Tuesday, 10 July 2012

Outsourcing the 80/20 Rule

Without doubt, sales and marketing in a business to business (B2B) environment has its own distinct set of challenges, especially when dealing with commodity goods and complex distribution models.

In our experience, more traditional models of marketing and sales processes persist. Typically businesses operate in-house marketing departments whose primary function is to stimulate the market and generate interest (email, DM, catalogues) and field sales teams whose job it is to convert the interest into sales.

In theory, this principal works well if properly conceived and managed, however issues can arise both in terms of resource, managing costs and return on investment. And in more than any other marketplace, the classic 80/20 rule is evident...

80% of effort goes into the 20% of accounts which generate 80% of the sales.

But what about the remaining 80% of accounts generating 20% of the sales?  

Key accounts receive the regular, proactive contact from field sales personnel but lower value accounts are often only serviced on a reactive basis. This can lead to a number of challenges:
  • Little customer development or product cross sell
  • Missed opportunities to upgrade customers to key account status
  • Lower value accounts often complain of “only being contacted when there’s something to be sold”
  • The perception of the brand in lower value accounts doesn’t match that of key accounts
So what’s the answer?

First and foremost it’s a question of identifying the development opportunity in smaller (or tier 2 for want of a better phrase) accounts. This can be done by performing analysis on the make-up and profile of the overall customer base, identifying those tier 2 accounts and the products they purchase, their frequency and the revenue generated.

Once the opportunity has been analysed , a communication strategy can be put in place, preferably one which integrates both the marketing and sales functions. It’s at this point that we always advocate the use of Relevance Marketing – relevance of channel, relevance of message and relevance of timing. If you can say the right thing via the right channel at the right time you will significantly increase your chances of successful conversion and make your sales team’s job much easier.

This leads me on to channel. The current or potential value of tier 2 accounts can mean it’s not cost effective to perform regular field sales visits. Indeed an existing client of ours has calculated that it costs somewhere in the region of £150 per successful field sales visit. Telephone based account management however is much more cost effective. For the same cost of a field sales visit, approximately 60 phone calls can be made in a working day of which you could reasonably expect 60% to be constructive conversations with decision makers. This is of course only true in an internal account management scenario where the businesses being called are already customers.

In-House or Outsourced?

Many businesses already operate telephone based account management models supported by structured marketing activity. With the right facilities and structure, it can be preferable to manage this function in-house however this can prove to be costly and problematic when factors such as recruitment, training, retention and contact centre infrastructure are taken into consideration. This is where an outsourced model can be attractive.

It is important though to choose the right partner when outsourcing something as important as your customer communications but what are the key points to look for? I’ve previously written a series of blogs on these topics which cover the following:

Whatever the primary reasons for seeking an outsourced partner in the first place, for me the most important are finding a partner who takes the time to really understand your business and products and one who can demonstrate a measurable return on investment.

Specialist business process outsourcing companies (such as ours) will have mechanisms and metrics in place to ensure that the results of the campaigns are measured and that continuous improvement is sought. What sets exceptional BPO providers apart from run of the mill ones is the investment they make, not only in the early stages but on an ongoing basis in really understanding your culture, proposition and the results you’re looking for. This way they can truly become an extension of your own business and a valuable addition to your sales and marketing function. 

No comments: