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A B2B Integrated Optimization Approach: Resource Allocation Strategy

This papers explains an integrated approach to the B2B World - A "Resource Allocation Strategy". Resources are limited. Change happens even more rapidly than at the breath-defying pace of the 2000's. Creating an integrated, data-based,
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  1 MiddleAccounts MinorAccounts MajorAccounts Number of Accounts    The Current Situation: secrets no longer  It’s no longer a secret. The evidence is compelling. It is well documented, both at the academic level and in practice. Enterprise-wide Customer Relationship Management  when properl! implemented - can achieve impressive results. The primar! results" • Increased sales E##ectiveness and E##icienc! • Increased Customer$Emplo!ee %atis#action • &ecreased cost-to-serveThe second 'secret( is that virtuall! ever! organi)ation has limited resources. *ptimi)ation o# the respective coverage models - sales, customer service, mar+eting and channels - is not well studied. The models and tools o# the eCRM practitioner provide almost a dot-to-dot li+e template with which to assure coverage optimi)ation and hence optimal use o# the #irm’s limited resources. The third 'secret( is that our customers represent a port#olio o# assets that we must proactivel! manage in order to maimi)e shareholder and sta+eholder value. The Business Issue hether the resource is time, mone!, or people, the optimal allocation o# resources is a critical issue, a critical challenge, #or almost ever! business organi)ation. %ince noenterprise has unlimited resources, it is worth investigating how customer relationship mar+eting models can provide a critical +e! to unloc+ the answer to this problem.In no #unctional area o# business is this resource allocation problem more true than in sales, mar+eting, and servicing customers and$or prospects. In #act, the search Quantify Customer Equity: (Understanding the worth of your Ideal, Best customers has ecome talesta!es for "irtually e"ery firm#$ hat is the net presentvalue o# a particular customer  eisting or potential  to !our compan!/ot 0ust toda!, but #or theduration o# the relationship nd what should it cost !outo ac2uire and$or retain eachsuch relationship, over time The answer to those two questions are !ey to a numer of critical decisions%among them: • hich potential customers should we pursue, with what investment o# resources • 3ow much should we invest in development o# additional business, #rom which customers, and in developing and retaining their current business • 3ow much e2uit! do we have in current customers • 3ow much should we invest in ac2uisition o# +nowledge about our customers • hat are reasonable goals#or 'port#olio growth( #or our business 4considering our e2uit! in our customersto be the contents o# our port#olio5 • hat investment is reasonable to achieve those growth ob0ectives The tem&tation is to followthe sim&lest route toma!ing thosedeterminations: 'ccount 6C bu!s 78 dollars o# widgets per !ear. That’s their potential value tous. I# we can land 1,999 such customers, we’ll be a :rice:ressureMargin:ressure *ptimi)e !our %ales, Mar+eting ; %ervice Coverage Models"Reduce costs< increase revenue< and delight !our customers By: 'ic! oulos  =  n n GV = N [   ∑ Θ τ π τ ) δ τ ]   −Ν   ∑ Α τ + Ρ τ ) δ τ   τ = 1 τ = 1 >alue o# customer segment or group4?>5  veragevolume o# purchasesper period4@5Margin per averagepurchase4A5 verage cost o# ac2uisition development ; retention4&R5 verageduration o# purchasestream4tB1n5/umber o# customersin group$segment4/5&iscountrate or cost o# capitaldB1$41DC*C5  o!al %witcher Competitive argeMedium%mall/ew in Categor!  F n n CE = N [ ∑ Θ τ π τ ) δ τ −∑ ∆ τ  + Ρ τ ) δ τ   Α 1 ]   τ=1 τ=1 Customer E2uit!4CE5>olume o# purchasesthis period4@5Margin per unit per purchasea#ter ta4A5&uration o# purchasestream4tB1n5Customer ac2uisition,development; retentioncosts4&R5&iscountrate or cost o# capitaldB1$41DC*C5 Monthl!%tatementRatein2uir!Teller transactionRatead0ustmentTeller transaction%tatement:roblemresolved ccountapplicationTeller Transation/ewGobMarriageCompetitor promotion/ewhomeChildrenCompetitor promotion/ewhomeChildrenTo collegeCompetitor promotionRetirement )The Customer Corridor* Customer E2   uit!4CE5>olume o# purchasesthis period4@5Margin per unit per purchasea#ter ta4 π)Προβαβι   λιτψ οφ πυρχηασειν περιοδ τ(Π) Χυστοµ   εραχθυισιτιον,δεϖελοπµεντ& ρετεντιονχοστσ(Α∆Ρ)∆ισχουν   τρατε ορχοστ οφχαπιταλ   =1/(1+ΧΟΧ  H 4dB .I915Cumulative presentvalue andac2uisition"costratio 4$@ π ) Χυµυλατιϖε ϖαλυε οφ ∃1 ατ10% χοστ οφ χαπιταλ +#,-.#/+.#0--#1/-#0+0#/20#,/3#-2,#/.4#2 4,30-.+/, 3 0 - . + / 1 2 ,4 Jears 6rea+-Even &urationCustomers /ot CreatedE2ual %ource"a!landand Cole, Customer Connections Moderatel!pro#itable>er!pro#itableho are thesecustomers 3owdo we +eep themand attract moreli+e themhat can be done todevelop thepro#itabilit! o# thesecustomersModestl!pro#itable or brea+ evenKnpro#itableh! are the!unpro#itable Canbehavior or cost bechanged %houldwe disengage 5ean Standard 6e"iation7alue &er Customer :  L ccount Cue *pportunit! Management unnel  1c2uisition o# valuable newcustomer relationships&evelopment  o#  e,isting customer relationshipsRetention o# valuablecustomer relationships?rowth in #irm value  1 simple linear model o# port#oliogrowth suitable #or illustrating the principles can be e,pressed as" ;<=aC n  > : (C n $? @ =drC e E > 6(CC e $? > =(,>r$ C e E @ A(C e$ ? InquiriesField Follow-up PresentationClosingSaleInactiveProspect ListFuture Follow-upInactive: Reason: A, B, C...Send LiteratureNewslettersNews Releasesec!nical "pdatesPro#otional Articles Select Names for Mailing R E Q U A L I F I  A ! I " N SR E F E R R A L SQualified   "pportunities to   t#e Field Space Advertising, $irect %ail, rade S!ows, &''( In)uiries, Re*errals, Card $ec+s, tc. Sales "pportunit$ %eneration Acti&ities Mar'eting (ata)ase "pportunit$ Qualification *rocess I( : Needs, Applications, i#e Fra#es, $ecision %a+ers, Budgeting, Procedures Reports  . Source Code Analsis /. 0pportunit Prospect List  1. 2uali*ied 0pportunities in t!e Field 3. 4ception Reports  Follow UpFollow-upFollow-up!o Mar'eting (ata)ase
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