow people to make this contribution. So far the contribution rate shows a contribution being made by 0.5% of passengers. To quote Joost Meijs, the commercial airport director, “There is a gap between intention and realization.”

Two lessons, as many companies get on the “green” bandwagon:

1. Be careful about your customers’ stated intentions.
2. That goes for any “intentions” you may choose to track.