How often have you heard companies with a wide range of products ask the question, “What’s the right product to sell to this customer?” Increasingly, this question does not need to be asked, as companies marketing on the Internet sell the exact products customers want to buy.
However, in many B2B markets, what you sell is related to the amount of money you invest in a marketing campaign. Determining how much you should invest in selling what, to whom and when, are key questions.
It’s in the detail
Customer-based optimisation is used by certain companies to refer to using a full set of information about customers and prospects. This determines not only campaign-level policies – whom to target for which products and when to do it – but total optimisation of marketing and sales decisions.
The information includes not only standard marketing and sales information – such as identities, needs, buying and service histories – but also information related to the specific category. In B2B markets, the most critical information needed relates to the customer’s requirements for different types of product or service, how often they need them, and how they would like to buy them.
Optimisation is a very advanced form of customer value management – which in turn is a combination of up-selling, cross-selling and retention. In theory, optimisation starts at the highest level – namely deciding which overall marketing and sales objectives to adopt for an existing customer base and/or a defined prospect base. Indeed, it must start at this level, for if it starts in any other way, then optimised decisions will come into conflict with marketing and sales objectives.
Optimisation also focuses on products – selecting which products to launch to an existing customer base or a defined prospect base, which particular mix of those products to offer to particular customers or segments, in what order and in what volumes. Again, if product decisions are not optimised, other decisions will tend to be adversely affected. Optimisation also supports better decisions on which customers a company should seek to retain – today and in the future – and which prospects to avoid or seek to recruit.
Also, if decisions have been made on non-optimisation grounds, the cost of imposing these constraints can be investigated. This means a company can review constraints for their removal or moderation because of their negative effect on profit. It also means that instead of individual product managers or sales managers competing against each other to meet targets, they can work as a team to optimise joint value.
A divine state
At a more tactical level, optimisation also focuses on how much you should spend on managing individual customers. In marketing to small businesses, this covers the allowable frequency and cost of contact, generally and for specific customers. Where offerings are tailored to individual customers, the focus moves to how to set the main parameters, both overall and individually, for these customers or prospects. Optimisation can also be used to determine the data strategy needed to increase the power of the process, perhaps improving the quality of existing data about customer needs or deciding which new data items to collect.
However, most companies address the optimisation process too late in the process, usually only at the level of the individual customers, by asking which products should be targeted at the individual customer during a particular sales visit. When optimisation is used from the beginning to end of the marketing, sales and service process, results are usually very good. I call this divine state ‘advanced optimisation’.
However, there are gains along the way, from the most basic to the most advanced optimisation, although my instinct is to get a company’s board to discuss the cost of making decisions the ‘old way’. Otherwise, a company may be condemned to a long period of slight advances in optimisation. Such long journeys tend to be vulnerable to changes in marketing staff.
Commitment reaps rewards
Advanced optimisation is rare except in the simplest businesses. Moving towards more optimisation means changing strategies and processes in areas such as corporate planning and business and marketing planning and implementation. This requires strong and consistent leadership over a long period. And guess what marketing directors are famous for? Their short job tenure.
Creating optimisation demands a strong focus on optimisation over several years, with plenty of learning by plenty of people, many of whom are outside the marketing department. It usually involves interlocking with the operational and technical functions – e.g. product development, customer service and accounts receivable – to identify the total costs of managing individual customers, and these are areas where marketing is often weak. However, the gains are good – even basic campaign optimisation generates doubling or tripling of campaign returns, as evidence from companies like Experian shows.
I personally look forward to a time when optimisation reaches not only the board but also the market research or customer insight department, to be used as an input in deciding what data to collect, and (my particular hobby horse) in determining the value of customer-given data such as intentions to buy and requests for contacts.
