Sales and Marketing Consulting

The cloud is changing a variety of customer interactions, one of which is the purchase process. We've seen a shift from buying, to renting, and now to subscribing.

Consider movie viewing as an example. Years ago, to watch a movie at home, we bought a VHS or DVD. Shortly thereafter, we went to Blockbuster and rented the movie. Today, many subscribe to Netflix, where they pay a monthly fee and get unlimited rentals. 

This change is happening across many industries, including those providing business-to-business products and services. In the report titled, "Sizing the Cloud," Forrester predicts the "global market for cloud computing will grow from $40.7 billion in 2011 to more than $241 billion in 2020."

This shift is impacting the role of customer strategy consulting. Historically, customer strategy consulting has focused on predicting repeat purchases by identifying which customers are likely (or not likely) to purchase again, when the need arises.

With the cloud, customer strategy consulting is focused on protecting the ongoing and recurring revenue. It is focused on predicting which customers will continue their service versus those who will cancel.

While there are many similarities between the historical role of customer strategy consulting and the role for companies with cloud offerings, consider these differences.

- The switching barriers are minimized for cloud customers, shifting the risk from the customer to the company. To help protect their investment, the company needs to have an intimate understanding of their customer segments, sophisticated analytics to understand and predict renewals within each segment, and systems or business processes that optimize the renewal potential.

- For many cloud-based companies, one sales manager could have many customers. Having a clear line of sight into each customer becomes difficult, if not impossible. Companies need a system that leverages the various sources of customer information to help sales managers prioritize where and how to spend their time.

I recently saw the following quotation in the footer of an email from one of my client contacts at a leading IT company:  “The memory of bad quality lasts longer than the shock of high prices.”  

How true that is.  On a personal note, have you ever opted for the cheap seats at a show or concert, only to wish you had paid 20% more to be able to actually see and hear the performance?   Or, ever made a snap decision to buy a new piece of furniture that was on a too-good-to-miss sale, only to realize when it arrives that it really isn’t that comfortable or doesn’t fit in like it should?   As customers, we make purchase decisions based on the value we expect to receive, and we all try to optimize the value equation in our favor.  But, sometimes we get it wrong and tip the balance too far toward price, only to later regret the quality component.

In Voice of the Customer relationship studies, it’s pretty common to include several metrics on quality and also a metric on price.  Most of the clients Walker works with are industry-leaders that are bringing to market leading innovations and new trends, and that calls for a premium on price.  In these cases, it’s critical to measure VALUE, including a competitive view on Value, so that we have a gauge on customers’ perceptions of ‘what they get, for what they paid’.  Analytically, we look at what drives value, and often find that quality components (Hardware and Software quality, the quality of the People that customers interact with, quality of Support) are bigger factors in customers’ assessment of the ultimate value they receive. 

The same thinking should apply when we scope out customer measurement programs – both in terms of vendor costs and the allotment of time for internal team members to manage the program.  We recommend that you, as VOC program leaders, are careful, even territorial, about not cutting out the 20% of scope and time that will provide 80% of the value – the extra analytics, communication planning, collaboration, action planning, change management and deployment type activities that are going to make the biggest difference on how your internal customers assess the quality – and the ultimate ROI! – of your efforts.


Krista Roseberry
Vice President, Consulting Services

I’ve recently become a Groupon user. For those of you that aren’t aware of this craze, the Chicago-based company is essentially a “deal of the day” website that is customized to the city you live in (currently offered in almost 150 cities around the world). The daily deal could consist of things to do, see, buy, or eat. To sign up, you simply go to the site to confirm your city, enter your email, and BAM! – you are all set. It’s that easy. After you are signed up, you get an email each day with an extremely discounted product or service that is within close proximity of the city you live in.

As a “deal-oriented” consumer, this is the best case scenario. If something of interest comes along, I snag it. Otherwise, there is no harm in ignoring them for days or weeks at a time. However, what about the businesses utilizing Groupon to sell their products and services? Is this really a good idea? What kind of revenue does it generate?

Many of you may have heard about Groupon’s $11 million day thanks to the daily deal that was produced for the Gap. It was a great – you got a $25 discount if you spent over $50 at the store. It was a no-brainer to buy it. So, was this really worth it for the Gap? Or, due to the overwhelming response, did they ultimately lose with the deep discount?

Contrary to popular belief, I say “no” to the fact that the Gap made a mistake. True, they didn’t expect to sell over 400,000 Groupons that day. Also true, they only received 50% of the revenue they could have had on the purchases that were made (not counting the cut that Groupon takes). This assumes, however, that everyone who purchased the Groupon that day was going to make a purchase at the Gap anyhow. Of course, there is no way this was the case and I’m certain the data would show that nearly all redemptions were well over the $50 amount for that sale. The publicity also came at a time when sales have been somewhat lackluster over the past two years.

So, all publicity and marketing aside, the real benefit that Gap created for themselves is an opportunity to not only gain new business and customers with a one-time transaction, but also to build greater loyalty for the existing customers who may not have purchased recently. So, the verdict is still out on whether or not this was a good strategy for the Gap or not – we’ll see in the long-term if sales grow and are sustained beyond the “pre-Groupon” day. Due to their size, this investment is likely one they would have made in some fashion anyhow. This type of reaction could have been devastating to a small business, however.

Have you had any positive or negative experiences with Groupon?

Katie Kiernan
Vice President, Consulting Services

Building customer loyalty can be interrupted by the economic climate. Savvy business consulting firms look to many different 'listening posts' to provide information to better understand the environmental aspects affecting  customers. For example, recently when looking at a retail situation where males had been the dominant purchaser, it was helpful to review labor statistics at www.bls.gov  to help explain what might be going on with declining sales.
 

Not only is the percentage of male unemployment higher than that of females, the unemployment rate for males is increasing faster than that of females. In the past year, approximately two-thirds of those who became unemployed are males, whereas males represent around 53% of those currently employed.
 

Labor statistics can also be used to understand how various markets have been affected by unemployment. This includes providing insights to assist with interpretation of same-year sales, resource allocation going forward, as well as refining the overall customer relationship strategy.

Pamela Toft
Vice President