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Accenture

Why do certain companies achieve high performance andconsistently outpace their competitors while othercompanies produce only mediocre results? This questionis arguably one of those most often pondered by businessleaders and academics, perhaps because the answer remainsfrustratingly elusive.

Why do certain companies achieve high performance and consistently outpace their competitors while other companies produce only mediocre results? This question is arguably one of those most often pondered by business leaders and academics, perhaps because the answer remains frustratingly elusive.

The economic downturn that occurred at the beginning of this decade provides another example of why the basis for market leadership is so intriguing and so difficult to pinpoint. As companies everywhere faced difficult times, a few confounded expectations and broke away from the pack. Today, these companies are putting even more distance between themselves and their competitors, achieving robust growth while others limp along.

Seeking to identify some of the secrets to the success of these market leaders, Accenture embarked on an extensive research project that examined the link between high-performance businesses and specific functional capabilities. This research identified, among other findings, several marketing-related factors that strongly correlate to superior overall business performance.

We established this correlation by using customer loyalty as the bridge between marketing and customer management capabilities and a company’s financial results. Customer loyalty is the foundation of the four key drivers of profitable, organic growth – acquiring new customers, retaining existing customers, selling more to all customers and establishing a premium for one’s brand. Marketing has a strong and highly visible impact on customer loyalty. Therefore, it’s possible to draw a connection between the level of marketing mastery and an organization’s financial performance, measured by top-line revenue, margins and shareholder value.

Marketing Success Factors

Accenture’s research resulted in a number of important insights. At a high level, we found that leading companies owe their success in large part to a broad, integrated approach to marketing that orchestrates all the activities that influence customer loyalty, including those traditionally associated with the marketing function as well as those that more conventional organizations often view as the separate domains of sales, customer service and research and product development.

Accenture also discovered that there are five key factors that account for exactly half of a typical company’s ability to win customer loyalty (with the other half comprising nonmarketing factors such as customer inertia, market maturity, geography and industry structure). These five factors are:

• Developing and delivering the branded customer experience;
• Creating and shaping demand;
• Translating foresight and insight into marketing productivity;
• Harnessing talent and technology; and
• Driving marketing to meet performance objectives.

While all five of these marketing factors make measurable contributions to winning loyalty, the most important are the two customer-facing factors: developing and delivering a branded customer experience and creating and shaping demand (see Figure 1 on page 39).

For all companies in our study, regardless of their industry or business model (i.e., business-to-consumer, business-to-business, etc.), developing and delivering a branded customer experience comprises 33 percent of a company’s ability to achieve strong customer loyalty. The second factor, creating and shaping demand, accounts for 30 percent.

Less critical, but still important, are the three factors characterized as supporting or enabling, which, combined, comprise 37 percent: harnessing talent and technology, translating foresight and insight into marketing productivity, and driving marketing to meet performance objectives. While these three are technically internal and not customer-facing, they have a significant impact on the other two factors that directly affect customers and their perceptions of the company.

Consistent Execution Is Critical to the Branded Customer Experience

While developing a compelling brand concept is important, consistent delivery of the brand promise is the single most important thing to get right, according to Accenture’s research. The key skills required to deliver the brand promise, day in and day out, are predominantly people-management skills, including ensuring that all functions deliver the same branded experience; training all front-line people completely and effectively; and reinforcing the brand promise consistently across campaigns.

Perhaps no other company embodies the concept of the branded customer experience better than Starbucks. The Seattle-based coffee purveyor built its growing empire on its ability to cultivate and maintain a consistent “Starbucks experience” in thousands of cafes around the world, a feat even more impressive given the retailer’s preference to eschew cookie-cutter stores in favor of fitting into existing, unique structures whenever possible. How does the company do it? For starters, it maintains strict control over its outlets, preferring to open company-owned stores instead of franchising them, and oversees every step of the coffee process from bean buying to roasting to brewing.

The retailer also has an intensive training program to educate employees on the Starbucks lingo and strict company rules, as well as an attractive pay and benefits package to keep turnover low – a critical element of brand experience consistency. Importantly, benefits extend to part-time employees as well, which makes Starbucks a very attractive place to work. By offering benefits to part-time people (who usually do not qualify for benefits in other companies), Starbucks attracts the best people from what is normally a very transient workforce.

Cross-Company Innovation Is the Key to Creating and Shaping Demand

The “create and shape demand” factor has the greatest impact on performance, and this reinforces Accenture’s finding that marketing extends far beyond the purview of the traditional marketing department. Other functions besides marketing are key to developing and launching new products or services that meet an undiscovered need or exploit weaknesses among competitors’ offerings, as Virgin illustrates.

This U.K.-based innovator is seldom first to a market. Instead, the company looks for segments, often busy ones, where customers have received inferior service or the competition has grown complacent, hence the launch of Virgin Atlantic. But Virgin doesn’t simply enter a market; it explodes onto the scene by innovatively differentiating itself. For example, Virgin Atlantic was the first airline to offer premium passengers complimentary limousine service to ensure a hassle-free journey door to door. Virgin Express was the first U.K. train company to introduce the stylish “pendolino” tilting trains, with features like an onboard shop, seat radios and digital seat reservations, as well as cutting travel time by 25 percent. And, Virgin Megastores was the first major music retailer to install listening posts where customers can listen to a CD before buying it.

Virgin’s presence in a market never goes unnoticed. Its product or service innovations are typically accompanied by marketing activities that have raised more than a few eyebrows and generally stand above the message clutter in the marketplace.

People Are Key

Talent and technology both are important to generating strong customer loyalty, but talent is clearly the star. In fact, managing, training and retaining the best talent was identified as the component that accounted for the highest percentage of the “harness talent and technology” factor’s impact on loyalty. Among the key skills in this area are applying rigorous selection criteria to new recruits, focusing HR and training efforts on customer-facing roles, developing the next generation of executives, implementing formal retention programs and encouraging risk-taking among staff.

Pret A Manger shows how it’s done. This company began with a simple idea to offer handmade gourmet sandwiches quickly and ended up reinventing the United Kingdom’s sandwich market. One of the keys to Pret’s success is that it invests significantly in recruiting, training and compensating talent essential to the growth of the individual shop and the company as a whole. Pret’s programs have won many awards, including being named in 2003 by Fortune as one of the Top 10 companies to work for in Europe.

Pret receives more than 70,000 inquiries from prospective candidates each year. Only 6 percent are likely to get an interview, and less than half of those people receive a job offer. Recruitment starts with an interview, followed by a Pret Experience Day, when the candidate works in a shop. The shop team then votes on whether the candidate has the skills, enthusiasm and attitude to join their team.

Those who get the nod attend a 10-day training program that ensures consistency across Pret operations, from making sandwiches to delivering customer-focused service. Employees are empowered to take action to maintain positive impressions of the Pret experience; for example, offering a free cup of coffee to a customer who had to wait too long for an order.

Analytics Are the Foundation of Sound Marketing Decisions
Many companies collect reams of customer data, but the ability to extract insights from that data is critical to making informed decisions. Four skills are especially crucial in this regard: standardizing around best practices, applying advanced techniques, using sophisticated pricing techniques and software, and linking segmentation to business performance.

Bankinter, a Spanish financial institution, provides an excellent example of the value of analytics. The company collects and analyzes detailed customer data, down to the level of each customer’s transactions executed by channel, day and hour. A single view of the customer, which includes account details, profitability, interaction profile, transactions by channel, purchase history, contact history and relationships, informs interactions across channels. Customer-facing employees access this information on their desktops; automated channels use it to individualize interactions. The result is increased value per customer, thanks to increased sales of products and services. Bankinter enjoys a cross-sell ratio of 5.7, compared with the national industry average of less than 3.

Customer insight is especially important to Bankinter’s customer segmentation strategy. Most banks follow the 80/20 rule of customer value: focus on the 20 percent of customers who generate 80 percent of profits. Bankinter, in contrast, concentrates on realizing more value from less-attractive segments. Understanding the needs and untapped potential value of these customers has enabled Bankinter to derive 40 percent of its profits from the lower 75 percent of its customer base.

The Buck Stops in the C-Suite
Senior executives must understand and attend to marketing, including making tough decisions when marketing fails to deliver. That is the key to driving marketing to meet performance objectives, according to Accenture’s research. Leaders in this area have executives who understand marketing’s contribution to business performance, ask deep and probing questions about programs, review performance regularly and act quickly when investments fail to deliver.

For instance, to ensure the consistency of its offerings from Boston to Beijing, McDonald’s implemented a global supply chain and stringent franchise agreements. When its reputation and revenues slipped, McDonald’s renewed its commitment to gold-standard quality in products, services and cleanliness across its operations and launched hip marketing efforts like the “I’m lovin’ it” campaign to win back customers. Similarly, U.S. telecommunications company Verizon measures marketing performance down to the level of the individual initiative; for example, calculating the payroll savings achieved by a system to help representatives handle email inquiries. And the company’s leadership stands ready to change course, as needed. They know that a rapidly changing industry like communications requires short-term, rather than long-term focus on understanding customers, technology and competitors – and being nimble enough to adapt.

There’s no question that the past few years have been difficult ones for many companies, and that the economic environment forced many organizations to temporarily abandon growth strategies. Now, as economic prospects brighten in most markets, companies can generate stronger revenue and increase their market share by enhancing one of their most critical assets: the loyalty of their customers.

As Accenture’s research illustrates, market leaders have climbed to the top of their segments by building incredibly strong bonds with their customers. They’ve done so by mastering the skills and capabilities that form the core of marketing – especially those identified as having a significant impact on loyalty – and by recognizing that responsibility for “marketing” is shared across the organization.

While it’s true that not every company can be a market leader, it’s equally true that all organizations can dramatically improve their business performance by becoming better marketers. Whether the goal is to reverse a sales decline, carve out a new product or service niche or more effectively exploit competitors’ weaknesses, superior marketing is the dominant path to enthusiastic, fiercely loyal customers and robust growth.