Data into Dollars: Smart Analytics for Profitable Growth

November 15, 2012

Download handouts (PDF) : www.mdm.com/slides or info@mdm.com

event sponsor produced by

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www.stibosystems.com

Thomas P. Gale Publisher Modern Distribution Management

Jonathan Bein, Ph.D Senior Partner Real Results Marketing

event sponsor

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Agenda

• Segmentation Fundamentals

• Sweet Spot Analysis

• Wallet Share

• Market Share

• Customer Lifecycle Management

• Power of Internal/External Analytics

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Legacy of 2009

• Lack of sales momentum

• Fight for share

• Purchasing behavior changed

• Data-free conversation loop

• Bring data to the dialog

• Resource allocation & alignment

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The vision • Data-based marketing

– Targeted messaging, offers – To high-profit, high-potential segments – Automated inbound programs – Strategic, integrated programs

• Data-based sales – CRM/SFA with deeper customer/prospect insight – Cross-sell, up-sell rules built into system

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Profile/Segment Customers

Ongoing Data Mgmt. Process

Profile/Segment Markets

Identify Opportunities: Analytics

Prioritize Sales & Marketing Activity

Execute Data-based Strategy

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SWEET SPOT ANALYSIS

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Best customer?

• Objective: Find “sweet” spots in your customer base that are high growth, high volume, high profit

• Method: Best Customer Profile is based on firmographic data such as SIC, geography, customer size, number of employees, profit

• Benefit: Focuses marketing and sales efforts on best opportunities

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Importance of Sweet Spots

• Executive intuition is imprecise due to – Change in business climate – downturn or upturn

– Exposure to customer base is often largest clients only

– Information about best segments is general, but no actionable

• Benefits of knowing sweet spots – Builds on proven success for customer acquisition and

wallet share growth

– Facilitates targeted messaging and campaigns

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Small states (AZ, CO, IN, MD) are high growth, moderate volume

Sweet spot by state

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Sweet spot by product

METAL is high volume, negative growth LUMBER PRODUCTS is the up and coming FASTENERS is the best sweet spot in growth and volume

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Sweet spot by customer segment

Millions

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WALLET SHARE AND MARKET SHARE

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Wallet and Market Share Estimation Methods

•Research methods are expensive and lack identifiable, actionable information. •Field sales estimates are very subjective •Analytic techniques provide a cost-effective, fast, reasonably accurate approach to wallet and market share estimation.

Technique Accuracy Cost Coverage ActionableSyndicated primary research 6 3 6 3Commissioned primary research 7 1 7 3Internal primary research 7 2 5 6Secondary research 4 3 2 2Field sales estimates 4 5 8 10Analytic techniques 6 9 10 10

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• Consumption profiling – Internal: Product, transaction

– External

• External data sourcing – U.S. Census of Manufacturers

– Other government databases

– Association and research firms

– D&B, Hoovers, other third-party data providers

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Analytic Techniques

Importance of Wallet Share

• Increasing wallet share is almost always less expensive than customer acquisition

• Understanding wallet share by account – Improves ability to cross sell

– Improves ability to up sell

• Improves account control

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Actual Spend This is simple reporting that almost all distributors can do. University of Oregon and Peacehealth are the best accounts while Peterson Pacific and Murphy are the worst accounts. $-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

ACTUAL BY ACCOUNT

$-$50,000

$100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000

PEA

CEH

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ACTUAL BY PRODUCT AND ACCOUNT

91- JANITORIAL SUPPLIES

84A- PACKAGING TAPE

29- SAFETY PERSNL PROTECTN

14- TOOLS CUTTING CARBIDE

7A- TOOLS MECHANICS HAND

2- ABRASIVES COATED

Janitorial supplies and coated abrasives are the best product categories

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Potential Spend

$-$200,000 $400,000 $600,000 $800,000

$1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000

POTENTIAL BY ACCOUNT

$-$200,000 $400,000 $600,000 $800,000

$1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000

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POTENTIAL BY PRODUCT AND ACCOUNT

91- JANITORIAL SUPPLIES

84A- PACKAGING TAPE

29- SAFETY PERSNL PROTECTN

14- TOOLS CUTTING CARBIDE

7A- TOOLS MECHANICS HAND

2- ABRASIVES COATED

Using the consumption model techniques, we can estimate potential spend by account.

Using the consumption model techniques, we can also estimate potential spend by product and account.

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Incremental Potential Spend

$-$200,000 $400,000 $600,000 $800,000

$1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000

TOTAL POTENTIAL AND INCREMENTAL POTENTIAL BY ACCOUNT

POTENTIAL

INCREMENTAL

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

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INCREMENTAL POTENTIAL BY PRODUCT AND ACCOUNT

91- JANITORIAL SUPPLIES

84A- PACKAGING TAPE

29- SAFETY PERSNL PROTECTN

14- TOOLS CUTTING CARBIDE

7A- TOOLS MECHANICS HAND

2- ABRASIVES COATED

Putting together transaction and market analytics, we can see what the total incremental potential is by account.

Similarly we can see what the total incremental potential is by product and account.

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Importance of Market Share

• Are you missing out on business?

• Identify gaps in product, coverage, segments

• Increase productivity of sales territories

• Focus resources on highest potential (ROI) – Customers

– Prospects

– Product categories

– Territories

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Market Share Analysis

1. Establish historical sales/employee profile - Divide annual sales by total employees for each SIC

2. Use this for gap analysis to identify potential - By account

- By territory

3. Source prospect lists by SIC

4. Improve data collection to validate

5. Benchmark with external data sources

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Product demand by customer segment

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Product demand by customer segment

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MSA share by category

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Performance index: 1 is average, less than 1 indicates gap between

Share by segment

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CUSTOMER LIFECYCLE MANAGEMENT

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When to offer?

• Objective: Reach out to customers according to a natural buying cycle

• Method: Use Recency-Frequency (RF) analysis to segment customers by how recently and how frequently they purchased

• Benefit: RF analysis can drive retention, re-acquisition, and wallet-share programs as well as optimize promotional spend.

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Recency Frequency Monetary Analysis

• Used for marketing to customers

• Always improves response and profits

• Better than any demographic model

• The most powerful segmentation method for predicting response

* It can be used for marketing to prospects who are not customers, but that is not the primary use.

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Recency-frequency-monetary value

There are 766 customers whose most recent purchase is within the last month and who made at least 200 purchases in the last 12 months. These are the best customers for this distributor. What is their DNA? Profitability?

There are 87 customers whose most recent purchase was 7 to 12 months ago and who only made 1 purchase in the last 12 months.

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Lifecycle management

Drive customer retention and wallet share

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Classic View of RFM

• Only a small percentage (such as 5%) of customers respond to the typical offer

• RFM tells you which customers are most likely to be in the responsive 5%

• If you use it all the time: – Half your customers will never hear from you and will be

lost – Others will suffer from “file fatigue”

• Use it sparingly; when you need a boost • Use it to identify your best customers

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Current View of RFM

• Use multichannel marketing to reach a broader set of customers than indicated in classic view of RFM

• Apply low cost marketing approaches, e.g. email to lower recency, lower frequency customers

• Apply higher cost marketing approaches, e.g. outbound telemarketing or field sales, to high recency, higher frequency customers

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Applications of RFM

• Direct mail

• Outbound telemarketing

• Email marketing

• Web marketing

• Field sales

• Customer service representatives

• Technical support

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CONCLUSION

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Analytics is key differentiator

• Smart data, not big data

• Leverage available tools to focus resources

• Change the internal conversation, process

• Segment, strategy, execute

• Don’t let perfect be enemy of good

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event sponsor

Questions?

Thomas P. Gale Jonathan Bein, Ph.D. President Senior Partner Industrial Market Information Real Results Marketing, Inc. 303-440-3857 303-898-8386 tom@imidata.com jonathan@realresultsmarketing.com www.imidata.com www.realresultsmarketing.com

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