The Next Frontier
The theories, buzzwords, mantras, and missions that have streamlined successful manufacturing over the last 30 years are familiar even to casual students of business, let alone those deep in the trenches. Terms such as quality circles, make-to-order, just-in-time, and push vs. pull have become so common to the business vernacular that few can remember a time before these terms were coined - and before they defined the ways in which any successful manufacturer had to view its business.
The movement toward a just-in-time environment had its roots in post-war Japan, where survival required nothing less than a total reinvention of the nation's manufacturing processes. Thirty years later, Japan's success in manufacturing forced American industry to adopt the same principles. It became inordinately clear that by cleverly harnessing the available technology, boldly reworking their processes, systematically reprogramming their mind-sets, and helping their people adjust to a new way of both thinking and working, American corporations could gain an important competitive edge. Not to mention the fact that they would avoid the disaster they knew awaited them if they did not advance in this direction along with their competitors.
We are at a similar point in the evolution of marketing. Intense global competition, emerging technology, incredible reservoirs of data, less loyal but more sophisticated customers demanding personalized, permission-based attention and service, and a growing corporate emphasis on Customer Relationship Management (CRM) have given corporations the imperative to do marketing faster, cheaper, and better. For many corporations, however, this insight has been little more than just insight. They have not been able to turn it into customer-focused action.
One way do that is to find the parallels between just-in-time manufacturing and marketing and then to apply these principles to marketing that is enabled by technology, empowered by insight, and informed by history.
Where's the Return?
Over the last several years, with the evolution of a CRM consciousness and CRM software, many companies have purchased expensive suites of CRM software, hooked them all together - and realized little or no benefit. They are not getting the ROI they expected. They're frustrated. They may even be further behind than they were before embarking on these initiatives.
What went wrong? Too many corporations bought the tools without rethinking organization, process, and integration around the customer. They automated first and then began considering simplification and integration across customer-facing groups. By viewing technology as the solution, not the enabler, and by automating before they integrated, they did not really know what it was they were actually automating. They were not extracting the value. While the software applications themselves might have been integrated, their use throughout the company was not.
Rather than looking at automation from an enterprise - and a customer - perspective, companies took a more traditional, siloed approach and simply automated discrete functions such as sales or call centers, using unconnected software applications. Taking this approach can often limit the value of the applications. Beyond that, employing software silo by silo can often keep companies from using the technology not only to serve customers but also to better target the marketing campaigns that bring them customers in the first place.
Lesson from Manufacturing #1
The rush to implement large-scale CRM solutions has a parallel in manufacturing in the 1970s. At that time, manufacturers viewed technology as the solution to managing manufacturing-floor inventory. Companies bought high-capacity, large production machines such as multi-access milling machines, programmable logic controllers, and inventory movement robots to provide flexibility. They invested in manufacturing resource planning (MRP) solutions and applied them to complex shop-floor processes. But what they ended up with were disconnected "islands of automation." They were not getting efficiencies. The lesson manufac-turers learned was that the value comes from managing the flow - that is, the manner in which all the processes are performed on the manufacturing floor - and not just the manufacturing process itself. Eliminating non-value-adding activities reduced the complexity and made the tools more effective.
Can We Talk?
One of our partners recently asked the head of marketing at a client company when he had last spoken to the head of call centers. He never had. Think of that: the head of marketing had never had a dialogue with the head of one of the major customer-interaction points.
While this lack of communication might not have been unusual in the old siloed organization, it's clearly counterproductive in the modern corporation. Not having a dialogue has kept this bank from effectively exploiting some key opportunities and issues. The head of marketing, for one, was missing the chance to get insight into customers that could feed into future campaigns and potentially cross-sell or upsell products and services. The head of call centers was going about his job without a clear understanding of what the bank's marketers were trying to sell to the customer.
Another bank has embedded face-to-face meetings - marketing-style quality circles - into the culture. Each time the bank mounts a campaign, the head of marketing pulls together a cross-functional team consisting of marketing, technology, analytics, customer service, and creative communication people - everyone whose work has a direct impact on the customer experience.
The marketing manager who convenes the meeting serves as the facilitator, making sure the group understands what his vision is from a marketing standpoint and then opening up the discussion to solicit ideas about how his vision can be developed, altered, improved, and executed. The call center people discuss what they have been hearing from consumers that might affect how the program is designed or executed. The analytics experts explain what they have been seeing in the data that ought to be considered before the team jumps headlong into the campaign. The IT and business application representatives talk about how the team might execute the ideas they have come up with given the tools and capabilities available-whether the Web or the call center or the field is the most appropriate channel to use. And finally, the creative folks reflect on what sort of spin they might put on this campaign, based on everything they have heard so far.
This approach has proven quite successful. Concurrence is usually reached. The team comes away from the meeting with not only program content but also a plan for action and specific assignments. And the campaign is off and running.
However, there is clearly room for significant improvement. For although their communication is well-established, and they leave the meeting with the processes - and their next steps - mapped out on paper, team members do not have the tools and enablers in place to integrate and automate the process. They also lack real-time access to campaign and marketing performance data. These capabilities would allow the bank to shorten marketing cycle time, automate feedback and learning from campaign results, and enable more proactive management of marketing programs.
Lesson from Manufacturing #2
One of the key lessons learned in the transformation of manufacturing was to get the "voice of the customer" in all processes. A critical design concept was the "manufacturing cell," which linked all production processes for a component in a small, contained area. This created a chain of customers from one machine tool to the next. Each customer could quickly provide quality feedback for each individual part as they received it. The feedback was quick, direct, and required no intermediary or system to make it work. The value of eye-to-eye communications on the spot quickly eliminated the need for complex data gathering and processing systems.
Where Are We Going?
Many corporations, embarking on a marketing campaign, simply push ahead without thinking carefully and comprehensively about the expected outcome of each campaign - not to mention what the ROI needs to be. First, it is important to determine who the campaign's core customer is, how many people fall into this target group, what the content of the campaign is, and what channels will best deliver the intended message to the intended audience. It is critical, too, to look at the cost of delivering to the number of people targeted, what the expected consumer reaction is, and how many people can be expected to read the marketing piece, respond to it, and, ultimately, buy a product or service as a result. Understanding this allows the marketers to predict the financial margins the program will achieve.
The tendency, however, to pursue the campaign before predicting the end result, is, of course, part of what created problems for companies rushing headlong into CRM initiatives before they had taken a broader view of their organization's goals. Only after you have decided what you want your outcomes to be and defined a process - and a means for supporting that process - can you really start applying technology to the process and developing a tool that will enable everyone to understand the goal of each campaign, the measures of success for each campaign, and the individual metrics that contribute to a campaign's success.
Lesson from Manufacturing #3
The JIT revolution established a new mind-set in the factory. The change from managing the direct labor content of a part and the variances in component costs to managing throughput and quality was a key to making the results happen quickly. "Lead time, quality, and cost are the only competitive weapons," became a popular mantra. Companies that focused on only one of these legs failed. Initiatives that were "the right thing to do" but didn't have a solid business case and sponsorship took resources away from valuable efforts and typically failed as well.
Figure 1 - Anatomy of a Marketing Campaign: Then and Now
(see Larger Image)
Why Does It Take So Long?
How does a marketing program get launched today? The typical scenario works something like this: a marketing manager working for a large bank wants to do a pre-approved credit card offer. She has some assumptions about the target of her campaign, but she knows she has to look at the data. So she calls up her IS department and says, "Why don't you do an extract on these types of customers, who have X number of accounts and X volume, etc." IS does an extract. The marketing manager looks at the report and says, "That isn't really what I want." So, it goes back to IS. They modify the extract. They run it again and the marketing manager says, "I think this is close."
Then she gets the analytic-model Ph.D. types involved and says, "Start segmenting this stuff." So they start iterating through the data, and they segment, and this goes on for awhile. Then the marketing manager says, "I think we have some good segments defined here. Let's do some predictive modeling." So it goes back to the analytic modelers. They model. They figure out what segments they want to send this campaign to, and they modify the segments slightly for each different grouping of people.
The marketing manager then takes this information over to her campaign analyst, and he uses a variety of spreadsheets to analyze cost vs. expected response rate and purchase rate. This cost analysis exercise drives some tweaking of the offers and channels used to contact the targeted customers. Then everything goes to a fulfillment house, and they launch the campaign. The data come back that have to be analyzed by another group of people.
Finally the data are filtered back into the database so that the company can get a historical view of the results. However, that historical view is limited in nature: the marketing manager has been functioning in a virtual vacuum, disconnected from other marketing managers pursuing similar paths in other silos, with little or no knowledge or understanding of what initiatives are going on elsewhere in the same company.
What was lost in this process? Why did it have to take so long? Isn't there somewhere along the way that the process could have been coordinated, streamlined, and the cycle time reduced?
Lesson from Manufacturing #4
The manufacturing cell eliminated many queues and stacks of inventory between operations. Optimizing throughput vs. focusing on individual steps got products through the cells more quickly and with significantly higher quality.
Hearing Your Customer Over the Noise
We're continually bombarded with information about the tremendous wealth of data now available on customers. Truth is, much of the data are inaccurate, some of them are not available when you need them, and all data are extremely perishable. When you're relying on data to create a marketing campaign, time is not on your side. That's where taking the information you have gathered through marketing quality circles and applying the appropriate, integrated technology can allow you to mine the data quickly, accurately, and effectively to achieve your clearly identified goals.
So it was for Xelector, a new UK-based, business-to-business-to-consumer online marketplace through which Europeans can compare, select, and purchase a wide range of financial services and utility products. The company wanted to identify the best and most profitable customers, determine their demographic, geographic, and behavioral characteristics (by asking them a series of fact-finding questions about their purchase requirements, for example), and then use that information to create relevant, differentiated customer offers.
The challenge was to turn that concept into an operational business. Meeting that challenge meant creating a database business capable of supporting multiple financial services and utility products across Europe. This meant choosing the right data warehousing, data mining, and reporting tools, and then complementing those with sophisticated data analysis tools that would generate ranked lists of purchase options tailored to meet customers' needs. The result: the opportunity for Xelector's product providers and website partners to understand market trends and customer behavior, to test products on the Internet, and to tailor customer offers appropriately.
Similarly, when Germany's Commerzbank wanted to offer the best-tailored products to differentiated customer groups, the bank had to re-engineer its entire retail banking business. The new marketing approach includes utilizing a real-time data warehouse and data analysis tools that allow efficient online analysis and targeted campaigns. At the click of a mouse, a call center employee can now display the customer's entire history with the bank. As a result, Commerzbank can offer each customer products that fit his or her individual needs.
Lesson from Manufacturing #5
A key element of JIT outside the factory was a proactive relationship-building effort with suppliers, who sold parts and subassemblies to the factory. By doing this, manufacturers and suppliers were able to share information on quality metrics processes and eliminate waste that occurred between the two organizations.
How Do We Start the Conversation?
To reach these customers, companies at first relied on mass marketing, which "pushed" messages out to everyone. Then came targeted marketing, which focused on groups of customers, attempting to respond to their interests in a "pull" approach. The next level of customer-focused marketing requires moving beyond "pushing" and "pulling" by seeking permission from customers and paying close attention to the information derived from various touch points so that marketers can have a needs-based, responsive conversation with the customer.
In a shotgun marketing approach, you push a lot of information out to the market at large, by placing banner ads on the Web, for example, and see who bites. That's the "finders" approach, and if you are lucky, you might get a 0.5% response. Alternatively, if you use email or direct marketing to customers and targets - a "seekers" approach - you might get up to a 5% response. Much better, however, is moving to a conversation orientation, a dialogue, an interaction. This "partnership" approach, where you provide highly targeted, customized information, can increase response rates by upwards of 40%.
Lesson from Manufacturing #6
The move from "push" to "pull" scheduling helped reinforce the message, "make no parts or products until someone asks for them." By using the customer "pull," no wasted effort was put into making components and products that might sit on a shelf until needed - if they were ever used. "Pull" scheduling eliminated the need to be a perfect forecaster by leveraging the responsive manufacturing cells. The process was built to support the "pull" scheduling mind-set.
A Holistic Approach to Marketing
Where does all this lead us? For a sense of marketing's future, consider these recent experiences.
When a large agricultural company wanted to mount a co-promotional campaign with its parent, an industrial/service corporation, that would capitalize on the affinity between seeds and crop chemicals, the challenge was: How do you launch an effective co-marketing program when your data are in more than 20 different places and your dealers are distrustful? The answer drew on virtually every tool discussed above, from keeping the end in sight to integration before automation, from tearing down the silos to using technology effectively.
In this company's case, this meant starting by interviewing employees to gain insight into their needs for serving customers. Then it meant building a data warehouse that consolidated, cleansed, and standardized existing customer information from a host of sources. By consolidating all the data, rather than relying strictly on demographics, which do not generally describe purchasing behavior, the company could blend transaction history and contact/customer feedback history with demographics to create a richer, more powerful data source to predict customer behavior.
Once the warehouse was built, the company leveraged it with a marketing analysis and operations tools that enable marketing analysts to optimize offers and promotions to farmers and perform aggregate analysis for dealers to provide business leads on new or existing customers in their area. In the wake of this program's success - measured in sales growth and the increased provision of data by no longer hostile dealers and distributors - the company has built a suite of sophisticated data analysis tools for customer offers that can be differentiated by segments - groups of customers defined by particular needs and behaviors.
Similarly, E*TRADE, the online investment service, knew that successful competition in an increasingly crowded field required better segmentation of its customer base and a heightened ability to analyze customer behavior. The goal: to move from quantity of customers to quality of customers. The method: to build deeper relationships with customers, whether they were long-time, core customers or first-time online investors. The solution: a marketing environment that, by taking lessons learned from previous campaigns and applying them to new initiatives, turns customer activity into insights. These insights, in turn, fuel targeted marketing campaigns and foster the deeper customer relationships the company is seeking. That happens because the customer experiences that come from campaigns driven - and thereby leveraged - by insight are more personalized, more fun, more conversation-based and more rewarding.
Data warehouses allow these companies to trap and store more information gained through interaction with customers, and this data, once accessible and usable, can be more readily analyzed. With data at marketing's fingertips that is easy to use and easy to transform into marketing campaigns along with treatments that are truly focused on customers, companies can tailor treatments to specific customers and specific distribution channels.
Whether consciously or not, these companies have clearly taken a page - several pages in fact - from manufacturing and developed an approach to marketing that is streamlined, collaborative, and, most importantly, insight-driven. For every campaign they launch, customer-focused marketers such as these:
o Define the desired outcomes and marketing measures.
o Define the process.
o Clarify roles and organizational responsibilities for "owning the customer" and executing an integrated, end-to-end marketing process.
o Integrate data and tools to support the process and organization.
o Implement technology tools to speed execution and improve information delivery to the point of need.
The logical extension of this process - maintaining the manufacturing metaphor here - is to coordinate all this activity through what could be seen as a "workbench." Working at this workbench, all the different people who participated in the "quality circle" would have access to the same information, albeit tailored to their view and their responsibility, within the entire length of the program and the complete set of desired tasks and outcomes. In their own view of the workbench, they can see their role in the process and everything else that goes on so they will not be blindsided when someone throws something over the wall. In addition, they would have access to specific modeling tools which then, depending on which assignments they have finished, would update the workflow so that everyone involved in the process knows what is getting done - and what is not getting done. That would enable the frustrated marketer, described previously, to extract the data, commingle it with external data and do some high-level segmentation herself. Then she could pass it to the analytic modeler who, likewise, could work through it pretty quickly.
The result: Time, tasks and people are pulled out of the process. The task is no longer a tedious operational chore. Value is added. And marketing, like manufacturing before it, moves into the modern age.
This article first appeared in the May/June edition of The Journal of Business Strategy. It is reproduced here by permision.
