Archive for the ‘Channels & Alliances’ Category

How winning companies go digital

Whether it is creating a winning online experience or enabling mobile commerce, digital marketing is a hot topic, with most companies either revamping or implementing new strategies.

Through consulting experience and research, Quanta has uncovered some industry and technology-wide learnings that can improve your odds of market and financial success. Consider the following best practices in your digital design and planning:

Power to the people

“In the next five years, traditional marketing will shift to digital channels to capitalize on the ‘power of the people’ phenomenon to displace brand-centric strategies in favour of buyer-driven everything,” research firm Gartner says. Buyers can control the marketing messages they receive and are only a click away from a competitive product.

That means the onus is on companies to provide a digital experience that powerfully delivers on their customer’s needs. All technology choices must be driven by customer needs and their desired experience as opposed to organizational or IT considerations.

This buyer-driven world requires personalization and location-based services. Consumers want to be treated as an individual with bespoke interactions and services based on their past experiences with the firm, the device or platform they are on, and the information they require at the moment.

Social not transactional

The buying journey is no longer linear — i.e. build awareness, generate interest and trigger purchase. Now, consumers rely more on peer recommendations, are less iterative and more information-driven.

Knowing that, companies should carefully consider what information, tools and functionality are needed. For example, to leverage the power of word-of-mouth endorsements, marketers need to understand how and when their customers are using social media and target them differently by platform at each stage of the customer life cycle — from awareness building and information gathering to seeking out peer recommendations and finding timely support.

One brand, many channels

Market researcher Forrester reports that companies in 2014 “overwhelmingly plan to continue investing in DX [digital experience] technologies, with a clear emphasis on multichannel delivery and analytics.”

New technologies, applications and platforms have dramatically increased the number of channels between customers and firms, and the potential for misaligned strategies and programs. Marketers are challenged to offer a compelling omni-channel experience that delivers a consistent and competitive brand message, price and service experience. This requires management to view their businesses in non-traditional ways, master new skills sets and define new organizational structures.

Structure follows strategy

From the outset, senior leaders will need to acknowledge the traditional marketing model may no longer be ideal for a digitally driven organization. Where the function is going is difficult to say. IDC, a research firm, contends that “by 2020, marketing organizations will be radically reshaped into three organizational systems — content, channels, and consumption [data]. The core fabric of marketing execution will be ripped up and rewoven by data and marketing technology.”

The best practice marketers we see are: team-focused incorporating a variety of skill sets including data analytics; tightly integrated with other functions including IT and operations and; are intrapreneurial in nature with free-flowing data, flat decision-making and rapid experimentation.

One common barrier to going digital is the need to satisfy the traditional business case. It is often difficult to generate sufficient return on investment when quality market and costing data is unavailable, revenue and usage is unpredictable and senior managers lack the technical confidence to place important bets.

In a recent survey, roughly one-quarter of respondents named “inability to prove ROI” the top barrier to budget increases, outpacing other concerns such as lack of overall revenue (18%), lack of buy-in from management (15%), and lack of clear strategy (15%),” web research firm Marketing Charts said. Digital pacesetters, on the other hand, make greater use of lower-risk market experiments, as well as employ more advanced approaches to evaluating strategic, time-sensitive investments.

Get it right and fast

In high-stakes industries such as banking, airlines and retail, the days of introducing beta-level technology and fixing it on the fly is quickly coming to an end. Most consumers will not tolerate shoddy products or a confusing online experience; product alternatives are often well-known and immediately available and; serious threats such as cyber crime are no longer rare. To cope, firms are adopting a variety of methods to improving digital quality, performance and agility including co-creating products with customers, integrating development and testing activities and; bringing in-house strategic parts of the value chain.

There is no magic bullet to digitally enabling marketing. Successful firms are choosing their technologies and channels based on consumer needs and habits, leveraging the power of social influence, developing the right organizational alchemy and learning from their pilots and other’s experiences.

For more information on our services and work, please visit the Quanta Consulting Inc. web site

Optimizing the insurance broker’s channel

Gone are the salad days for many P&C (property and casualty) insurers, the companies that insure our cars, homes and belongings. The sector is facing many headwinds including rapidly changing consumer needs, increased risk (particularly around climate change) and rising costs. One vital component of the P&C insurer value chain, the independent insurance broker, is at the centre of change. Insurers that can deftly navigate this transformation will deliver higher consumer value, increased revenues and enjoy better relationships with their broker partners.

Historically, most insurance carriers distributed their products through local insurance agents or brokers. However, times have changed as new distribution channels emerged. Web-based technologies now allow customers to quickly and directly deal with insurance companies and get around-the-clock peer feedback. Insurers now have better predictive tools, advanced pricing algorithms and straight-through underwriting data that allow them to offer quotes instantly while minimizing risk and cost. Finally, providing a differentiated customer experience has become more challenging when consumers can deal either with brokers or with insurance companies that offer their products directly to consumers and influencers. These changes have important implications for the provider-broker partnership.

Contrary to the hype of a decade ago, the Internet is not dis-intermediating channels like insurance brokers even when consumers have a direct-provider option. To wit, a 2012 McKinsey study of the U.S. auto insurance sector found 59% of consumers dealt with a broker and directly with an insurance provider through their customer journey. For the foreseeable future, good brokers will continue to play an important role in the marketing, selling and servicing insurance products by providing choice and advice to consumers.

While marketing through this multi-channel world can complicate an insurer’s business model, it also presents opportunities to outflank competitors and deliver more consumer value. How can insurance companies work better with their brokers and deliver on joint goals?

In our client work and research we have found that P&C insurers share similar channel issues as other sectors including banking, travel and industrial goods. Leaders in these markets have thrived in a multi-channel environment by using strong, intermediary relationships to deliver an omni-channel brand experience — a compelling value proposition consistently delivered through every online and offline channel. Some best practices to enhance the broker relationship include:

1. Align around the consumer

Many factors — social media, mobile computing and a continuing recessionary mindset — are affecting the way most consumers research products and want to deal with brokers and insurers. Successful providers and brokers are embracing these trends through: an integrated, customer-centric model; the capture and utilization of partner knowledge of local markets and sub-segments, and; sophisticated, qualitative Big Data analytics that enable insurers to better understand customer needs wherever they are in the purchase or support journey so they can provide the brokers with the right products, tools and information. Failure to stay abreast of consumer needs can result in a compromised value proposition and lower market share.

2. Get closer to the channel

Smart providers understand that partnership is the foundation of a high performance broker channel. The way to achieve this is through multi-level communication, common goals and ongoing collaboration — not conflict. This partnership mindset includes understanding its entrepreneurial brokers, aligning everyone’s business interests and giving the broker a differentiated reason to favour them over other providers. Market leaders seek to embed this cooperation into their cultures as well as management practices.

“Insurance companies who rely on brokers for the sale of their products will succeed only if brokers are successful,” said Monika Federau, chief strategy officer for Intact Financial Corporation. “This is why we aim to be the insurer that is the most conducive to their growth by providing them with financial, technological, and marketing support.”

3. Enabling the broker’s business

Making significant investment in technology, innovative products, joint marketing and capabilities are needed to reinforce verbal commitments. For example, Intact has invested millions of dollars in technologies that make it easier for brokers to deal with it and allow them to focus their efforts in better serving their own customers. Furthermore, Intact provides differentiated products and services that meet the bespoke needs of its 2,800 brokers and their customers.

Intact’s strategy has paid off. Today, the company is the leading P&C insurer in Canada with a market share that is nearly double its nearest competitor. Furthermore, Intact has consistently outperformed the industry in terms of revenue growth and profitability. Clearly, working with — not against your channel — can pay significant dividends.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Consumer Good’s dilemma

Consumer Packaged Goods (CPG) has always been considered a solid, recession-proof business. After all, people always need to eat, wash and look after their households. However, steady demand does not mean firms can afford to be complacent. A number of developments are producing significant headwinds – and opening up new opportunities for growth. How CPG leaders navigate these waters can make the difference between building or losing market share.

The CPG industry is facing many challenges, including:

  • Weak growth

Times are tough. Unemployment remains high, incomes are flat and a recessionary mindset continues to influence consumer behavior in terms of higher coupon usage, increasing market share of deep discounters and the growing popularity of lower cost private label brands.

  • Margin pressure

Margins are under siege tracing to rising input costs and limited pricing power due to retailer consolidation and pricing pressure from discounters. Emerging market growth was supposed to offset this funk. However, emerging markets have become more competitive due to slowing growth rates and the rise of viable, more competitive local brands. Profit risk comes at the same time as managers need to boost their capital and marketing spend to drive product & manufacturing innovation and next generation IT capabilities.

  • Growing role of regulators and activists

Governments are getting more involved in what goes into our bodies and households. Increased oversight has important implications in terms of regulatory compliance, product development and marketing tactics. Some regulators are trying to levy higher taxes on products that are considered unhealthy, introducing measures to improve product safety, scrutinizing product claims and labels, and discouraging marketing to children. Moreover, there is increasing consumer demands for transparency on how companies perform when it comes to sustainability and corporate social responsibility as well as where products are made.

These are not easy challenges but the future need not be grim. Leaders should consider the following strategies to cope with this ‘new normal’:

  1. Embrace digital transformation

New digital technologies and devices have fundamentally changed consumer behavior in many categories. Winning companies will skillfully embrace digital transformation to more tightly connect their brands to consumers, and demand to their supply chains.

Yet, most firms we have researched have been cautious in embracing digital business. They do so at their own peril. Many companies need to quickly become proficient at digital marketing; adapt to new information gathering & mobile buying practices; leverage Big Data insights and; recognize the role of social networking in driving word of mouth referrals, awareness and community-building.

CPG firms have a variety of emerging technologies at their disposal. They can use location-based services to deliver personalized promotions or content based on their physical location. Companies can also leverage a smartphones or tablet’s camera functionality to directly enhance the customer experience. By scanning QR codes on a product, consumers can get more information, such as advice on how best to use a product or which complementary products to buy.

On the operational side, cloud services plus “agile” development practices give companies the ability to shorten the product innovation cycle, reduce infrastructure costs and rapidly scale functional capabilities.   Mining Big Data insights can help organizations better identify consumer preferences and trends, improve marketing ROI, refine pricing and deepen relationships with retailers.

  1. Refine brand strategies and portfolios

The difficult economic climate requires brand managers to refine their targeting and value propositions while holding down cost. In particular, companies will need to have distinct strategies to address an increasingly stratified market of affluent and lower-income consumers as well as seniors and ethnic groups. Multi-category firms should think about pursuing complexity reduction initiatives to cull poorly performing and costly sizes, variations and brands as well as streamlining operations and maximizing scale economies.

  1. Optimize channels

According to a 2013 Deloitte study, U.S. consumers consider 2.5 channels for their CPG purchases across 28 food, beverage and household goods categories. Consumer migration to both on and offline channels for selling and support creates operational, IT and marketing headaches around integration, alignment and efficiency. To profitably serve consumers with a consistent experience, firms need to balance their reliance on traditional channels like retailers and wholesalers with the need to follow consumers into emerging channels (e.g., mobile computing) and deliver them more personalized service, products and information. In 2014, the ‘holy grail’ of brand strategy has become delivering the omni-channel customer experience.

  1. Tweak supply chains

Many companies can do more to squeeze more flexibility, predictability and efficiency from their supply chains. For example, Big Data and Predictive Analytics combined with advanced IT systems can better match supply and demand in real-time, minimizing inventory levels, improving service performance, and reducing stock-outs.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Delivering the omni-channel experience

New technology-based “channels” are giving firms the opportunity to more deeply interact with customers.  However, adding new channels to a traditional business can trigger marketing misalignments, internal strife and significantly higher cost.  Managers who can overcome these challenges to deliver an omni-channel experience can grow revenues, enhance customer value and improve margins.

A channel can be any intermediary between a customer and the manufacturer of a product or service. Traditional channel partners include retailers, outsourced call center and wholesalers.  New channels – handheld devices, apps and soon, wearable computers – are enabling a host of activities including mobile commerce, information gathering and social interaction. Entering this brave new world poses significant risks for a company.  Consider these three areas:

  1. Marketing

Programs designed for different channels can easily work at cross purposes, leading to reduced marketing efficiency and effectiveness.

  1. Information Technology

Adding new technology to heterogeneous infrastructures is not simple or inexpensive.  Furthermore, channel must operate reliably and securely across different platforms, networks and geographies.

  1. Organization

Channel managed in divisional silos hinders operational integration and drives up complexity, resulting in higher administrative costs and conflict.

All of nothing

To overcome these challenges, many firms are pursuing an Omni (meaning “all” or “every” in Latin) Channel strategy, whereby all sales and support channels work synergistically to seamlessly deliver a firm’s brand promise to each customer segment. In turn, the operating and IT model is organized to deliver on a consistent experience at every customer interaction.

A way forward

Some companies we have researched are meeting the omni-channel test – but many are not.  Successful firms recognize the strategic importance of their channels and share some key attributes, including:  a customer-centric philosophy; an emphasis on organizational and technical integration and a collaborative mind set inside and externally.

New software can help enable customer centricity across every channel.  As an example, NexJ Systems, a leading software provider, developed an enterprise-wide solution that gives managers the information and tools to manage all their channels for maximum performance.  According to CEO and Founder Bill Tatham, “At one of our large insurance customers, a single view of the customer and every interaction with that customer is shared by head office, the contact center and the field agents, allowing collaboration in selling and customer value maximization.”

One firm that is getting it right is TD, which is no small achievement in the complex retail banking space. At the core of TD’s effort are three key principles:

  1. Put the customer first

TD launches and manages channels & services based on what the customer wants, not just what their technology can provide.  The firm receives a daily flow of usage data across each channel generating real time insights on a user’s behaviour as well as needs states.   This customer-centric philosophy ensures each channel maximizes the value delivered at the lowest possible cost.

  1. Have a supportive organization

TD understands that consistent leadership, a clear ethos and engaged workforce can make or break the omnichannel experience. Their unique “Better Bank” culture emphasizes continuous improvement, collaboration and a longer view of program payback.  TD’s digital channels are not managed as siloed businesses.  Instead, they reside in a horizontal, enterprise-wide structure, which helps drive marketing & operational integration, rapid execution and higher system ROI.

  1. Be bold but implement prudently

Though keen to adding new technology, TD takes a prudent approach to introducing new services.  The Company adopts an end-to-end operating view and a “continuous improvement” approach to designing and implementing the right technology.  Before launching any capabilities, multi-functional teams carefully evaluate their options and select the ones that best fit their brand and IT strategies.

“Customers want us to know them, and we’re continually evolving our notion of convenience to make their journey with us more comfortable, no matter when, where or how they choose to bank with TD,” says Teri Currie, Group Head, Direct Channels, Marketing, Corporate Shared Services and People Strategies. “We are leveraging TD’s strong North American brand and scale to develop connections with our customers by focusing on their needs, looking specifically at their journey with us to understand how we can make their lives better.”

TD’s approach is working.  The Company is rated number one in customer satisfaction (according to J.D. Power) among the Big 5 Canadian Banks for In-person, ATM, Online, Automated and Live Phone.  This accomplishment is not merely a function of the company’s strong bank network.  TD is also number one Canadian bank for mobile banking according to Commscore.

Providing an omni-channel customer experience can generate significant rewards, though it might not be an easy journey.  Nonetheless, managers have little choice. In a low growth world, failing to prioritize an omni-channel strategy can result in missed growth opportunities, higher customer attrition and increased operating costs.

For more information on our services or work, please visit the Quanta Consulting Inc. web site.

5 sources of growth in 2013

North America is mired in a low growth funk driven by cautious consumer spending and frugal capital expenditures.  For 2013, many CEOs are bracing for zero or even negative revenue performance. Even frothy companies are adjusting to this ‘new normal’ by continuing to restrain R&D, sales & marketing and M&A activity.  Is this reaction a tad premature?  Have firms exhausted all avenues for growth?  Since 2008, we have helped a variety of dynamic companies drive topline growth an average of 27% by identifying market ‘white space’ and monetizing under-utilized assets.  Managers should explore these 5 areas to propel their 2013 business:

1.    Find under-serviced or ignored niches around your core offering

The fluid nature of many categories and consumers hide a number of market anomalies that could be exploited by nimble firms.  For example, the majority of markets can support different strategic positions including low cost, specialized and premium offerings.  Some categories, however, are missing one of these players offering opportunities for new and differentiated entrants.

Other companies will discover adjacent “white space” – an ignored market or compelling, unmet consumer need – where they could extend their strong brand franchises. P&G has done this successfully by launching Crest White Strips, extending their Oral Care line-up from toothpaste and brushes into the Whitening business; and by launching an array of Swiffer products to clean various surfaces in addition to their other cleaning line.  “Cutting costs is important, but you cannot shrink your way to growth.  You’ve got to reinvest the savings in distinctive value-added products and services that customers are happy to pay for.” said Tim Penner, retired President of P&G Canada.

2.    Increase revenue from current customers

Most firms inadvertently leave money on the table, often with their best customers. This occurs for a number of reasons including: over-zealous discounting; poor visibility into the customer’s potential value; low customer awareness of the vendor’s full offering or; ineffective cross-selling programs.    Fact is, opportunities exist in every customer relationship and company.  We designed a revenue maximization program for a software company that plugged billing leaks and better aligned pricing to value deliveredpainlessly producing an 18% revenue lift.  In another case, we helped a U.S. industrial goods manufacturer double their cross-selling rates by mining their customer data with advanced analytics and developing targeted sales and marketing initiatives.

3.    Turn platforms into new revenue generators

Following significant capacity, infrastructure and IT investments over the last decade, many firms now have robust but under-utilized operational platforms that can be leveraged into new revenue opportunities.  Amazon has successfully pursued this strategy.  Early on, they recognized the potential of their B2C e-commerce platform by launching a host of new B2B services including cloud computing, online storage and merchant e-commerce services.

4.    Maximize all distribution opportunities

Many marketing strategies have not kept pace with the buying habits of their customers, who increasingly are directing their purchases through a plethora of direct and indirect on & offline channels.   Filling these distribution gaps is an ideal way to build volume and outflank competitors.  For example, we helped a consumer products company drive a 18% increase in shipments by gaining ‘bricks and clicks’ shelf space in non-traditional retail and B2B channels.  Furthermore, firms can no longer ignore the revenue, margin and custom experience benefits of going direct to the consumer.

5.    Monetize intellectual property and process by-products

In some firms, healthy investments in R&D and strategic partnerships have spawned a significant amount of intellectual property.  Much of this IP may now be lying dormant due to lower commercialization investments or a shift in corporate strategy. Organizations should look to monetize inactive IP through outright sale or by licensing to non-competitive 3rd parties.  In addition, many companies like Cook Composites and Polymers have discovered that there is gold in the waste by-products of their manufacturing processes. Turning waste into new products can create new streams of high-margin revenues and improve sustainability performance.

In tough times, prudent companies will seek to maximize their revenue by better leveraging their existing customer base, resources and capabilities.  To realize this potential, managers will need to relook their entire business, including: enhancing their understanding of the market ecosystem, mining their consumer data and; looking for creative ways to serve customers in unique and compelling ways.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Gold medal partnerships

These days, many companies are looking to build their brands, target new customers and launch new services using marketing sponsorships, outsourcing arrangements or business development alliances.  To do this, managers need to master partnership management with complementary firms, government agencies and non-government organizations.   Identifying the need for a partnership, however, is easier said than making one work. A myriad of issues can complicate key business relationships, including poor communication, misaligned objectives between the organizations, and weak integration between the entities.  

Our firm has identified a number of best practices around designing and implementing winning partnerships.  To illustrate these, we will look at two very different examples:  1) the Olympics and; 2) the software industry.

The Olympic Games

Recently, strategy+business magazine looked at the Olympics Games as a model for effective partnership management.  To successfully pull off the games, the International Olympic Committee must orchestrate a tightly choreographed dance of hundreds of sponsors, broadcasters and service firms. The IOC and its corporate partners have developed a world-class partnering model, based on the successful completion of many games (now including London) as well as a few painful experiences (think Montreal 1976).  Some of the IOC’s key learnings include:  

  1. Prioritize the brands

To maximize the value of the marketing sponsorships, all parties need to work closely to uphold the rules around brand usage and exclusivity.  Furthermore, corporate partners will drive better results when they have a clearly defined and powerfully articulated brand message that intersects the needs and desires of all stakeholders.

  1. Cultivate a few key relationships

Better outcomes are achieved by having fewer, deeper and longer term business relationships as opposed to more numerous, shorter term, and more superficial arrangements.  This ‘less is more’ strategy triggers each partner to invest more resources, capital and effort against longer term goals and to work more diligently through teething pains.

  1. Anticipate political pressure

The involvement of the public sector or a NGO usually brings some form of subtle (or not so subtle) political pressure that could run contrary to the financial interests of all players.  Managers should be aware of potential risks when structuring partnership deals and develop contingency plans to handle unexpected problems or political interference.

Software Industry

My firm was engaged to help a software company resurrect a stalled business development alliance with a global IT services firm.  Initially, the client thought they had the key ingredients – great technology and strong personal rapport at senior levels – for a winning relationship. We quickly discovered, however, through internal research that the partnership needed a structural, process and cultural tune-up to realize its potential. Three key lessons emerged:

  1. Align around common goals

At the outset, it is crucial that all players agree on what a successful partnership looks like, how it is evaluated and where their marketing and operational strategies converge to produce a mutually beneficial relationship. Not surprisingly, alliances based on similar long-term objectives & values, a ‘win-win’ deal and a ‘partnership mind set’ have a much greater chance of flourishing.

  1. Establish troubleshooting mechanisms

When disparate organizations come together, there is a good chance that modest disagreements and latent misperceptions could rapidly escalate to derail program implementation.  It is vital to deploy a high-level, cross-organization steering group that can quickly resolve issues before they can jeopardize the entire alliance. Moreover, this senior team can also support ongoing priority-setting and resource allocation.

  1. Foster intra-preneurialism

Rock solid contracts and detailed plans can not deal with all the demands and snafus that come with executing partnerships.  It is up to the ‘people in the trenches’ to make partnerships burgeon.  These vital individuals are most effective when they can act like intra-preneurs i.e. internal entrepreneurs.  To encourage these behaviors, key managers need a high level of empowerment, sufficient resources, and the opportunity to communicate extensively with their counterparts.

Some final and poignant thoughts come from John Boynton, Chief Marketing Officer, of Rogers Communications Inc. “Rogers prefers bigger partnerships. Bigger to us is a deeper, longer term, more integrated relationship. You know when you have a done a good job when you can’t tell who in the room is from which side. Getting one partnership or sponsorship to work on as many levels as possible provides a better return.”  To a prominent sponsor like Rogers, great partnerships are based on strong customer appeal.  “A lot of sponsorships don’t make sense to customers”, says Boynton, “because the target audience doesn’t line up in the “sweet spot”, or that companies choose the sponsorship based on profile or personal interests. Having a very tight overlap with the sweet spot and ensuring the sponsorship addresses the target customer’s “passion” are the keys.”

Despite the best intentions, many business partnerships will ultimately fail.   They need not.  Managers can follow a variety of marketing and organizational best practices to improve their odds of long term success.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Customer acquisition in a multi channel world

Most companies depend on some form of channel to target, sell and deliver products and services to end users.  A channel can be any intermediary such as a retailer or distributor, a sales team or a technology platform like the iPad. Recent developments are putting channel performance in executive crosshairs.  A low growth economy puts a premium on having high performance channels that drive customer acquisition and retention while maximizing efficiencies.  Secondly, the power of Web-based technologies can no longer be ignored.  Social media, e-commerce, and mobile computing already play a vital role in product purchase, research, referrals and support.

All too often, channel-focused acquisition strategies fail to achieve the desired results for the following reasons we’ll call the 5 Cs:    

Cannibalization – Customer acquisition programs in one channel end up cannibalizing another channel’s business.

Consistency – High channel complexity increases the chances that your value proposition, tactics and strategy will be inconsistently deployed.

Conflict – Misalignments in strategy and incentives triggers conflict between different channel players and the company.

Customers – Customer behavior and needs become out of sync with the channel design.

Change – Managers do not follow ‘best practices’ when making changes to strategies and structure.

Although channels are complex to manage, there is hope.  Our learnings from two industries – industrial automation and consumer insurance – highlight the fact that strategically agile firms who pay close attention to their customer and channel partner’s needs can build market share, reduce conflict and gain competitive advantage. Two examples illustrate the value of this bottom-up approach:

Industrial automation

An automation company approached us looking for help in penetrating an unexploited customer group. Management focused on 2 key questions: what was the best channel to target this new segment? How do you formulate a channel strategy that was a win-win-win for the customer, channel partner and company?

Our solution began with an exploration of the target customer’s behavior, needs etc. Secondly, we surveyed their likes/dislikes of the channel that traditionally targeted them.  Finally, we framed this research against major industry and technological trends to understand how the market was evolving. The recommended channel strategy would fall out of these purchase, market, technological and behavioral drivers. 

Our findings opened a few eyes.  Initially, the client assumed the segment could be targeted by the existing distributor and systems integrator channel, with only new and improved marketing programs.  However, we discovered that over half of these customers had a high level dissatisfaction with existing channels, both as individual firms and as a structure.  Instead, these people wanted a direct relationship with the manufacturer – if the firm could develop a functional and informative Web platform.  The research results triggered the deployment of a new e-business portal and direct marketing program.  This channel dramatically improved customer acquisition, minimized cannibalization, and increased overall customer satisfaction.

Consumer Insurance

Boston Consulting Group looked at how to win new business in a channel-reliant business –  the North American home and auto insurance industry,   BCG wanted to answer some questions essential to firms looking to profitably grow market share in a mature market.  For example, how do consumers really want to buy insurance? Do different demographic groups truly prefer different channels? Which channels will prevail in the future? And, which strategic steps should be taken to drive growth?

BCG’s research yielded some noteworthy findings, which we have validated through our Canadian insurer experience: 

  • Over 40% of consumers across all segments are channel indifferent. These consumers represent the battleground for customer acquisition.
  • One way to target these consumers is with a direct relationship using the Web.  Although insurer web channels are poised for the highest growth, current executions must become more customer-centric and functional.
  • All consumer segments value personalized advice and service delivered via agents. However, this agent channel, ideally positioned to provide advice, is not fully meeting consumer needs.
  • Strategically, managers should look to rejig their channel strategy to better drive acquisition.   They have 3 channel options:  agent-focused, direct-focused or a hybrid of the two.

In most channel-intensive markets, the key elements – consumers, technologies and channel partners – are evolving.  Companies that best understand the changes and are able to quickly and adroitly develop new channel models can outflank competition and win the battle for new customers at lower acquisition cost. 

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Optimize the channel experience

Firms competing in channel-intensive markets are regularly challenged to satisfy finicky and value conscious customers without introducing too much cost and complexity.  All too often, however, a firm’s customer experience and value proposition is compromised by channel partners whose objectives, value proposition and capabilities are strategically incongruent.  For example, we worked with an IT equipment manufacturer whose premium brand image was hurt by the actions of a deep-discounting, low service distributor.  In another case, a leading consumer goods company could not satisfy customer service requirements because one of their retailers was unwilling to invest in new capabilities. 

To maximize customer satisfaction, managers should understand how their channel partners – such as resellers, portals, service providers, installers and retailers – interact with buyers through the entire marketing-purchase-service continuum and then work collaboratively with them to enhance that experience.   

This will not be an easy exercise. Many enterprises have thousands of SKUs, work with hundreds of channel partners and use multiple platforms to sell, communicate and serve customers.  There could easily be over 100,000 different physical and digital touch points between consumers, producers and channel partners.  This hodge-podge can only lead to conflicting, poorly integrated and uncoordinated marketing, channel and service programs resulting in failing customer experiences, overly complex operations and lower margins.

The root cause of this problem lies in misalignments between the structure of the channel and how consumers want to get information, purchase products and receive services.  Channels that are underperforming or based on yesterday’s requirements are often unable to accommodate current market needs let alone deal with growing consumer demands, new product launches and emerging digital technologies.

In reality, consumers no longer separate the channel from the product, service and message — the channel is the product. In the era of buyer engagement, customer acquisition and retention is a lot about effective channel management and design. To truly engage consumers through a multi-channel world, companies must do more outside the confines of the traditional channel marketing function.

Improving the channel’s ‘customer experience’ requires three fundamental changes:  1) an agreed understanding of buyer needs across the entire continuum;  2) a commitment and action from the entire channel to satisfy these needs — not just from the company’s marketing and service departments and;  3) a redefined channel management function that links the organization to a desired and brand-compliant channel customer experience.    

We have helped organizations design and implement new channel management programs that have enhanced customer engagement and reduced operational costs while driving higher revenues and service levels.  Some of these principles include:

Expand the channel role beyond just marketing

To better engage buyers whenever and wherever they relate to a firm’s product, companies must expand the channel management role beyond sales and marketing to include input to and co-ownership of all customer-impacted operational, IT, product and service decisions.    

Bring the channel into organization

To improve performance, firms need to bring a rich understanding of channel requirements into the enterprise.  This can be done by creating internal councils with IT, finance and operational representation.   As well, important channel relationships can be managed through integrated, cross-functional teams with P&L responsibility.

Tweak the channel

A good starting point is to think about the channel experience as customers do – a series of related interactions that, added together, make up a ‘moment of truth’ experiences. This approach will naturally identify areas where the channel can be redesigned and better managed to ensure strategic congruency.  This process will usually trigger a discussion of who internally is in the best position to manage these activities and what resources and capabilities are needed to achieve the new vision.

Get everyone on the same page

Channel engagement (at key touch points) and performance should be regularly measured with some of the same metrics that are used to evaluate brand image, operations or marketing effectiveness. All channel partners should align around these metrics and goals

Anticipate challenges

Optimizing the channel experience will not be easy given the business risks and the organizational implications to partners, employees, processes, technology and strategy.  Change will be doomed if management and the channel:  1) do not have a common understanding of their markets, buyers and value proposition and; 2) do not work collaboratively towards the same goals. If companies and partners don’t make the transition, they run the risk of being overtaken by competitors that have mastered the new era of engagement.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Improving joint venture performance

Over the past 20 years, Joint Ventures (JV) have become a popular form of business structure.   There are many types of JVs but each share a basic premise: separate businesses agree to develop, for a finite time, a new entity and new assets through the contribution of equity and resources. The partners exercise control over the enterprise and consequently share revenues, expenses and assets.

Although difficult to get an accurate tally, there are likely more than 8,000 JVs in existence worldwide representing hundreds of billions of dollars in combined revenues. JVs have been the preferred strategy for North American and European companies to enter the rapidly growing BRIC (Brazil, Russia, India, China) markets.

When operating well, JVs deliver compelling benefits including simplifying entry into new markets, reducing business risk and conserving scarce capital. 

The operant phrase is, “when functioning well.”  JVs are not easy to form, operate and exit. A number of studies by KPMG, McKinsey and PWC have concluded that no more than 50% of all JVs were seen to be successful by their participants, with the average partnership lasting between 8 and 10 years. For those JVs that soldier on, they often suffer from strategic confusion, slow decision-making, and duplication of effort with the parents.

Two successful JVs provide some important lessons on creating and managing these unique relationships.  CIBC Mellon, a leader in the Canadian Asset Servicing industry, is a successful 14 year JV between the CIBC and Bank of New York Mellon.  Sony and Ericsson created a JV s in 2001 to manufacture mobile phones.  In 2009, Sony Ericsson was the 4th largest mobile phone manufacture in the World.

The following are some key lessons on creating and managing well-run JVs:

 Finding the right partner

  • Look for similar goal, and cultures – Not only must the firm’s culture and business practices be amenable to collaboration but it must have what Tom MacMillan, Chairman of CIBC Mellon, calls “the JV mindset…Some companies are good at working with others, some aren’t” 
  • Ensure a strategic fit – When prospective partners are identified, managers must evaluate the firm’s capabilities, management and financial health against the JV’s needs and their own gaps. In Sony Ericsson’s case, the JV combined Sony’s well-honed consumer electronics expertise with Ericsson’s leading technological knowledge in the communications sector.

 Reaching the right agreement

  • Get a strong business case – A winning JV combines a compelling business case with financially-strong partners.  “Two lousy businesses put together will not make one good business…they will give you one big lousy business.” Says Tom MacMillan.
  • Align around goals, commitments and mutual expectations - To avert conflict and ensure proper resource allocation, all parties must ensure their strategic and financial interests are in sync before commencing operations. To ensure strategic and financial alignment, both Sony and Ericsson agreed in the JV to stop making their own mobile phones.
  • Get the right equity and capital deal – Research says that a 50/50 equity split, with clear responsibilities and rights on both partners, has the greatest chance of success. 

Making the partnership flourish

  • Assign effective leaders – Senior management at both the parents and JV must be skilled at managing through differences in reward systems, cultures and organizational practices.   According to Tom MacMillan, strong Board-level leadership by the partners and day-to-day leadership in the JV may be the most critical factor in ensuring the JV’s success
  • Insist on mutual commitments –  Both partners must honour and maintain their financial and operational commitments even when results are less than ideal or the strategic circumstances of one party changes. This puts an onus on properly capitalizing the JV at the outset and dealing with future investment requirements.
  • Get the governance model right – The ideal governance structure provides sufficient controls to minimize risk without stifling operational flexibility and speed.
  • Anticipate and pre-empt conflict – According to a PWC study, the top 2 reasons why JVs fail are poor financial performance and a change in strategy.  To pre-empt surprises and illuminate important issues, JVs need regular strategic reviews and performance tracking.  Building in transparency and regular management communications will help foster trust and reinforce shared goals.

For more information on services and work, please visit the Quanta Consulting Inc. web site.

Follow

Get every new post delivered to your Inbox.

Join 262 other followers