The three most read articles at www.gojceta.com during the past year
After more than a year of posting to www.gojceta.com, it seems that the most popular articles were those written with intention to be posted to Alen’s Think Place. In competition with English translations of my articles published in Croatian business and technology magazines during the past decade, the winners were the two posts created out of pure intellectual joy, reflecting my thoughts, without expectation for a financial reward.
The most read article on www.gojceta.com was the story of my experience at the first McCafe’ in Zagreb: “A coffee shop in the hamburger kingdom“. It explored the business model and the McCafe’ service in general.
The other most read article, missing only one visit to equal the McCafe’s score was the story about brand extension of Cedevita multivitamin drink to their line of tea. “Dad does it dissolve in water?” was doomed to be written the day when my son confirmed to me that my own confusion with the brand message goes beyond my own perception.
The third most accessed article was “The bdp triangle“ – my framework to managing successful proactive telephone campaigns described in an article in Croatian business magazine Lider. Despite the fact that the “triangle” was around 10% behind the two winners, I’m very proud of this concept and I believe that it has deserved the position.
The first full year of Alen’s Think Place is represented by 12 peaces of written work. Here are the summaries and links to 5 business articles translated to Englsih, 5 blog posts and 2 reviews of positioning / branding strategies…
The 2010 was the first full year of Alen’s Think Place is represented by 12 peaces of written work:
5 translations of my articles published in Croatian business magazines during the past decade. Mostly on CRM.
5 classical blog posts. Some of those were quick thoughts, and some other were excerpts from my recent articles
2 reviews of positioning / branding approaches (McDonalds and Cedevita)
Alen’s think place is meant for business professionals, mostly for those who deal with sales, marketing, CRM and business strategies in general. I hope that you have found value for yourself and that you will keep finding it at www.gojceta.com.
A pretty long article about Interactive Voice Response set in two parts. Still relevant, but with the major change about the handy nature of mobile Internet access. Read first the part one below 🙂
One of my recent articles published in Marketing UP magazine in May 2007 and translated here to English. You can find here some classical wisdom about segmentation.
Twenty percent of customers make eighty percent of sales, Vilfredo Pareto (1911)*
The popular “20/80” metaphor of the Pareto principle reflects its simplicity and broad applicability. This is one of the most used and most cited principles in economy. Anyone who ever tried to trade on an open market can recognise this pattern.
Segmentation is a wide marketing topic, which, among other, helps understanding the value of each customer to your organization, and vice versa – it creates insight to what are the aspects of your products and services that your customers value the most. Such awareness enables adapting of business strategies to different homogeneous market groups that we call segments. Differentiating customers with regards to the value that they ‘deliver’ to the organization became particularly important in recent decades with highly saturated markets and consumers that show great immunity to the large amounts of marketing information they have been exposed to. The marketing response to such market conditions is basically answering the question: “how to keep the most profitable customers in the most efficient and cost-effective way?”. Driven by the above mentioned transformation in market environments and by changes in technological capabilities of modern information and communication systems, the evolution of marketing has yielded some new and innovative concepts. Among those, the services marketing represents a fundamental change in the traditional market approach, followed by important concepts such as niche marketing, relationship marketing and the customer relationship management (CRM).The latter two concepts are mutually overlapping and complementing each other. Boundary between them is a wide “zone” of common postulates and shared principles. In this ‘zone’, the understanding of the value that customers ‘deliver’ to the organization, take a very prominent place. A number of segmentation tools and techniques exist that are used to support strategies aimed to identifying and retaining the most profitable groups of customers (customer segments).
The value exchange as foundation of business
The purpose of markets as well as the foundations of the marketing concept lies in exchange of value. How much are you aware of the value provided to your organization by each of clients you serve? It’s a good question indeed, because the value is not allocated only within the tangible parameters, such as actual sales figures. It is the difference between costs and revenues, but much more than that. Doing business with certain clients for your organization can be matter of image, reference, or some other “intangible” benefits. Some clients, even if they do not contribute significant revenue to your business, can be your good messengers to a wide number of potential customers. On the other side, some others will take a significant place in your business books and stand up with figures, but a deeper analysis will discover that they are actually “value destroyers”. There are different ways in which your customers can destroy value. Those can be reflected in requests for (unreasonable) product customizations or frequent urgent deliveries. Other aspects of destroying value could be wide exploiting of customer service rights, taking advantage of long delays in payment and by generating similar expenses or other extraordinary pressures to your organization’s resources. We often justify such actions by customer’s revenue figures. However, we should ask ourselves: is it the volume of transactions on our bank account the purpose of our business? Or is it perhaps the amount that remains after the transactions are completed, through a longer period of time?
Value based segmentation
There are different methods of recognizing the value of customers for the purpose of grouping them into segments. These methods range from the most primitive measurement of sales figures to complex models that include the allocation of the current and future value creation such as potential referrals or future use of other products in your portfolio. In practice, the value of a client is measured by different surrogate measures. Some well known segmentation methods are RFM (Recency, Frequency, Monetary value), usage analysis and Customer Lifetime Value.
Within Customer Relationship Management strategy, the most suitable segmentation is the one based on the so-called Customer Lifetime Value. It is used to define the general approach to the customer set. The Customer Lifetime Value is a complex, synthetic value gained by allocation models that take into account both present and future value exchange factors. To simplify identification of present and future “value creators” marketers seek to identify visible client attributes that indicate his or her tendency toward specific behaviors that affect value creation. For example, within a costly customer lifetime value segmentation project, conducted by one of America’s leading insurers, among other findings, they understood that the size of individual’s US credit score represent a very strong “value creation” predictor.
ABC method – earn the status
Director of Customer Service department of one of Croatian telecom operators, when arguing the substantial investment in segmentation and distinctiveness of customer service levels, said: “We started the investment when we realized that we couldn’t afford any more the highest service levels to all of our customers.” What the telecom operator actually did in that occasion was to use the ABC method to diversify approach to their customers based on their value creation. The best customers were entitled to the so-called premium service. When deciding about the granted quality of service, the CRM system was able to distinguish not only those which created value, but those who were destroying it as well. The investment in a customer’s service level was reciprocal to his or her contribution to the profitability as the operator’s measure of sustainable success.
For a better segment “visualization”, the value levels within the ABC method are often marked by descriptive terms such as “bronze”, “silver” and “gold”.
In the late nineties, the former Swiss monopoly telecommunications operator Swisscom, started a loyalty program to protect its market position during the market liberalization process*. The objectives of the program were focused on keeping the leader position, retaining the most profitable customers, while trying to avoid price wars with the newly introduced competitors. The loyalty program was delivering certain benefits to its members. Based on the data collected through the program, Swisscom was able to analyze more than 20 target groups. Four segments were chosen based on the analysis. Using the ABC analysis method, different approaches were deployed towards each of the four segments:
– Premium customers: keep them loyal at all costs
– Profitable customers: keep them loyal and intensify cross selling
– Customers with medium consumption: offer packaged services, cross sell
– Unprofitable customers: there are no benefits without increasing consumption
The ABC method can easily be recognized by clients in the banking industry. The personal banker (or clerk) service is meant to be a lever of investing in “value creators.” The remaining clients are left with the option of waiting in queues within the branches, the ATMs or other self-service systems. For the “worst ones”, which can be described as “the value destroyers”, the preferred channel of business is – the one with the competition.
Customer segmentation based on benefits
The above described segmentation will differentiate customers according to their contribution and their potential profitability. It is obvious that it puts the needs of sales organizations in the focus (which client is better for ME).On the other side, it is good to know what customers find most valuable in our offer or our general approach. We’d like to know that in particular, for those that we value the most.
Contemporary markets are often perceived as collections of different business models (within the organizational buyer) and lifestyles (in case of consumer markets). Such determinants of our clients define the reasons why they would accept our value proposal. Benefit segmentation is a mirror in which we try to figure out how our customers segment their “suppliers market” based on their perception of value. In contrast to value based segmentation, the segmentation based on benefits puts the needs of customers in the center of the segmentation effort.
A business organization, whose business model is based on low costs or minimal inventory, will value your ability of flexible, frequent and timely delivery options. Two persons that purchase the same vehicle will base their decisions on completely different reasons. While one will value a prestigious brand and design, the second will be making the purchase based on safety features and high quality service network. This understanding of value that the customer perceives within our proposal can have a powerful impact on adapting the product / service, the marketing approach, as well as the pricing strategy.
Segmentation based on value will give us the answer to the question about who are the customers that are worth our best effort, while the segmentation based on benefits will help us to understand what this effort should look like. Modern marketing segmentation concepts keep confirming – Vilfredo Pareto was right.
*The idea use of Vilfredo Pareto’s principle in this article was inspired by Art Weinstein’s “Hanbook of Market Segmentation – Strategic Targeting for Business and Technology Firms”, The Harworth Press, 2004
The original of this article has been published in MarketingUP, 05/2007 magazine. The article and the above English translation are copyright of Alen Gojceta.
The Swisscom business case is described in: Brown, Stanley A.; Customer Relationship Management – a strategic imperative in the world of e-business; John Wiley & Sons Canada Ltd; Toronto, 2000.
If you decide to use this article or its parts for academic or professional work, do not forget to cite the author and the source.
I had the opportunity to host a CRM seminar for a great group of professionals. Here are the conclusions written in form of follow-up letter to the attendees. I’m sure you will find it interesting too…
Past Thursday I had an opportunity to host a seminar on CRM for a group of experienced professionals. I have announced the education in my recent post, describing challenges and uncertainties around the topic and the potential audience. This post is written in form of a follow-up letter to the seminar attendees, but it might be interesting to many of you who deal with CRM and who are interested in what were the major take-aways from the intensive 6 hours CRM education.
thank you for taking part of this seminar that showed to be very productive and interactive, due to contribution of all of you.
All of my concerns before the education about the homogeneity of the group vanished when I received the first list with your names, your companies and business functions. The group was very compact in terms of CRM understanding as well as your experience in managing customer relationship or implementing CRM systems. A bank, several telecommunication companies and two CRM vendors made a perfect audience for a focused and productive education.
I really enjoyed the experience and I hope you did as well.
There are ten points that I want to stress out and that I’d like you to keep in mind as points to take away from the lecture:
No one needs CRM because it is fancy (’cause others „have“ it too) unless they plan to waist time and money
CRM often doesn’t need „implementing CRM“. In many cases, I’d rather advice you to take a look at you core processes and make it fast, responsible and transparent.
Basics of a healthy customer relationship management lies in you customer focused corporate culture in opposite to the one that arises from product or process orientation (remember our first exercise?)
When you work on aligning your company’s agenda with that of your customers, don’t forget about different motivations of your departments as well as talents and motives of individual employees
Manage customer experience through managing their perception. Perception is often tightly related to expectations. Take care! Expectations are set by your organization’s „CRM processes“, your marketing communication, as well as by your competitors.
Manage touch points. Those are the essential „places“ where customer experience occur. Try to use „Moments of truth“assessment in combination with customer expectations or even emotions as a powerful tool to manage total customer experience.
Customer data derive from customer oriented processes not vice versa
„Critical point of CRM implementation“ is the one where you know what do you want to achieve, why do you want it so much and what is the frame within you are able to do it
The message of the story tale „Wolf and the three piglets“ is that we have to build solid basis for a lasting survival (business) model. The same is with social media and their use in CRM ecosystem (sCRM): invest time, engage to get them engaged
…ah yes, segmentation. Some of you stated that you didn’t get enough. You asked for more. More of theory, more of tools, more of segmentation methods. It is homework for me and a great feedback from your side. Thank you.
When talking about segmentation, is not only about splitting customers into (more) manageable groups. And especially it is not just
about distinguishing them based on their spending (value based segmentation). It is about what does your offering or your organization mean for different customer groups (benefit segmentation). It is about events from the CRM ecosystem that create dynamic
segmentation attributes and micro segments. The segmentation is about the general approach to certain customer profiles, as well as small operational activities. This is in particular case for the segmentation of the CRM era where you are able to track in real time what your customers are doing, experiencing or even saying.
About trends of the future, remember that today’s products can become powerful interactive touch points. Use QR codes in combination with Web 2.0 tools.
I encourage you to try in your everyday work what you have learned. Think customer. Think expectations. Think experience at touch points. Think about service – the fast one, responsive and transparent.
Thank you for your active contribution and for sharing your time, energy and experience with all of us.
P.S. Feel free to comment about your experience or suggestions for further improvements.
Outbound telesales campaigns take part of many contemporary channel strategies. Those are often used to cover large customer base within sales models with simple transactions. There are plenty of arguments that support such approach, but there are some rules to respect as well. I have embedded these rules into the “bdp Triangle”…
Today’s organizations that operate in intensively competitive environments need to adopt comprehensive customer relationship management (CRM) strategies. These strategies are striving to integrate the one to one marketing principle. It fosters approach to each person, member of a large customer base, as an individual with his or her needs, characteristics and specific behaviors. This approach, among organizations embracing CRM, has brought customer interaction channels on top of the business agenda. In addition to traditional brick and mortar offices and ever present sales representatives, modern technologies brought new interaction channels that are by their very nature, more convenient to customers and more profitable to the organization. Besides the Internet, contact centers are the most important means of interaction with large customer base.
The power of telephone marketing
Development of management disciplines within call centers and increase of their complexity had impact on widening the area of their
applicability. Sharing knowledge among inexperienced agents, conversational scripts, intelligent call routing, education and quality assurance are just some of the challenges faced by management within call centers. However, pro-active calling activities have always been among their most challenging tasks. There are two different ways of such interaction: incoming (inbound) proactive activities and outgoing (outbound) calls.
An organization can proactively act upon incoming calls by anticipating needs of their customers by proposing products or services, in addition to fulfilling the original scope of the customer call. There are a number of processes, policies and technologies that support proactive proposals during incoming calls. Those will not be further discussed in this article. The following text will investigate the topic of outgoing telephone campaigns. Its multi-disciplinary and complex challenges have to balance contact center technologies with psychology, ethics, legislation, sales techniques and marketing know-how.
According to the recent data (2005) from Direct Marketing Association (DMA), in US, telephone marketing is ranked second with 47 billion dollars behind direct mail with 49.8 billion. These data are even more significant if one takes into account other studies sponsored by the same organization, which puts telephone marketing on the throne in terms of response rate with 5.78% and the rate of return on investment (ROI) with a significant 18.2%, higher than e-mail marketing with 16%. In year 2005, direct marketing will participate with as many as 10.3% in the United States’ GDP.
About 50% of today’s call centers in the United States use the functionality of outgoing telephone campaigns. About 45% of those use this functionality for telesales and telemarketing, and about 22% of them for market research.
Telephone marketing and privacy threats
By implementing call centers with outbound functionalities and campaign management capabilities, organizations gain control over a powerful tool that can bring significant business savings as well as realize substantial added value through sales and marketing campaigns. This is a bright side of the coin. Unfortunately, telephone campaigns have their dark side too. Conducting telephone campaigns which are inconsistent with consumer’s expectations, their cultural habits or the current needs around company’s offerings, can lead to a complete disaster. The consequences can range from a complete collapse of a specific campaign to many insulted and forever lost customers.
Only a doorstep is perceived as more private property than a private phone number. Knocking on the door of someone?s home by a sales representative or a call to a private phone number is the event that can create or destroy customer’s good opinion about an organization.
Business phone numbers, as well as offices, are completely differently positioned in our minds. In order to perform work, purchasing decision-makers will be happy to listen to persons who represent their providers. Business phones are used precisely for this – to support business activities. Outgoing telephone campaigns in business environments are mostly used to create sales leads, and could be characterized as a combination of market research and sales initiatives. Already in 1989, the direct marketing department in Oracle Corporation used to sell their products using combination of a call center and internally developed application for campaign management. This fact is even more interesting when taking into consideration that they where selling databases worth several hundreds thousands dollars. Many were skeptical at the time about the strategy of the department which was headed by Tom Siebel, later founder of Siebel Systems. The strategy was confirmed by almost double the sales from the previous year.
Approach to consumers by means of telephone campaigns is different in many aspects. The consumer is more sensitive to privacy issues, he is protected by law, and cultural constraints may be of critical importance, especially in multi-cultural environments.
Consumers are hunters, not prey. Although the marketing industry has been targeting customers for decades, trying to arouse need and awareness about a product or service through various forms of marketing communications, at the end the customer had the opportunity to choose among various options. Growing awareness on consumer’s rights, increased share of the educated individuals within a population and the increased customer care by organizations in deregulated and competitive markets, made the average consumer less open to the traditional marketing manipulations around attitudes and nonexistent needs. Modern consumer gradually realizes that he is the “boss.” Outgoing telephone campaigns today are more complex and challenging for marketers than ever before.
The “bdp” triangle – first rules, then calls
Proactive outbound telephone campaigns should be run when combination of conditions that border by the “bdp triangle” are fulfilled. Its corner points are marked by: benefit, debt and permission.
bENEFIT implies a reason to call that brings true value to the customer through the so-called win-win relationship. The person who just bought an apartment will be satisfied if he or she gets the call from a sales representative from a company that deals with arranging documentation for property registration. In addition to the true value for the customer, calls may be considered acceptable when referred to “public good” such as humanitarian work or survey for market or social research. It is important to keep in mind that an organization whose existence depends on selling their products or services on the market, should not afford to make “dummy” outgoing calls. Each disturbance can instantly contribute to the negative positioning of the company’s brand in customer’s mind.
dEBT in the triangle indicates situations in which the customer is indebted to the organization. An example would be delay in bill settlement. Friendly warning or a reminder will not be taken for bad. For debt collection even telephone machines are often being used. However, the preferred form of the “debt angle” is the one in which the customer “feels obliged” towards the organization because of the high level of satisfaction with the experienced products or services.
pERMISSION implies customer’s consent to be contacted. The permission may contain the desired time frame of a call, possible reason (content) and the desired (permitted) communication channel. Permission based marketing, opt-in marketing or consensual marketing are among the terms that mark the only excuse that you can use to choose the content that you will communicate to your customers, as well as the how you will do it. Permission given by a customer is a passport to overcoming all the limitations put through legislative, cultural or professional boundaries to customer relationship.
How to get a permission? Strategic imperative of modern businesses is their capability to communicate directly with customers. In such communication, customers should be able, through various means, to opt for communication channels and content. Also, a customer should be empowered to change his or her mind at any time, to change the preferred way of communication or the type of content that will be delivered.
Obviously, for successful outbound telephone campaigns several criteria should be fulfilled: calls should be triggered at times that match the timing of a need incurred, and should target periods that will not be perceived as a threat of privacy.
The recipe for a successful implementation of outbound campaigns is called Marketing Optimization (MO). MO comprises a number of technological and organizational means that enable automated creation and communication of content that is suitable for a particular consumer. Comprehensive CRM systems often support MO as its integral functionality, providing technological support for managing processes and business relevant data.
Proper implementation of outbound pro-active telephone calls successfully combines ethical and cultural norms with the legal framework and detailed customer information such as profitability, demographics, past behavior and the behavior of consumers with similar characteristics. An organization that successfully manages to juggle these challenges by orchestrating their people, processes and technology, will be gaining significant advantages through marketing of relationships and cooperation.
If you will use this text for publishing or academic pursposes, be so kind to cite the author and source: Alen Gojceta, Liderpress, 11/2005. Thank you!
For some time now I’ve been cultivating the idea to write a few lines about an unusual branding that the Atlantic group applied to their tea product line. Probably the idea would never have grown into a decision, and the decision into action, if there wasn’t the observation of my eight-year old son that has confirmed my suspicions…
For some time now I’ve been cultivating the idea to write a few lines about an unusual branding that the Atlantic group applied to the tea product line acquired from Pliva in 2001. Atlantic’s decision was to keep the teas within the Cedevita line of business and also to use this very popular brand of refreshing beverages to promote the teas. Cedevita was among the most popular drinks in former Yugoslavia. Today it is packed in plastic jars in form of granules that dissolve in water with an effervescent effect that create a fruit tasting refreshing multivitamin drink.
Probably the idea about the mentioned article would never have grown into a decision, and the decision into action, if there wasn’t the observation of my eight-year old son that has confirmed my suspicions. Passing near the “city light” advertisement at one of the Zagreb tram stations, the child begins this unusual conversation:
Lovro: “Dad, will we buy this Cedevita tea?”.
Me: “But my son, we have it at home – an ordinary tea in filter bags.”
Lovro (enthusiastically): “Oh, it is kept in bags, you mix it with water, shake and drink?.”
I (taking a deep breath): “No, my son …”.
Yes, the tea is not an instant beverage in granules, and still it is called in the same way. How’s that possible?
Before of Atlantic’s re-branding, in consumer’s perception Cedevita meant only one thing: an instant vitamin drink. Time ago, when Pliva used to
pack Cedevita in medical jars, consumer perception recognized the drink as a serious diet supplement. Still today, the text on the package states that it is just about it and that the recommended daily dose should not be exceeded. The package itself, however, does not reflect such seriousness any more, and the same goes to the related consumer perception (and habits, I’d add).
We know that the perception of a brand is usually established early in childhood. If we consider that children are the main consumers of Cedevita instant beverage, and that for them Ce-de-vita means exactly this, the confusion when encountering teas with the same trademark does not surprise.
I believe that applying brand attributes of a recognized instant beverage to the tea product line, represents a negative shift in the strategy of such brand. The confusion is further increased by recent investments through package redesign and intensive advertising of Cedevita teas – by ads that, by large portion of our perception, actually promote vitamin instant beverage. Judging by the web pages of Cedevita teas, it seems that even Atlantic’s marketing experts weren’t able to detach from such perception. The pages that belong to the teas represent just a subset of the Cedevita site, therefore the new tea packages are surrounded by orange bubbles on the move, so characteristic for the instant drink sharing the same name.
In this discussion I will disregard the hypothesis that the people from Atlantic deliberately push the more profitable Cedevita instant beverage on the account of (supposing) less profitable tea product line. Knowing this private company by a decisive and pragmatic management, I believe that the line of former Pliva teas, would have been rather sold to competitors than kept to serve as advertising billboard for a more successful product line.
Returning to the Cedevita brand and its communication. Cedevita, comparing to natural tea satisfies a completely different need. Even when we drink it, somehow subconsciously we do not believe that we are doing something really healthy. Effervescent effect when preparing the drink, during which the glass becomes temporarily transformed into a test tube, and sugar as one of the basic ingredients, suggest that we are going to consume a refreshing vice, rather than a healthy beverage. What remains as consolation is that we get the necessary “power of seven vitamins” as a food supplement.
While the primary function of Cedevita is a cold drink for refreshment and thirst, the tea is a warm beverage of health and relaxation. It implies a natural herbal mixture, kept in a previously boiled water. Tea is aromatic. Cedevita is the freshness and the sound of the dissolving granules. The tea are leaves and dried fruit, while Cedevita is the powder with “natural fruit flavor”, as stated on the label.
In this whole discussion the potential synergy of the brand should be taken into account. Cedevita drink, Cedevita tea, Cedevita basketball team … When such unified brand has been stretched through consistent marketing communication at a wider region, then this approach carries a synergistic effect and significant savings. In the case of Cedevita, this region includes Croatia and its neighboring countries. Basketball club that plays in the regional league under the name of Cedevita and marketing campaigns that can be recycled in several markets with little intervention, reduce the cost and increase the synergy effect of a long-rooted brand. But it is exactly this “rootedness” to be the reason for confusion by the communication that places the instant beverage and the tea in same basket.
Cedevita teas and brand internationalization
If we consider the brand in terms of its internationalization and ignore the neighboring countries whose consumers grew up Cedevita, then we raise the question of purpose of a brand shared among instant drinks and teas. While in Croatia and the region, brand recognition can encourage a faster acceptance of Atlanic’s tea product line, this is not the case in other countries. Assuming that Atlantic plan to address a broader market with their teas, the arguments above seem to loose the ground. Even in a market that has never heard of Cedevita / instant drink, the question is how well will consumers associate that name to teas. The name itself evokes the C and D vitamins, or the life (Latin vita = life).
Successful global brands of tea are appealing to lifestyle, environmental production, originality. They try to give a breathe of colonial times and distant places to their products. The aroma of such teas evoke the smell of the wooden hulls of sailing ships, pollen, rain forests and the value that ingenious merchant achieved before the tiny amounts of crushed leaves ended up in our tea paper bags. Looking at the world’s most famous tea brands such as Lipton or Twinings, we can notice the above patterns, also successfully applied by Franck to their campaign for Gunpowder premium green tea. Gunpowder communicates exactly that – exclusivity of each peace of tea leave, for which Franck claims to be specifically cut, highlights its premium quality, appeals to inner peace, and evokes travel. Tin box in which the tea is sold and kept, returns us back to the times of our grandmothers and precious shipments from distant places.
Returning to Cedevita teas. What would be the brand that Atlantic could have had applied to their warm herbal drinks, which would ensure its fair share in the hearts and minds of their consumers? Atlantic have already separated brands of their line of functional teas from those intended for enjoying the warm pleasure. Functional teas are set apart under the brand Naturavita. My objection would be that these teas are also promoted under the umbrella brand of Cedevita (the web with bubbles).
Personally, I would be more inclined to place them under the umbrella of Atlantic’s Dietpharm line of business that covers dietary supplements. As for the rest of the tea line, I believe that some variations of Atlantic’s corporate brand carry the greatest potential for the purpose. My suggestion would be to use the Atlantic ocean as link of the New and Old World: “Atlantic genuine tea”, “Old Atlantic tea”, “Atlantic premium tea”, …
This article is not work of a professional brand manager, but an attempt of a consumer who is educated in marketing to share his thoughts about the confusion created in his perception, by a brand expansion to the “adjacent” product category.
There are many similar branding cases that confuse, such as Podravka‘s use of an extremely successful brand of baby food Čokolino [Chocolino] for its excellent chocolate spread, or even worst, the decision of the city of Zagreb to promote through an expensive ski world-cup race (Zagreb has a ski resort with a very limited capacity).
Although this article represents a critical review of a business decision, it is not supported by relevant research or market survey. I am personally convinced that, even in Cedevita’s “clothes”, Atlantic’s tea product line will have its success on the market, primarily due to excellent distribution and managing of sales channels, but also due to investments in other elements of marketing mix that make some product line successful, such as design, quality, pricing policy, promotion as well as management of costs of good sold.
And finally, I think that what happened to the former Pliva teas is the same that usually happens to user-oriented processes in companies with strong organizational silos. I believe that the experts from Atlantic started their considerations from their own organizational views when branding the line of teas, instead of stepping in the shoes of their consumers. I believe that the organizational view, in this case (as with every other silo), was narrow and was saying only one thing: “We are Cedevita organizational unit, and our teas are Cedevita teas”.
Notes to Text
Atlantic, Cedevita, Cedevita tea, Dietpharm are trademarks of Atlantic Group. Franck, Lipton and Twinings are trademarks of their respective owners. The text reflects personal conclusions of the author, and is by no way influenced by author’s current employer or any other third parties.
In case you use this text or its parts, please quote the author and the source (Alen Gojčeta, www.gojceta.com, June 2010).
I have decided to keep “Alen’s ThinkPlace” consistent by delivering consistent content to the consistent audience using a single language. Here is why…
I have decided to keep “Alen’s Think Place” consistent by delivering consistent content (marketing / mainly CRM, sales, management, leadership) to the consistent audience (CRM experts, marketers, business leaders) using a single language (English).
I gave up writing posts in Croatian language and I have cancelled the category “Better Croatia”. Therefore I’m in process of translating some of my already prepared work in Croatian language on marketing and CRM to English.
This concept transformation is the major “why” I haven’t post a word for some time.
I believe that this is a good decision because success of any source depends on how consistent its message is for the targeted audience.
If I’d ever decide to write in Croatian it will be on a separate web site / blog. If I’d ever decide to use my Twitter account for chatting with my friends, I’ll open an alternative account. If I’d ever decide to use Facebook for business, I’ll create an additional profile.
Us – the individuals appear in many forms: as professionals, friends, relatives, hobbyist, thinkers, artists… The many of ours become one among different appearances in front of different audiences – our bosses, partners, subordinates, parents…
The appearance of the one is always consistent, so shall be this web site.
Organizations in mature phase of managing customer relationship are becoming able to implement real time dynamic (micro) segmentation in addition to the traditional segmentation based on “obvious” customer parameters. Personalization of the content, on the level of individual customer, is possible through matrure data collection and management. The article starts by an original introduction into the topic by an example of a restaurant with 150.000 tables…
Contact me… in an adaptive way
If you will use this text for publishing or academic pursposes, be so kind to cite the author and source: Alen Gojceta, Banka, 09/2002. Thank you!
Restaurant with 150.000 tables – no thanks
Technological maturity has made possible what we call today Customer Relationship Management (CRM). The need to establish a business strategy based on technologically supported CRM philosophy, emerged from 3 factors: (1) high penetration of products and services, (2) highly saturated competitive markets, and (3) a large customer base.
When managing relationships with a relatively small number of customers, we do not need support of advanced technological solutions. On the contrary, the most effective CRM is the one based on close, frequent contact, strengthened by mutual trust and understanding.
Many of us have a favorite coffee shop where the waiter serves us with the “usual” drink, or restaurants that are part of daily gastronomic routes, where they know that we do not want vinegar in the salad, or don’t stand cakes with cinnamon. But let’s imagine that a restaurant does not have 15, but 150,000 tables all occupied by “regular” guests. In this case there is a choice: the restaurant management could allocate one waiter for every 5 tables, or make use of technological benefits. In the first case we would achieve the desired effectiveness and personalized relationship with customers, but with the same cost and a lower level of service. Actually, to help a waiter remember returning guests and their habits, the latter would be forced to sit always in the same “district” between the 150,000 tables of the giant restaurant. It is clear that gastronomic experience in such a large restaurant would be far from ideal. Let’s then rather split our tables in some 100,000 restaurants and enjoy properly for a little higher price.
Let’s consider the other case and reach for technological solutions, the same ones that lie below any contemporary CRM solution. In this scenario, we would still have 150,000 tables, but the number of waiters would not be 30,000 any more, but much less, say 10,000, keeping similar level of service. Except for the efficiency achieved by a CRM system, the reduced number of waiters may be additionally achieved by the use of different workforce management or advanced enterprise resource planning systems, often seen in conjunction with modern CRM solutions. The best part of such solution would have been the choice for a guest to sit in any part of our imaginary endless restaurant, and be served by any CRM waiter in a similar, yet adapted (personalized) manner. This is the basic idea of CRM philosophy: collecting and storing information about customers and acting upon it seamlessly across the whole organization, with the aim to establish and maintain relations adjusted to the individual customer or a customer segment. Our CRMwaiters would have been equipped by hardware and software solutions that would help them to identify the customer and gain insight into their habits and aspirations. Such IT infrastructure would have enabled them to simulate mature established relationships with their guests, similar to the situation of a restaurant with 15 tables and a returning guest. All that would have been made possible despite the fact that the CRMwaiter and the guest have had never met before. Unfortunately, the atmosphere of the enormous restaurant would have still been far from pleasant, but the scope of CRM is not perfection in mapping customer requirements, but rather a compromise between aspirations and wishes of individual customers, and objectives of CRM organizations.
The 150,000 tables in a restaurant is just an exaggerated picture of what’s going on during the past hundred years with dozens of industries from retail or manufacturing to tourism – the introduction of massive scale as a vehicle for maximizing revenues and reducing costs per unit of product or service. Such business model has led to the alienation of business organizations from its end users. Rapid growth of processing power on computer clients, improved database technologies and means of interaction with customers (Internet, call centers, laptops and PDAs) have enabled introduction of technologically supported customer relationship philosophy, the one that seeks to simulate intimacy of the increasingly lacking personal contact.
Traditionally, marketing strategies have been relying on market segmentation and targeting specific market segments by different marketing initiatives.
The most primitive, the most easily applicable and the most widely used segmentation is based on revenue (who spent what with us) or, in a more advanced case, on financial potential of our customers (who has the money to buy our stuff). The theory of marketing segmentation is being developed for decades, so today we have advanced models that go beyond profitability or demographics, taking into account a number of parameters such as lifestyle, social affiliation, cultural determinants and the like.
CRM philosophy has set new standards for the segmentation. Its purpose is to recognize the most profitable or potentially profitable customers, adjust the value proposal to their profile, keep them as customers and create long-term (profitable) relations. The tendency is to use advanced technology to make interactions with customers as close as possible to their most positive expectations under a reasonable cost for the organization. The usual number of customer segments in an average organization is less than 10. It is easy to conclude that the communication strategy based on 10 groups from a large customer base is nothing less than a compromise. At the bottom line, such marketing strategies, especially those based on profitability segments, are reduced to the most profitable, or even just the wealthiest customers. Often the maximum achieved is differentiation model where those get a better service levels (better response, higher quality,…).
Organizations that where pioneers in using technology for accessing large customer base, have often emphasized their ability to show the names of visitors of their web sites and outbound e-mail messages as personalization. Most often, they where able only to simulate the classic “Dear George” message, which would be followed by content, usually not adapted to the message recipient. Despite the trend to call this ability personalization, use of term personification would have been much more suitable for this capability to address the message recipient by his or her name.
Personalization is a higher degree of content customization within marketing communication. It is dominant within advanced CRM oriented organizations today. Personalized message contains customized content, in addition to the simple addressing the one to which it was intended. There are more organizational and technological ways to solve “recognizing” specific user affiliations towards certain content or his/her eligibility for a particular marketing proposal. The most common, and also the easiest way to identify user preferences are different customer query forms put as part of a contract or a form that would allow access to a protected part of the company’s web site. The customer should be provided by opportunity to express his/her area of interest and communication preferences.
Such inquiries are known as permission-based marketing. The additional information collected allows classification of the customer into one of the segments defined within the organization. Additional data are gathered from the transactional history. From technological perspective, the more demanding part is later processing of customer information for the purpose of classification into segments defined within company’s marketing strategy, and further splitting within sub segments that mark propensity to buy certain products or services. For this purpose, different tools are used to search databases, analyze the stored data and predict future patterns of customer behavior. These tools and methods are database query, OLAP and data mining, known under common name of business intelligence (BI).
Advanced CRM organizations today, usually combine interest areas and preferred channels chosen by the customer with the segmentation parameters from available relevant customer data. Targeted marketing campaigns are conducted by additional selection of potential members from one or more segments by using advanced BI processing.
The goal of a CRM strategy would be to adapt the business to the customer in an efficient and effective manner. Ultimately, this means that customer’s experience would be marked by an unexpected match of approach, communication, offer and service, still preserving the organization’s business objectives. How to achieve such combination? Organizations that have developed their businesses to the level of personalization filter large customer bases through different BI processes, using combinations of the mentioned parameters, to mark those most suitable for a specific offer or message. Such process is based on visible customer attributes (e.g. demographics) and historical behavior, disregarding the current behavior.
BI tools serve to recognize the potential behavior (e.g. purchase decision) of a targeted customer group, marked by some common features, based on the behavior of a test group or an existing (returning) customer group. Limits of personalization, such as too large segments and research on a case by case basis will be eliminated in the next stage of CRM evolution – the dynamic micro-segmentation. The prerequisite to the dynamic micro-segmentation is large amount of data about a particular customer combined with patterns gathered from a wide customer base. The quality and nature of the customer data is such that it is impossible to collect it through the traditional market research. The only way is to systematically gather information about user behavior during their interactions with the company. It is obvious that this phase of development of relationships with customers is intended only to “mature” CRM companies, i.e. to those that have a long lasting history of processing and storing of customer data.
Remark: to this view from “2002 perspective”, we could add today (2010) that “mature” CRM companies are those that are able to leverage data collection through different means of Web 2.0. as well.
So, what is it all about? The simplest example of a dynamic micro-segmentation will be described on a case of a client of a bank calling its customer care call center. By calling the bank’s toll-free number, the client is greeted by the latest generation of IVR system, with the automated announcement: “Dear Mr. George (Oh, no. Dear George again!😉 ), we noticed that you where searching for information on housing loans on our web site. Do you want us route you to our credit department or you would like to choose an other service? “. If the user chooses to be routed to the credit department, not only will the system do so, but the clerk receiving the call will be automatically noticed on his screen about George’s solvency and previous credit obligations. And that’s not all. The screen will show the best possible offer for Mr. George: loan repayment period in accordance with his income, and previous habits. This is just an imaginary example, similar to the many that customers of mature CRM organizations are already starting to experience. These organizations are equipped with modern technologies that enable such data processing and managing customer interactions.
Of course, implementing and managing such processes it’s not that simple. Considerable efforts of the organization are needed on the field of data integration from various sources and automation of background processes with systems that participate in customer interactions. A CRM organization in a mature stage will assure the same level of personalization through other channels as well, such as call centers or traditional “brick and mortar” offices.
Some analysts, one of them is Eric Schmitt of Forrester Research, believe that in the future the winning strategy of the majority of CRM organizations will rely on segmentation based on the traditional 10 segments instead of the infinite number of dynamic micro-segments. Schmitt believes that the advanced personalization, which may be based on a very large set of rules, is too complex for most ordinary mortals. Indeed you will not be able to achieve a level of dynamic personalization by a simple business decision. The maturity of business processes, data collection methods and information resources are required. Management understanding and tradition in collection and processing of customer data have no less importance. So why wait? Start today with the systematic collection of information about your customers and their behavior. Get ready for tomorrow’s real time market segmentation.
McDonalds announcement to introduce McCafe’ line of business brought many controversies during past year or so. One of the comments from a journalist was about hard-to-immagine truck diver who jumped in McDonalds for a fast and cheap hamburger lunch, asking a fancy cup of latte macchiato. Is this a problem? I went to the Zagreb McCafe and “had a taste” in person of the newly introduced McDonalds business model. Read about it in the furhter text and let me know what do you think.
A coffee shop in the hamburger kingdom
A year ago I read a lot about controversies about McDonalds’ decision to introduce coffee shops within their existing restaurants. At the time one of the many skeptics wrote that he couldn’t imagine a truck driver entering a McDonalds restaurant, taking a cheap lunch and ordering a fancy cup of coffee. There where many opinions that McDonald’s intrusion into Starbuck’s playground will turn into failure. There where many believing the opposite though.
Mc’Donalds decided for two approaches to introducing coffee line in its existing business:
1. In US the coffee line of business is integrated into the existing front counters
2. Separate counter and cafe’ – style furnishing within existing restaurants, started in Australia in 1993. This model started to extend to Europe in 2009.
In Zagreb the first McCafe’ was introduced in autumn 2009. I was really curious about what will be the success. These days I had the opportunity to “taste” the business model, through customer goggles. Here is my experience and annotations.
Me and my laptop walked through the McCafe’ door due to a reason different than usual choice of a cafe’. After the temporary suspension of the anti-smoking law in Croatia, McCafe’ remained one of the very rare places in Zagreb where one can enjoy a coffee without having to take the role of a secondary smoker.
Nice cakes, but where is the WiFi?
From customer perspective it was a decent experience (as I didn’t poor the coffee on my keyboard this time, my laptop will not be asked about his opinion :-)). The McCafe’ (at Zagreb at least) is smoothly integrated into the standard fast food area. As my idea was “work-and-coffee“, too many children running around after 3 PM where disturbing eventual phone calls. As some customers claimed to the Business Week’s reporter (http://www.businessweek.com/magazine/content/09_40/b4149070703260.htm?chan=globalbiz_europe+index+page_management+%2Bamp%3B+learning) in her article about McCafe’ penetration in Europe, the smell of French frites and hamburgers does spoil the coffee shop atmosphere. Indeed. During my stay at McCafe’ I really missed a WiFi link and a coffee sized less than a mid cup. What about a “small macchiato”?
When trying to have a look from the back door, my estimation is that the business model is placed on healthy basis. Here is why.
My only concern is that the McCafe’ bar seems often too empty, but the rest of business case seems to be built around productivity and up sell.
First, it is pretty hard to resist some of excellent, yet pretty expensive cakes, when you jump in for a cup of coffee.
Additional argument on up selling that keeps the business running, are many parents that approach the McCafe’ counter after having ordered food for their children at the fast food counters.
Productivity + up-sell is the name of the game
From productivity perspective, McCafe’ shares existing resources (such as cleaning personnel) with the rest of the restaurant and employs fewer personnel than an average coffee shop. Actually only one lady is taking care of the whole McCafe’ experience, including coffee making, cakes decorations, billing and the inevitable “enjoy” phrase.
Comparing with a traditional coffee shop that engages a “running waiter”, in McCafe’ the productivity is additionally enhanced by the fact that customers serve them selves at the bar and clean their desks afterwards by bringing their trays back to the McCafe’ counter. It is worth mentioning that the price of a small cup of coffee is among the highest in Zagreb area (10Kn = 1,3€, cca 2$). More expensive coffee can be found at a few very fancy places and 4+ star hotels.
In terms of cross selling and reusing existing resources, McCafe’ has thought about the possibility to sell cakes “to go”, extending their presence to home parties and celebrations. McDonald’s has extended its business model to coffee line of business, without actually having to innovate, or spend too much. They got all of it already – food “to go”, restaurant management, location, experience management, standards,…
The Business Week’s article cited above, brought an estimation of Jeffrey Young, managing director of London management consultancy Allegra Strategies that the investment for a new stand alone Starbucks in Europe is at least tripple the amount of that for a McCafe’ within the existing McDonald’s facitilites. I’d add that it is the same ratio, if not higher, when talking about the daily business expences (personnel, energy and the like).
All in all it seems that there was no place for skeptics when talking about McDonalds introduction of McCafe’. The new line of business is all about up sell and reusing the existing resources. This was a simple business idea, and simply hard to miss. And here is a simple thought for the end: If these are results of a marriage between hamburgers and cappuccinos, think about the consequences of the merge between mobile (T-Mobile) and land line (T-Com) telecom operators.
This is my first post. After having brought a difficult decision on which blog platform to use, I have chosen to install the WordPress on my domain. I must say that the people from Google’s Blogger are great and I’ll probably never know if my decision was really right.
My vision is to provide here 3 different categories of blog posts:
Posts in English about leadership, sales and marketing (mostly on CRM)
Posts in Croatian language about same as above + some thoughts about how to make my country better
My articles, published in different Croatian business magazines. Translated here in English (I’ll post as translated one by one – the first one right after this post)
In addition there will be a separate page with my academic work. I plan to provide this work in English and Croatian (I’ll probably need a sponsor for translation :-))
You can follow me on Twitter(search agojceta, untill I install a widget on this web site).