Archive for the ‘Profitability’ Category
Hot on the heels of its best ever year for growth in 2012, when turnover expanded by 28% to £5.1 million, business-to-business market research and business intelligence agency B2B International is setting more records.
The company’s rapid growth has continued apace in Quarter 1 2013, posting its best ever start-of-year figures. Revenue surpassed £1.7m, a huge 108% increase year-on-year. The quarter was also the second best quarter in the company’s history, after the £1.9m achieved in Q4 2012.
Since its formation in 1998, B2B International has continued its record of growing its revenue and making a profit for 15 consecutive years.
CEO Matthew Harrison explains, “It is hard to single out highlights from these results as revenue in the UK, US and Asia-Pacific all increased by over 100% on Q1 of 2012. In addition, our medical division has seen enormous growth since summer 2012, and the proportion of our revenue represented by ongoing contracts rather than ad-hoc work has increased fivefold in less than 2 years.”
The company, whose main offices are located in Manchester, London, New York and Beijing, has aggressive plans to continue its rapid expansion. In the past year it has doubled the size of its data processing department and continues its recruitment drive for high calibre graduate research analysts.
It never ceases to amaze how many times I discover sellers within client companies, who misunderstand the signals they get from their customers and – as a consequence – over-estimate the number of price-buying customers they have. My most famous case occurred ten years ago. I kicked off the first day of a three-day marketing workshop to be confronted by one seller: “Before we waste three days of our valuable time, could you just explain why I should spend three days in this workshop when 80% of my customers are Price Buyers?” – A not atypical challenge.
I was very interested by this claim, as I had personally never come across any market situation where there were so many Price Buyers and I had worked in a number of undifferentiated (some would say “commodity”) product-markets.
On that occasion ten years ago, I managed to convince my challenger to stay with the workshop. By the end of the three days he acknowledged and agreed fully that less than 30% of his customers were actually Price Buyers. The end result put several millions of Euros on to client’s bottom line that same year and sustained into the subsequent years.
This case highlights a very common issue and challenge for companies in many B2B markets and especially in the chemicals and plastics industry. Just imagine what that means to margins if we can misinterpret the needs of up to 50% of our customers!
So what are the causes of this widespread phenomenon and what can we do about it?
1. Buyers defences are high
Situation: Buyers are often between the rock and the hard place, under pressure to reduce raw material costs, whilst at the same time ensuring a continuous and timely supply of good quality products to the plant. That pressure is often manifested in a demand for better prices.
Remedy: Sellers need to understand how difficult it is for a buyer to be a GENUINE Price Buyer – it is not easy. To be a Price Buyer the customer must have the following conditions in place:
If the customer cannot demonstrate these conditions, they cannot be a Price Buyer…..and, by the way, any customer that comes back to the seller with the offer to win or keep the business if they match the price of an alternative supplier is NOT a Price Buyer. This behaviour is a clear indication of a preference to do business with you – you must discover the basis of that preference.
2. Sellers think they are selling commodities
Situation: The word commodity carries with it many connotations, not least that there is no value in marketing or customer segmentation; it’s all about getting the price right, as customers do not value anything else.
Remedy: Sellers should think of these as UNDIFFERENTIATED PRODUCTS, which are just one part of the TOTAL OFFERING; this means that there may be still real possibilities to differentiate the offering on service levels (e.g. reliability or responsiveness) or on intangibles (e.g. reputation or relationship).
3. There is no meaningful and differentiating customer segmentation in place
Situation: Sellers have no reference points or supporting models to help them to distinguish different buying behaviours and different customer needs.
Remedy: Sellers need to be able to recognize the differences in need and behaviour of their customers. It can help to provide them with a customer segmentation model based on needs and values of different customer groups, encouraging them to seek out and recognize the differences and to gear the offering to fulfil the specific customer needs; for example:
4. There are no clearly defined customer value propositions
Situation: The seller has no clearly defined value propositions to offer to the customer, based on the segment to which they belong.
Remedy: Marketing needs to provide sellers with well-defined and clearly differentiated value propositions, providing them with the ammunition to beat the competition. Sellers fire the guns, marketers provide the bullets.
Each of the above segments demands a clearly different and differentiated value proposition with Product – Service – Intangibles and the 4R’s of sustainable differentiation
5. Sellers typically approach a customer with one offer rather than offering choice
Situation: Sellers are ill-equipped to offer choices to the customer, either because the marketers have given them no alternatives or they are not empowered nor authorised to develop their own alternatives and therefore make a single offer (“take it or leave it”).
Remedy: Customers need and value CHOICE. If you do not offer choice, they must seek alternatives from other suppliers in order to be able to run the trade-off process, which is typically the core of any buying decision-making process. Marketers must provide the sellers with a palette of offerings tailored to the needs of customers in specific segments and reflecting the importance and value of the customer to the supplier, so that sellers can offer their customer a genuine choice (“which of these offers best meets your needs at the price you are willing to pay?”).
Phil Allen is CEO and Value Creator at Marketing and Sales Excellence Practice, GEMS International GmbH.
For more information on how B2B International can help your business segment their customer base and more closely satisfy their needs and make a profit along the way then visit – Segmentation Research
Yesterday’s blog entry entitled Getting More From Your Existing Customers is clearly a hot topic at present.
What’s more, less than half (46.5%) of the 650 marketing professionals who took part in the online and in-person survey feel they have good insights into retention rates, customer profitability and lifetime value.
However, among those strategies cited for extracting greater revenue/profitability from existing customers are:
• making communications more personal, relevant, targeted and timely
A much broader set of strategies are employed for acquiring new business, including:
• testing and launching new products aimed at specific market segments
And, according to nearly 60% of survey respondents, introducing better segmentation, profiling and targeting strategies is the principal way in which they are aiming to better engage core audiences.
In a recent article in BUSINESSWEEK, the Harvard Business School guru on competitive strategy, Michael E. Porter, gave his view on why America needs an economic strategy.
His article offers useful insights on the determinants of long-term prosperity for the United States and from this we can pick out many aspects that are pertinent to the long-term growth of business. We have extracted some of the key points and linked them to a business perspective:
To read the article, please click here.
It is widely accepted that satisfying customers profitably lies at the core of every successful business. But do we always fully appreciate all the different ways our customers come into contact with us, and do whatever we can to understand how they can best be served? Nick Hague isn’t so sure…
In these uncertain times, holding on to your most valued customers is more crucial than ever. From just a quick Google search you can get many different statistics thrown in your face:
The average company loses 10% of its customers each year
A 5% reduction in the customer defection rate can increase profits by 25% to 85%, depending on the industry
The top 20% of customers in a business may generate as much as 80% of the company’s profits, half of which are lost serving the bottom 30% of unprofitable customers
I recently read an article on www.btobonline.com about some research carried out by the CMO Council (an online survey of more than 450 global marketers). It stated that only a half of global marketers have strategies in place to further penetrate or monetize key customer account relationships, and only one-third have strategies in place to win back dormant or lost customers. It brought it back home to me that while b-to-b marketers are increasingly focused on improving relationships with customers, they still have a long way to go in implementing effective, consistent customer retention practices.
The survey found that everybody was spending money on demand-generation programs, but was missing a trick in not looking closer to home at their existing customer data and leveraging it further. We all know that it is easier to sell more of a product or service to a current customer than it is to try and get a potential customer on board, so it begs the question, ‘why aren’t more companies doing this?’
The problem is that, historically, companies’ customer satisfaction data hasn’t been disseminated widely enough throughout the company to heighten the importance of little things, like the fact that a delivery driver can speak the native language and is friendly and polite when on site, or that the appearance of the delivery fleet is up to scratch. These little things can impact on customer satisfaction and loyalty in a big way, especially because this might be the only real contact that a customer has with the company. Therefore, the lack of ownership of the customer relationship across a company is the first step to reducing churn.
Marketers should determine their most profitable customers, and look at how to improve the customer experience and how to increase business with those customers. The study showed that only 6.8% of marketers stated they have excellent knowledge of the customer when it comes to demographic, behavioral and psychographic data; there is no excuse!
At B2B International we are passionate about customer satisfaction and customer loyalty research. We have spent our lifetime speaking to other people’s customers. However, the question is often asked; ‘who is the customer?’ This is the biggest challenge business-to-business companies face in the battle for customer loyalty. Keeping on top of all the interactions and touch points a customer has with a company is difficult, but it is important to return again and again to this subject because we all know that the customer is made up of many touch points and different people in different positions. A company not only needs to know who the key decision maker is, who ratifies the decision and who are the key influencers, but also the wider myriad of connections between companies and their customers.
Think about the bank that you deal with. It is not just the cashier that you come into contact with; what influence does the ATM machine, the call centre, or the adverts you see on the television have on your perceptions and satisfaction?
A customer might call in to a call centre for a query on their bank account and get turned off because the call wasn’t handled properly. Small things like this might go unnoticed but when added up these could result in large churn.
It is crucial that all marketers understand that customer touch points are linked and thus work towards heading off the ‘domino effect’ if something goes wrong at one of them.