A customer profitability management (CPM) program helps companies begin to lay the foundation for building a B2B lead generation program that will maximize average new customer profitability and corporate earnings.
Posted Oct 4, 2004
By serving on a national marketing association's B2B advisory board, I'm included on inquiring emails from members. Recently, a member's email sought help in developing a lead generation program designed to maximize corporate profit growth.
The resulting barrage of suggestions and debates lasted for weeks and was only successful in highlighting the fact that no one seemed to have a solid recommendation. Given Corporate America's recent acquisition binge, resulting in further depressing earnings, I can't say I find this surprising. What is surprising is that in all the talk about targeting, qualifying, tracking, and closing prospects, nobody--not one person--mentioned analyzing the company's current customers.
Any attempt to connect potential-prospect (new-customer) profitability to corporate profitability should start with an analysis of current customer profitability. By pinpointing those high-value customer segments that are maximizing value to the company's bottom line and the customer touch points these customers prefer and utilize most, a customer profitability management (CPM) program helps companies begin to lay the foundation for building a B2B lead generation program that will maximize average new customer profitability and corporate earnings. In other words B2B marketers need to follow the (slight) lead their consumer marketing colleagues have gained from CPM.
Consumer marketers tend to have more customers, and there is a common misperception that the impact of the CPM process is greater in consumer marketing efforts. What many B2B marketing professionals fail to recognize is that with a higher cost of sale and longer sales cycle typical in a B2B environment, any improvement in average customer profitability can have as great, if not a greater, effect on short-term earnings than can a comparable consumer company.
Since a vital part of the CPM process includes in-depth dialogue with like customers, grouped by profitability, it's easy to see the benefit--beyond retention--that CPM offers a company's lead generation efforts. The prospects with the highest propensity to become high-value customers will closely match the company's current high-value customer profile. Strategies developed as a result of CPM can have a profound impact on ensuring that B2B acquisition efforts maximize corporate effectiveness and profitability.
What Customers Say Versus What They Mean
Since customers will many times tell a salesperson one thing then reveal something entirely different in a research environment, the result of going through the qualitative side of the CPM process offers huge benefits for sales. In essence, it opens their eyes to a number of new opportunities/threats and strengths/weaknesses related to the product/company/brand/USP. By utilizing this new information, sales management (and customer service) can more effectively fine-tune their dialogue with potential high-value customers to close more business.
In one example, a sporting equipment manufacturer developed a collaborative extranet for use by its sales force and customers. The company's best customers responded favorably to their respective sales reps, leading sales to draw the conclusion that the site is a great new benefit to this customer group. The sales reps began heavily promoting the site when selling new accounts. However, in one-on-one interviews as part of the CPM process, these high-value customers revealed that they felt they are being forced to use this new tool by sales, and that they would prefer more personal contacts/calls from their reps, or at least the same amount of personal touches during their ramp-up on the tool's learning curve. This example reflects the benefit of identifying gaps in actual experiences and preferences from a company's more valuable customer segment.
Moving Up the Profitability Ladder
CPM not only helps generate more profitable leads but also helps B2B sales members understand their vital role in moving customers up the profitability ladder, once they become customers.
In the B2B marketing arena the strategies and tactics developed to accomplish this vertical profit climb typically include reconciliation of the scope and respective cost of personal sales and customer service touches, in relation to revenue received. The more that sales and customer service understand this analysis and the necessary changes as a result, the more integrated the two departments tend to work together toward this common goal, thereby further increasing productivity, average customer profitability, and the corresponding optimization of corporate profitability. There are three critical thoughts to embrace:
Optimizing corporate profitability begins by optimizing average customer profitability. Invest in customer profitability management and your company will reap the benefits.
In stratifying customers by profitability, be sure to include the customers' views and experiences. This feedback is vital for involving and leveraging sales in the CPM process.
Only after implementing these vital analyses and program evaluations can you begin to build a lead generation program that maximizes average new customer profitability and therefore both short- and long-term corporate profits.
About the Author
Michael King is group vice president and creative director of the Grizzard Performance Group. King offers 20 years of direct marketing experience from both client and agency perspectives. He has won dozens of awards from industry organizations, including the AMA, BMA, and DMA, based primarily on campaign results. King has a BBA in marketing from Stetson University and an MBA in marketing from Georgia State University. Information on Grizzard Performance Group is available online at www.grizzardpg.com.
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