CASE STUDY: OWNING THE CLIENT RELATIONSHIP

By: Richard Peters

http://ca.linkedin.com/in/richardpeters2/

Much of my business career has focused on getting under performing organizations and their business units on a faster growth track. In these situations, an essential piece of homework has been understanding the competitive playing field. Over the years and based on exposure to a wide variety of industries, businesses and products I have found there are few basic questions that when asked of a management team can be very enlightening regarding the identification of competitive issues, challenges and problems. Chief among these questions is “who owns the client?”

This is not an uncommon question. We have all asked it in one form or another. When I ask it, the discussion I am looking to stimulate centers around identifying which supplier(s) the client values as a partner rather than a supplier. In other words, from the client’s perspective, which competitor or competitors position themselves as the client’s preferred call when they need something. The company that owns this place with the client has a significant competitive advantage.

Last week I posted a Competitive Advantage case study entitled Achieve and Maintain Competitive Advantage and in it I presented an example of how my company established a “partnership” relationship with the client by starting to add value to the client early in the client’s chain of events for taking a product from concept to sale. In the following case study I share an example of taking ownership of the client relationship and thereby securing “partnership” status with the client.

CASE STUDY – OWNING THE CLIENT

A few years ago, I was responsible for Trader Quebec which was a major North American subsidiary of Trader Classified Media, a European based multi-national media organization. Trader’s primary business was publishing classified ads for used vehicles as well as boats, motorcycles etc. in a variety of print and online media. Trader was the market leader in Canada with well over 150 magazines and dozens of websites. In Quebec alone, we produced over 50 titles and operated 6 or 7 sites. As the market leader in Quebec, Trader enjoyed an 85% market share.

Competition in the classified advertising industry was intense. Trader was competing against all major Canadian newspapers as well as dozens of independent magazines, newspapers and websites. A key market for this business was car dealers. In the case of dealerships, the selling process involved sales reps from Trader and its competitors visiting car dealerships and with the assistance of the dealership staff identifying vehicles to be advertised. The reps would then photograph the target vehicles and get the relevant details on these vehicles from the dealers. The photos and vehicle data would then be posted or advertised using classified advertising websites, magazines and newspapers. Classified advertising publications were published weekly and sold through thousands of retail outlets (e.g. grocery stores, corner stores, car parts dealers etc.) across Canada. In Quebec alone we distributed our publications through approximately 3,000 locations.

Trader and its competitors followed the same model for gathering classified ads from dealers. In any given week, some dealerships, especially those located in or near major metropolitan centers could be visited by numerous sales reps representing multiple media organizations. As long as a competitor could convince a dealer that they had the ability to provide the dealers with access to potential car buyers that the dealer would otherwise miss, the dealer was willing to spend money with them. Despite Trader holding a significant market share advantage (e.g. In Quebec we estimated that we had 85% of the used car advertising market) competitors were successful in taking ad dollars from us.

 

Dealers could be required to commit quite a bit of time to managing visits made by numerous sales reps weekly. While no individual competitor was a significant threat to Trader in terms of sales volume or market share, the extent of competitive activity caused problems and challenges in a number of other ways:

• Dealers’ were showing signs of sales call fatigue.
• Pricing wars, that always develop when the competitive field becomes over populated with new players, were eroding margins.

Increasingly we saw our competitive advantage being threatened. In addition to eroding margins, this competitive climate was also driving up our cost of doing business. In proactive and reactive modes we were constantly required to differentiate our offerings by introducing online and print product innovations. Despite these challenges, an even greater concern was our relationship with the dealers. Customer service was a pillar of our marketing and brand strategies. Erosion of this pillar was being threatened by the relationships being established by competitors.

The Trader organization decided to convene a North American Task Force to investigate the situation and to make recommendations regarding what action could be taken to mitigate the threats. I was asked to head the task force which comprised representatives from Trader’s North American Head Office and all seven of Trader’s North American regional operations.

After several months of study and research, the Task Force submitted the following recommendation for Trader’s first North American wide online integrated program comprising its 7 regions. 

Recommendation:

Trader must put in place a barrier that would ideally eliminate and definitely minimize the opportunity for competitors to develop and cultivate client relationships. Accomplishing this would require Trader taking control of client relationships. 

Action Plans: 
A. Trader needed to introduce a new service to Canadian dealers that would motivate the dealers to empower Trader to assume responsibility for their classified advertising programs. This plan comprised:

• Trader providing inventory management services to the dealers. Under this plan, Trader would maintain, for each dealer, the photos and records for their entire used vehicle inventory.
• Trader would become the dealers’ sole provider of photos and data to whomever the dealer authorized access. If a dealer wished to advertise any of their inventory using a competitors magazine, newspaper or website, Trader would be notified and would provide the photos and related data to the competitor.

B. In order to implement this recommendation, Trader first needed to invest in the development of new online services and the upgrading existing services. These improvements would ensure that Trader had the inventory and data management systems necessary to meet the requirements of all dealers and media organizations.

Outcome:

The strategy was implemented and was successful. It weakened the competitors’ ability to secure and nurture client relationships and it strengthened Trader’s ability. In its first year approximately 2,000 car dealers across Canada signed up for the program. In Quebec alone, we signed almost 800 dealers in the first 6 months. The strategy’s success was also contingent on the cooperation of competitive media organizations and while there was resistance, the dealers liked the program and their pressure on the other media organizations to cooperate went a long way to ensuring the strategy’s success.

Pre-existing Client Relationship Environment

Trader Media

Competitor A

Competitor B                      Dealerships

Competitor C

Competitor D

New Client Relationship Environment

Competitor A

Competitor B

                                                Trader Media                  Dealerships

Competitor C

Competitor D

  

Other case studies by Richard Peters include:
Anatomy of a Turnaround
Ancillary Business Opportunities
Achieve and Maintain Competitive Advantage

The Rise of the Digital CMO

by Jake Sorofman

Fact: When it comes to marketing spending, analog still outstrips digital by a factor of three to one. How could this be?, you ask. Digital marketing provides targeted reach and measurable impact. Innovative digital marketing approaches in social media, CRM, and other areas dominate the discussion. Nevertheless, analog spending still rules, as confirmed by Gartner's 2013 digital marketing spending report. Shouldn't CMOs and all marketers be shocked by this? Sure, an ample pile of dollars can be attributed to big spending on a few analog media channels, like Super Bowl ads, for example. But I would suggest that there is something more fundamental happening behind the numbers; something lurking in the very nature of digital marketing and what it asks of leadership and what it means for accountability.

The Digital Disconnect
First, there's a digital disconnect in the executive ranks, a leadership vacuum created by a mismatch between expertise and authority. Like so many other revolutions, digital marketing has taken hold from the bottom up. Here, we find digital natives steeped in digital culture and practice — twenty- and thirty-somethings who came of age on the social web. Squint your eyes and you see tomorrow's CMOs. But today's CMO is different: the corporate attire may be gone, but the assimilation to the new digital culture is incomplete. 

You can see a strong precedent for this in the open source software movement, which didn't go mainstream until its early adopters progressed through the ranks. Yesterday's Linux hackers are now the chief architects and CIOs of the largest enterprises. Unsurprisingly, open source has become a key part of most enterprise IT architectures. But open source only crossed the chasm once its champions came of age. Many CMOs see their digital future, but struggle to make the case across the executive ranks, where resistance is born of unfamiliarity, fear, or misperceptions about what digital marketing means for the brand. "But we're a traditional company" is no longer a credible line of defense, though, unbelievably, it is still a more common one than you'd think. 

Perhaps digital marketing won't go native until the natives occupy the executive suite. But I'm betting it will only accelerate because, unlike the open source movement which was initially about cost, digital marketing is plainly driven by revenue. Digital experiences and engagement draw consumers closer to a brand and more efficiently drive conversions and transactions, both online and off. 

The Consequence of Measurement
Second, digital marketing is illuminating in ways both powerful and problematic. Analog practices leave room for ambiguity. The numbers matter, but can't always be counted with precision. ROI is often ambiguous and anecdotal, which can relieve the CMO of true accountability. To be fair, many CMOs do want greater visibility. They're tired of the murkiness clouding the space between investment and impact.

Others, however, long for the bygone days when the big idea was sufficient. The CMO could tap dance through the average board meeting, as long as revenue tracked up and to the right. Like Mad Men's Don Draper, the CMO became the master of the soft-shoe performance. 

But with digital techniques, everything is measurable. Feedback loops tighten, segmentation becomes microtargeting, and optimizations can happen on the fly or even in real time. The relationship between investment and impact becomes correlated and causal — and the CMO becomes accountable down to the dime and moment by moment. Light dawns on the marketing spend! This transparency is powerful when quarters are turning into dollars for the business — but potentially perilous when the opposite is the case.

The Digital CMO
Now, a few CMOs may feel unfairly implicated here. Apologies! Of course, there are indeed strong examples of digital converts who have completed this assimilation successfully and built world-class digital marketing organizations that reimagine brand engagement, and even reinvent business models.

What do these "digital CMOs" do differently? They experiment aggressively. They hire smart digital natives — and empower them. They partner with great agencies. They have the humility to admit what they don't know, the courage to toss out the old playbook, and the confidence to allow digital metrics to illuminate the results. 

Some hire a chief technologist. Sometimes it's a peer to the CMO, perhaps a chief digital officer, which Gartner predicts will be present in 25% of enterprises by 2015. Sometimes it's a chief marketing technologist reporting to the CMO, which Gartner already finds in 70% of marketing organizations today. In both cases, this role is the designated left brain to the CMO's right. 

Digital CMOs also think beyond digital marketing. They look for opportunities to create digital experiences and revenue streams enabled by the nexus of forces, which is Gartner's description of the convergence and mutual reinforcement of social, mobile, cloud and rich information. The collision of these factors unlocks opportunities to reach and engage with consumers across the physical and virtual worlds, drawing them closer with targeted, contextually relevant experiences and offers. Further, it can allow brands to redefine how value is created and delivered — the way Apple has with music, Amazon has with IT infrastructure, and Netflix has with movies.

Last year, Gartner predicted that by 2017, the CMO's technology budget will exceed the CIO's. Why? Because more often than not, it's the CMO who is expected to drive this digital transformation, which is deeply dependent on technology. Is the average CMO ready to step up to this challenge? 

Some CMOs are preparing for the digital revolution by filling the gap between expertise and authority. In other words, they have the self-awareness and the confidence to take bold action even when the context has shifted beyond their sphere of influence and scope of expertise. That is leadership. Others are afraid of the digital disruption — or exhausted by what it will take to convert digital resistors in the executive suite. 

But as we've witnessed through the economic and technological upheavals of recent years, and the resulting creation and destruction of business models, markets and careers — disruptions can be swift and unrelenting, and it is much better to be a disruptor than one of those being disrupted.

Jake Sorofman

Jake Sorofman is a research director with Gartner for Marketing Leaders, from Gartner, Inc. Read Jake’s blog and follow him on Twitter @jakesorofman.