Engagement, Experimentation, Innovation, Marketing, Sales, Technology

Has Marketing Failed Sales?

A few weeks ago, at the Sales 2.0 conference, I noticed a trend: Salespeople are generating their own leads. In fact, I heard pundit after pundit offer justifications for salespeople to be more proactive and take lead generation into their own hands, including statistics showing that as few as 30% of the leads sent to sales by marketing are worthy of pursuit.

Isn’t it marketing’s job to deliver qualified (or at least pursuit-worthy) leads to sales? So has marketing failed?

Well, no, not exactly. There are two significant (you might call them disruptive) trends happening at the same time in lead generation: the indivdualization of technology and social selling.

Marketing is less-well-equipped than sales to take advantage of these. Sales, especially the individual salesperson, is far better equipped to experiment with new methods, processes and technologies than any marketing department can be, if only because of the scale. And marketing has significant responsibilities beyond lead generation, including leading and developing the company’s relationship with its prospects, customers and all other stakeholders, and stewarding the company’s brand.

But in order to be successful, marketing will have to watch these trends — and how salespeople take advantage of them — and figure out how to make them part of everyday marketing in order to stay relevant.

Trend One: The Individualization of Technology

Technology has migrated from huge systems only practical for large institutions to apps any individual can use anywhere, anytime. In the same way, systems which large corporations use to manage their resources are now available for individuals, including cloud-based (SaaS) services, such as CRM and marketing automation.

Companies such as Nimble and Contactually provide cloud-based services that are designed for (and priced for) individual salespeople to do the essential parts of what a more cumbersome CRM system once did. They manage everything from contacts to social relationships to follow-ups to engagement opportunities.

What is important about this is these services can be used by an individual salesperson to find opportunities and generate leads entirely on his or her own, even while working within a larger corporate CRM system.

In fact, my friend Matt Heinz offered a wealth of tips and tricks (he calls them “sales hacks”) for individual salespeople to use a range of tools to create a robust lead flow — all independent of any marketing department (yes, this works very well for sole proprietors, too!)

Trend Two: Social Selling

Social selling means salespeople can use their social networks and the activity they generate to find prospects and identify buying signals. For example, if I were selling marketing automation software, and a 2nd-degree LinkedIn connection just took a new job as CMO (a possible buying signal) for a company in my market, I would want to contact that person. I might find that out through the activity generated in my own social network, then find out more about that person through their own social and other activity. I would then have a connection that can introduce me and would also know how to approach my newly discovered prospect.

Notice I am not looking in my CRM system for a lead that has not been touched in a while, nor am I looking for an introduction from my management. Salespeople (presumably) have their own networks they can use to find the connections they want and need.

Services such as TwitHawk and Newsle offer this kind of social signal search service, and Nimble and Contactually integrate it into the activity stream.

When you put all this together, you have a powerful new source of very well-qualified leads for the salesperson to pursue.

So Where is Marketing?

Marketing departments have done a very good job of adapting to the world of on-line and social media, and they have found ways to successfully get the word out. Marketing departments have also become very good at doing this on a large scale, just as they became very good at large-scale communication in traditional media.

But even the most targeted integrated email and social media campaigns reach thousands — sometimes tens or hundreds of thousands — of people in the hope that a small percentage will be sufficiently interested to become leads and prospects.

Salespeople are looking at this from the other direction. They are ignoring the scale of reaching mass markets and large target audiences, and instead, using the power of atomized technology and social media combined to find the proverbial needle-in-the-haystack — who they are pretty sure is an interested prospect.

Can Marketing Adapt?

Should marketing change its approach and focus on finding individuals? No. Well, maybe.

Marketing must look after its whole scope of responsibilities and ensure there are strong relationships with customers, prospects and other stakeholders. Marketing must also continue to use its ability to scale communications to ensure large audiences are reached.

In fact, without doing this first, the salesperson may never have the chance to find that one interested prospect

But marketers must also become proficient in a world that has become individualized. This individualization has happened not only in how sales leads are found, but also in how relationships and brand preferences are developed. Marketers must be able to take all the activities where they focus on the mass market and find ways to translate or evolve them into individual relationships.

It’s easy for individual salespeople to experiment with new methods and technologies, and they are finding some of them very useful. Marketers must find ways to experiment with new methods, processes and technologies to find the ones that work in this changing world.

The challenge marketers face is learning how to scale this individualization to reach the mass audience so the company can scale its individual relationships.

And marketing can deliver more relevant leads.

Join the conversation: post a comment telling us how you are addressing this issue.

customers, Engagement, Events, Relationships, Sales

Selling Again: Your Biggest Missed Opportunity

Next week, I’ll be spending lots of time at the Sales 2.0 Conference in San Francisco with people who think about revenue.

One of the topics I will be discussing with those revenue leaders is how to take advantage of the biggest revenue opportunity of all: selling to your current customers.

If your business depends on recurring revenue (for example, your customers buy subscriptions of some kind, say cloud services), then you not only have an enormous opportunity right in front of you, but if you overlook that opportunity, you are placing your business at significant risk.

Let me illustrate: Let’s say you sell a cloud (or other online) service. Your customers pay for a one-year subscription when they sign up, then pay for one year at a time every year when they renew — if they renew.

Your growth target for this year is 50%. But your churn rate (percentage of customers who do not renew) is 20%. That means you need to sell 70% more this year than you did last year to make your growth target.

I’m guessing your growth target is already a stretch. Can you really beat it by 20% or more?

Or should you take a different approach?

I help my clients focus on the relationships they’ve already built with their customers and building a sales and marketing process to make sure more of them renew and fewer leave.

Read my recommendations at the Sales 2.0 Conference Blog.

And join me in San Francisco on April 8th and 9th.

Collaboration, Decision Making, Engagement, Innovation, Items of Interest, Management, Technology

Making Remote Work Work: Nine Ways to Succeed and Five Myths Dismissed

If you’ve been paying attention to the news out of Silicon Valley recently, it would be hard to miss the uproar about Yahoo! CEO Marissa Mayer’s decree that Yahoo! would no longer allow its people to work from home.

I spent several years leading marketing and internal communications for the remote work program at Cisco Systems.  During that time, our policies evolved and grew into a sophisticated program designed to create competitive advantage for Cisco in both its access to skilled workforce and in serving its customers.

I don’t want to jump into the debate about Yahoo!, nor do I want to discuss how organizations and employees benefit from remote work.  My colleague Faith LeGendre has covered that very well.

I want to take a closer look at how to make remote work (which includes working from home, working in a remote location, or even just having a geographically diverse team) actually work well and benefit both the company and the employee.

First, let me dismiss a few myths:

  • Working from home is not just for mothers with young children.
  • Working remotely is not just about wanting schedule flexibility for personal needs.
  • Working remotely to achieve a flexible schedule does not reduce productivity.
  • When remote work programs fail, it’s generally because of poor technology planning or a lack of good management practices.
  • Collaboration and informal interaction do not require being in the same location.

Making a remote work program work for the benefit of everyone requires hard work and a shift in thinking on the part of both the employee and the company.  The goal of a remote work program should be to make employees just productive from anywhere as they would be in an office.

For the company and the remote worker’s manager, these practices will help make you and your people successful and productive no matter where they are:

Shift your thinking from presence focused to results focused.

One of managers’ most common complaints about people who work remotely is that they can’t see whether they are working. I suggest that your inoffice workers are probably also pretty adept at making you think they are working even when they are not.  But it just doesn’t matter.

Whether your people are in your office or somewhere else, remember that you hired them to produce results.  It may require a bit more rigor on your part, but make sure both you and they understand what those results are and how you expect them to be achieved.

Be honest:  if your people are producing great results, does it matter whether they did all the work between 9 and 5?  Or is it OK with you if they did some of the work at 3 AM?

This also means you need to set expectations and have an explicit agreement on when the remote worker will be reachable for emergencies and other time critical matters.  Make sure you know what you actually need and what is reasonable to expect.

Be reasonable and allow yourself a learning curve.

Managing remote workers is not easy. You will find that shifting your thinking, measuring results in a different way, and trusting your workers more completely than you likely have before is challenging and requires a learning curve.

Don’t expect more from your remote workers than from your inoffice workers (though you will probably get more) and watch yourself for inequities in your treatment of the two. This will get easier with time, and it will be much easier if your company’s HR team provides support and training.

Create formal agreements and stick to them.

Your remote workers should know what you expect from them, and you should know how they are meeting those expectations.

When you either hire a remote worker or change an inoffice worker into a remote worker, create a formal written agreement.  Outline everything from objectives, expected results, response times, and availability to reporting and collaborating with colleagues across the company.

Get the technology right.

Don’t skimp.  The technology available in today’s market for making remote workers effective is both very good and very affordable.  Make sure you have the technology that allows your remote workers to get the job done as efficiently as your inoffice workers.

For the remote worker make sure you work effectively and follow these ideas to help your management realize as much benefit as you do from your working remotely:

It’s not about your convenience; it’s about producing results.

As with so many communications you have with your management, explaining why you need this “privilege” just doesn’t cut it.  Explain how it will benefit your manager and the company.  Show how you will make it work.  Sell your manager on trusting you to make it work.

Take it slowly.

Don’t walk into your manager’s office and announce your plan to work remotely full-time starting Monday.  Start with one or two days per week.  Create milestones that show your part-time remote work plan works.  Then go to three days per week.  Then four.

When you are choosing which days to start with, intentionally choose days that will show that you can work effectively.  For example, choose a day when a weekly team meeting occurs, then demonstrate your outstanding participation in that meeting while sitting in your living room.

Demonstrate results.

If there is one single key to success in remote work, this is it:  create external objective evidence of your work.  Your management will not see every bit of work you do remotely. But they can always see the outcome of your work.

For example, let’s say your job is to run email marketing campaigns.  You and they both know lots of planning and collaboration go into creating those campaigns.  But they may or may not see that.  What they will see is that the campaign launched and produced results.

Learn to collaborate online.

Both structured and impromptu collaboration can easily happen from anywhere.  But for most of us, it’s not natural to strike up informal conversations electronically.

I can’t put too fine a point on this:  learn how.  Getting good at making connections and developing relationships with people you can’t (and may never) see is critical to your success.

Overcoming resistance is about proving success.

This is generic but critical to making it work.  Some managers will resist the idea of having someone work remotely.  You can’t change the culture overnight, but you can create opportunities to prove success.  Create trial remote work times.  Develop result focused plans for making it succeed.

When the trial period ends, make sure you have lots of evidence of success to show your manager the benefits and start planning for a larger trial.  Make your success available to others also:  the more people who show and prove success, the faster the culture of resistance will change.

The list of benefits of remote work for both employees and employers is seemingly endless, so there’s no reason not to get started.  Remember, if your people can’t work remotely for you, they might just work remotely for your competition.

customers, Engagement, Marketing, Relationships, Sales

Timing Matters: A Different Way To Fill Your Pipeline

As marketers, we are very good at understanding our products, knowing how they bring value to our customers, and helping our customers translate our products into that value.  We know how to promote our products and how to target market segments and different buyers with the right messages in the right channels to make sure everyone in our market knows about the benefits of our offerings and can bring them.

We work to generate interest and then determine if the person interested is “qualified” (meaning, generally, they can buy our product), then we create what we call a lead. Sometimes those leads buy, and sometimes (likely the majority of the time) they don’t and are sent to the cultivation pool.  There, we do things to keep in contact until they are ready to buy.

To do all of this, we run campaigns that target certain profiles of buyers.  Those might be by preferences, industry, or some other market segmentation.

But what if we segment by time?  What if we run campaigns targeting people who are ready to buy?

One of the ways I help my clients is to use the massive amounts of data they have about their prospects and customers to discover the actual triggers that cause prospects to make buying decisions and customers to make repeat buying or renewal decisions.  Once you have this information, you can go beyond a simple understanding of the reasons they buy to gain insight into what events trigger the decision.

Then, you can focus your campaigns around these events.

Consumer marketers have been great at this for decades.  You know this if you’ve ever bought a house or gotten married.  Suddenly, new homeowners are flooded with catalogs and emails promoting interior design, home improvement, and other related products new homeowners typically need.  Brides- and grooms-to-be are inundated with ads for wedding services, flower arranging, music performance, and other wedding related services.

Can this translate into the B2B world?  Of course it can!  But it has not done so very well.  At least not yet.

I recently talked with a vendor of marketing automation systems about their segmentation, and it turned out that they were very good at selling their system to young, growing companies.  So they were running campaigns targeted at those companies.  I asked them to review about 50 recent sales to this type of company, looking for things their sales reps knew had happened to the customer in the months before the sale.

There were several things that seemed to be common, but one that stood out was the closing of a fund-raising round (typically what Silicon Valley folks call a “B” round). Suddenly the company had money, and the primary use of that money was to invest in customer growth—meaning marketing and sales investment.  One of the first things they did was to buy a marketing automation system.

After this, they started running a campaign targeted specifically at companies who had just closed a “B” round of funding.  And, yes:  conversion rates shot through the roof.  Contact-to-lead ratios jumped dramatically.  Cost-per-lead dropped.

The next question is:  where do you find the people or companies that have recently experienced a buying trigger event?  Depending on the event for which you are looking, there may be publications or data sources that list these.  In the example above, we used some of the popular venture capital publications to get the lists of companies and then merged that with the data already in the CRM system.

If the event you choose does not have a data source or publication associated with it, you can use both traditional and social research techniques to find both the companies and the people (If you sell marketing solutions, imagine finding the tweet posted by someone you didn’t previously know celebrating their appointment as CMO.  You’d probably want to get in touch with them). This can require some data scrubbing, but it will yield a much higher quality of lead.

The important question we miss all too often is, “When do our customers buy?”  We are quite good (I hope) at knowing why, but knowing when is just as important.

Selling to your prospects when they are ready to consider buying changes your lead generation and cultivation strategy.  You can become much more efficient in your outbound efforts and much less annoying to all those customers who just don’t want to hear from you this week.

I challenge you to consider:  do you know any events that trigger a buying decision in your customer?  Are you using that knowledge to create time-based segmentation?

Because in creating an effective and efficient lead generation machine, timing matters.

Brand, customers, Differentiation, Disruption, Engagement, Marketing

Stop Enabling Your Customers! And Get Your Product “Hired” Now

Have you ever heard product or service claims like these:

  • [Our service] enables executives to achieve their top priorities.
  • [Our product] enables you to make better use of your network to help the people you trust.
  • [Our product] enables you to create beautiful native mobile apps styled with CSS.

These are typical examples of statements that all too often appear as the headline of product data or sell sheets, web pages, and other promotional material.  Two of these examples come from small companies you probably don’t know, and one comes from a large company you probably do know.  And while this type of phrasing is all the rage in Silicon Valley, it pervades plenty of other industries as well.

But it says nothing.

Or at least nothing useful.  In these headlining statements, the companies producing the product have failed to communicate to the potential buyer why it is so important to the buyer to have the product or service being offered.

Of course, we want to enable our customers to do something that is of value, but all too often, when I see statements like the above, the value is either misplaced or misunderstood.  This is often indicative of a serious underlying issue with the positioning of the product or service.

Allow me to explain.

In his seminal work on innovation, The Innovator’s Dilemma, Clay Christensen points out that every product, in order to be successful, must have a job.  This means that in order for any person or organization to buy a product or service, they must have a job they want that product to do, and then they make a decision to “hire” the product or service to do that job.

Sometimes we know well the job we need done.  A simple, if dated, example of this is the personal computer.  When PCs were first brought to market in the 1970s, they were hobbyist toys.  Then along came Dan Bricklin with a program called VisiCalc, and suddenly companies could “hire” personal computers to do the arithmetic that had taken junior accountants much of their day to accomplish.  As the versatile computer became more of an office presence, it found more and more jobs to do but would never have been there in the first place had it not had a job in the first place.

Sometimes we don’t know the job we need done until it shows up in front of us.  A personal example goes back just two years to when I bought my first iPad.  As Silicon Valley marketing professional, I was a fairly mobile worker able to find ways to be reasonably productive from pretty much anywhere, whether traveling on business or working from home.  Once I learned how to connect my iPad to all the relevant services, however, I became a walking office.  Everywhere I went, all I had to do was open the iPad and suddenly there was no difference between being in an office and being anywhere else.  The iPad did the job of making me location-independent (or as one of my campaigns put it, “as productive from anywhere as I am at my desk”).  I wasn’t very aware I needed that job done, but once it was being done, there was no question that I had made a great “hire.”

So what’s the problem with statements like those above?  They don’t connect the value of the product or service to the value the potential buyer needs.  The marketers behind them found a really cool thing that their product enables, but they either failed to connect it to something their buyer needs or communicate that connection.  This is a serious positioning error that could cost you your ability to successfully enter a market or overtake competition.

Fortunately, the solution is simple, and it is nothing more than great positioning. Here’s how:

  1. Understand your intended customer’s needs:  What do they need done for them?  What needs does this create?  Which needs are being met and which are not?  Can you identify any needs they have — or soon will — of which they are not aware?
  2. Look carefully at your own capabilities:  not just your product or service but the whole range of capabilities your company, including its people and technologies, can bring to the market to serve those needs.
  3. Match your capabilities to the identified customer needs and figure out exactly how your capabilities meet those needs.
  4. Communicate as potential results your customers can achieve rather than things they could do, which will allow them to understand the compelling reasons to “hire” your product or service.

There is one more pitfall.  Many of the start-up companies with which I work fall into the trap of defining customer needs as what they want them to be (or, in the worst cases, wish they were).  It’s nice to think your customers should have a need to do whatever your product does for them, but (as we so often have to remind ourselves) we do not get to define what customers need and why.  Our task is to discover the actual needs and meet them.

When you define customer needs, make sure you do not believe your own mythology.  Make sure your findings are grounded in reality.

So stop enabling.  Start solving problems and creating results.  And your product will be the one that gets “hired” over and over.

Decision Making, Disruption, Experience, Experimentation, Innovation, Leadership, Management, Marketing, Sales

Elephants and Data: The Missing Link to Making Sales & Marketing 2.0 Work

This week I had the privilege of attending the Sales and Marketing 2.0 Conference in San Francisco (thank you to the conference team for the invitation!).

While this edition focused on social selling and marketing (as expected), it also focused heavily on what leaders need to manage a social selling or marketing team.

But this is not a summary of the conference. If you would like to see the very useful and interesting learnings from these two days, my friend Matt Heinz has an excellent post you should read.

This is my view of the most important lesson learned this week, and what I think is the missing link to making all of these new ideas in sales and marketing work. First the data.

Data

For the past five years or more, I have been hearing conference presenters, pundits and all sorts of others talk about the new way to market and sell in a social world. While some of it is just hype (isn’t it always?), when you sort through all of the information out there, you reach a few simple conclusions:

  • Technology has and will continue to disrupt how products and services are marketed and sold
  • Social technology has shifted the balance of power to the buyer, so that sellers now have to work not to sell, but to help buyers buy
  • Most corporate organizations and the systems by which they measure their people have not adapted to this new reality at all, meaning we are all essentially doing what we used to do, just with new technology (yep, I wrote that five years ago!)

The focus of the conference for the past two days offers some hope for addressing this last point. Much of the focus was on managing in what they call a “sales and marketing 2.0” or “social” world.

Speakers showed us how they are helping their people do certain things differently – or do entirely different things. They showed how they are figuring out what those things should be. And – since we know what gets measured gets managed – they showed how they are measuring success in the social selling and social marketing process, and how they are rewarding people for that success.

These management practices are all based in what we have come to call big data. For example, you have to merge and interpret data from your company’s traditional systems (e.g. CRM), your other internal data (e.g. email communications, chat and other interactions), customer data, social network data and other public data to gain a deeper understanding of how a Facebook campaign or a sales rep’s blog helped generate revenue and specific deals. And yes, this can be measured. But no, it’s not easy.

We saw examples of how every aspect of management from governance to measurement to evaluation, to hiring to leadership and coaching (yes, coaching) can be improved when driven by the effective use of data.

Elephants

Here’s what I think was the elephant in the room: In order for individuals to succeed at anything at all in a corporate organization, they have to know what success looks like.

Your sales leadership can be the best at understanding and directing a social selling organization. but does your newly hired rep know what to do when she is on the phone (excuse me, web conference) with a hot prospect? Do they know how to use the social tools at their disposal to make that a more successful call?

Your marketing leadership can put in place all of the social tools and programs, and even hire people to manage the various social channels. But when your demand gen manager executes a new campaign, do they know how and when to incorporate those channels?

Do your people know it when they see it?

What leadership needs is a way to institutionalize the knowledge, learning and assumptions needed to become a social sales and marketing organization. We need not only a way to not just communicate to our people what this is all about, but also a way to make sure that when our people do their work, they know – intuitively – how to do it in this new way.

Do you give your people the knowledge and skills to be able to do their jobs in whatever new way your organization is adopting? Does it work?

Add your story to the comments below. And I’ll see you at the next Sales and Marketing 2.0 Conference.

customers, Disruption, Engagement, Marketing, Relationships, Sales

Does great customer service matter?

“Of course! If I didn’t give my customers great service, then my customers would leave for a competitor” (which we know is is not a good outcome)

True, but let me phrase the question differently: What does it take to keep your customers coming back?

Before you answer, did you ask? Yes, customers typically love great service, but here’s the most important thing to remember:

Customers became your customers for a reason (or several). If you do a great job at a bunch of things, but not that (or those) thing(s), you will lose your customer.

Yes, it’s that simple.

Let me give you an example: I used to have DSL Internet service in my home (which gives you an idea of how long ago this was), and was more than a bit suspicious of cable-Internet. When I signed up, the DSL was the fastest connection available. And, my DSL provider was fantastic (shockingly) at customer service. Every time I called, I got an actual person. I wasn’t transferred around, the person who answered my call did the research and talked to colleagues for me. He/she was nice, friendly and often offered credits for past poor service.

But….I needed a fast connection (when I signed up, they were the fastest available). And in the months preceding my change, my DSL provider’s speeds had slowed dramatically and a connection that hadn’t dropped in six years (you read that correctly!) was suddenly dropping several times every day.

The best efforts of several customer service reps, technicians, and even the people they sent to my home (for free!) could not resolve the issue.

They offered me credit; they offered me free add-on services; they made so many enticing offers that I was tempted to live with the unreliable, slow service. But in the end, I switched. I needed fast service.

My new provider has horrible customer service. An actual person never answers the phone, and when I get a person they are always rude and unhelpful, it usually takes five, six or seven people just to get a simple answer. But my connection is fast and almost never drops (three times in five years).

If you don’t believe me, take a look at two very well known examples of poor customer service. Whenever people bring up bad customer service stories, the examples they rely on are typically cable television companies and airlines. In my area, that means Comcast and United (I pick on them a lot). Think about it: Do you fly one airline all the time? If so, are you getting great customer service? If not, why do you keep going back? (If I had to guess, it’s schedule convenience, fares or frequent flier points — not customer service!)

This may not be how your business works, but if your business depends on repeat customers, you have no choice but to ask: “Why did my customers buy from me in the first place, and what will keep them coming back?”

Then invest your customer retention budget right there.

So, yes, if customer service matters to your customer, make it great. But always be sure you know — and are serving — your customer’s needs.

customers, Differentiation, Engagement, Experience, Marketing, Relationships

Keep Your Customers Coming Back: How to Increase Repeat Business and Reduce Churn

Are you in a business that depends on returning customers?  Or a business that sells a subscription service?  If you are, then you already know intuitively that bringing your customers back — or ensuring they renew — is the lifeline of your business.

Knowing that, are you spending disproportionately on new customer acquisition and leaving renewals to a customer service team that lacks the incentive to maximize return/renewal revenue?

Many of my clients are in the technology industry, which is in the midst of making an industrywide shift from one-time product sales to subscription based services (the trend to so-called cloud computing is leading the way).  In the old model, it was fair to assume that once a customer purchased a product, they would most likely use it and then buy smaller add-ons, such as upgrades or service contracts.  In that model, most of the revenue came from the initial purchase, so most of the marketing and sales effort went into new customer acquisition.

But as the model has shifted, the investment has not kept pace.  My clients see symptoms such as customer service teams that are expected to renew their customers but have little or no incentive to do so or sales reps that have no incentives tied to long-term customer success.  The result?  Churn (customer turnover) rates as high as 33% are common.

So how do you keep one-third of your revenue from walking out the door every year?

The most common response I get when I ask this question is, “Good customer service.”  But what does that mean?  It’s usually measured by anything from product performance, to support center response/resolution rate, or to customer satisfaction survey scores.  This is all good, and these are desirable results.  But they are not (necessarily) what keeps your customers coming back.

To succeed in a repeat customer or subscription renewal business, you need to do two things very differently:

  1. 1. Redefine your business strategy and goals to align with this desired result.
  2. 2. Create metrics that both demonstrate success and allow consistent incentives to be

provided to those teams responsible for that success.

Aligning Your Business Strategy

You have, I presume, a very successful sales and marketing strategy and process for acquiring new customers.  Do you have a parallel sales and marketing process for bringing customers back?  This won’t be the same approach as customer acquisition, but it will take advantage of the existing relationship — and everything you know about your customer and how they value your products.

The information you have from your ongoing customer relationships will determine how to set strategy and process for renewal/return sales and marketing.  To define that strategy, you must answer questions such as

  • What customers are most important to you? Why?
  • How do you determine the value of a customer to you?  Are you considering all the aspects that matter?
  • How important are you to your customers?  Why?
  • What criteria do they use to evaluate your relationship and determine whether they return/renew?
  • How predictable are return customers or renewals?  What predicts them?

If you have sources of data — and you likely do — that hold information about customer behavior, usage patterns, specific activities, interactions with the various parts of your organization, etc., then you have an opportunity to mine that data, test (or defy) conventional wisdom, and learn very specifically what actions (or lack of action) can give you a reliable signal about your customers’ intentions.

Which leads to the second part of building an effective strategy: investing in the right people, systems and processes.

Once you know how to value your customers — what actually signals a return or renewing customer and what signals a departing customer — you can then institutionalize this in processes and systems, and communicate it to your people so concerted, prioritized action can be taken to maximize your ongoing revenue stream.

Creating Metrics and Driving Results

How you measure the success of your renewal/returning customer sales and marketing processes will depend on your specific business and what results you want to achieve. But with the data about how to value your customers and predict behavior, you can start by creating metrics that measure things such as

  • Increases in renewal/return rates year-over-year (or reduction in churn).
  • Increases in value of your customers to you.
  • Increases in value of you to your customers.
  • Success of programs that persuade customers to take the actions that predict renewal/return.
  • Success of programs that convert predicted nonrenewers to predicted renewers even before it comes time to renew.

A variety of other metrics can apply, depending on how your organization is structured and how your customers come back to you.

An important point to keep in mind is that a repeat business or subscription based business model is fundamentally different from a single product sale model.  The differences go much deeper than how you bill.  The investment levels are different, the management of the customer relationship is different, the way you offer and likely distribute your product is different…the list can go on and on.

Those of you in telco (telecommunications) and banking (and similar businesses) will know how to do this intuitively; these businesses depend on repeat customers.

For those of you who are in industries trying to make the shift to a recurring revenue model, don’t underestimate the fundamental changes in strategy and process that are needed. Looking at how you make sure your customers are coming back again and again is a very good start.

In my practice, we have found that understanding the true depth and value of the customer relationship can make the creation of a recurring revenue business much smoother and more successful.

Do you run a recurring revenue business?  Or are you trying to convert to one? Share your thoughts on the challenges and how you address them!

conversation, customers, Disruption, Engagement, Experimentation, Innovation, Marketing, Relationships

Making Better Investments in Your Customer Relationships

(this is a repost of a post written by me for PAKRAgames. It is part four of a series of four.)

Business relationships are not this intuitive (though I contend they should be), but let me ask you this (if you’re in a long-term relationship, think back to when you were single).

When you started dating, you had opportunities to begin and pursue relationships. How did you make the choice of which woman/man to pursue? Was it the best looking? The smartest? Maybe the most accessible or one you thought would say yes? And if you were lucky enough to have several people from which to choose, into which relationships did you invest your effort? Was it with the cutest partner? The one who seemed most likely to succeed? The one most likely to commit to you?

I’d be willing to bet you made these decisions based on some form of intuition. You probably agonized, analyzed and got lots of advice from your friends and family, but some sense of the “right” choice probably made itself apparent, and off you went.

We don’t do the same with business relationships. We look at forecasts, financials and, if we’re smart about it, marketing and culture compatibility. Specifically, when we look at our customers, we have pretty much one measure of desirability: Customer Lifetime Value (CLV), which is essentially a net-present-value of expected future revenue from that customer.

But if you ask your sales people and customer service and support representatives, you might see a very different story. You’d hear endless anecdotes that go something like this: This customer may not produce much revenue for us, but they (pick one or more of these) helped us fix several critical bugs, showed us some new uses for our product, are really devoted to us, use only our products and never our competitors’, or have been our best reference customer and a big advocate in the market.

How much value do you place on any (or all!) of those things? My guess is that when it comes to making decisions on how much effort to put into the customer relationship or how hard to try to save them if they suggest they may not come back next year, you put not much value at all (or maybe a little, as an exception).

But you should. Companies that do have customers who keep coming back to them and not their less-successful competitors.

Here’s one example of why: Clayton Christensen’s (@ClayChristensen) “Innovator’s Dilemma” suggests (among other things) that as companies grow, they miss the customer doing something weird with their product. Smaller entrants see it, find the new market based on it and can disrupt the larger company’s market in doing so. But if you — I presume you are the larger, growing company — found the customer doing that weird thing and knew they were valuable, then worked to keep them, you would be able to see the new opportunity and capitalize on it.

There are similar examples for any number of the possible reasons noted above that customers can have value beyond CLV.

So what do you do about it? It’s a simple yet hard answer: Develop a model that can evaluate any given customer’s true value to you (building and helping you manage this model is one of my firm’s main services). That model must include revenue (CLV), but also must include the other dimensions that could make a customer useful and valuable to you. Not all possible dimensions will apply to all companies and, even among the subset that applies to you, not every customer will have much value in each one.

Once you have a model that can assign a quantitative value to each customer relationship, you not only know how valuable each customer is, but how to rank them and know who is genuinely more (or less) important to you. Then you can make well-conceived and well-informed investment decisions. You’ll also know why exactly you are making those decisions.

So when it comes time to allocate budget, time and people to ensure customers are happy, you’ll know who to make happiest. It’s not exactly intuition, and your friends may not have much to say about it, but it will ensure you are doing the best for your customers and for your company, and building relationships that last.

Conclusion:

Over the four parts of this series, I’ve suggested a new way to approach improving and deepening customer relationships, which can reduce churn and ensure customers who walk in the front door this year don’t walk out the back door next year.

I’ve covered:

– Rethinking our business model to ensure we’re making the most of recurring revenue

– Building an effective and measurable sales and marketing process for renewal revenue, and why that’s just as important as your acquisition process

– Learning to understand the value our customers place on our services

– Valuing customer relationships and making better investment decisions

I hope this has helped you think about your business model a little differently and more clearly, and that it has helped you focus your efforts on maximizing the power of your recurring revenue model.

We’d love to hear your story about how you are making the most of your recurring revenue model. Tell us in the comments. And thanks for reading!

Marketing

Prediction, Renewals and Big Data

(this is a repost of a post written by me for PAKRAgames. It is part three of a series of four.)

Do you know why your customers renew their subscriptions or services? Do you know how to predict whether any given customer will renew? I suspect you probably have an answer something like, “Well, yes, but it could be better.”

So let’s make it better.

And let’s make better marketing investment decisions by doing so.

The big marketing shift

One of the most important shifts in marketing in the past decade is the combination of the exponential increase in the amount of data available to us and the advent of tools to analyze that data. This trend is generally referred to as “big data.”

Those of us who relied on data-driven marketing in the era before all this data became available used statistical models to attempt to predict behavior based on the few items we could measure (does anyone remember when the measure of success was the order percentage from direct mail … yes, postal mail?)

Big data is an improvement, but it presents us with a very big issue: We now have more data on our hands than we can possibly handle, and, while dramatically improved in the past few years, the tools available to handle this data are barely in their infancy — in fact, they are barely keeping up with the exponential growth of data.

This leaves us with only one way to get the most out of all the data at our disposal: Ask good questions. I cannot emphasize the importance of this enough. And what constitutes a good question isn’t always what you think it should be.

The key question

To answer the questions I posed above, we want to ask not why customers renew, but rather what predicts whether a customer will renew.

To answer, we must use both statistical and data-mining techniques. Historically, we’ve been pretty good at looking at this question and answering with either subjective measures (such as attitude during on-boarding) or objective measures (such as number of successfully resolved support/service calls).

But we need to go farther. We need to look at actions taken during the course of the use of the service. Are your customers adding new users? Are they putting specific kinds of data in the system? Are they completing a full cycle of whatever your service is supposed to help them do within a certain period of time after signing up? All these and many, many more items are potentially significant.

How do you know which ones are? Here we use good old-fashioned statistical techniques to correlate the data to renewals.

What will we learn? We don’t know until we’ve done the analysis, but we might find out that customers who take one series of specific actions within the service always renew, and customers who take a different series of specific actions never renew. Whatever we find out, we’ll have a very good method for predicting the likelihood of renewal.

Now what do we do with that?

To me, this sounds a lot like lead scoring. We can assign grades to customers based on their likelihood to renew and take different actions based on that. For customers we think are 100% likely to renew, maybe we just make them a really good offer. For customers 5% likely to renew, maybe we make a rescue offer. For customers on the bubble — maybe they will, maybe they won’t — we might assign a renewal rep to learn more about how they value the service and turn them to renewal.

Which decisions you make for your particular service depend largely on the economics of the renewal and the specific relationship with and value of that customer (we’ll discuss this in the next part of this series). You can then make good investment decisions and create renewal programs that will help you maximize renewals for your most valuable customers.