Expense Reduction

Wouldn’t the sales process be easy if we had endless resources with which to contact, communicate with, and serve our customers? Alas, budgets are not limitless. The ability, therefore, to make prudent investments and appropriate trade-offs – and to maximize the leverage of sales and marketing investments – is paramount in business planning.

Expense reduction is not a simple process. Sure, taking out costs by cutting services is easy. But true, business-rational expense reduction requires that Quality be maintained at equal or superior levels despite the expense reductions. The trade-off is not intended to be one of “lower service for lower dollars”. Effectively applied, expense reduction in sales and marketing involves appropriate allocation and leverage to reduce total costs which INCREASES customer satisfaction, loyalty, and revenue.

Marketing Integration

Customer communications are a key (and effective!) weapon in the arsenal of customer knowledge acquisition, customer relationship building, and customer growth. At the same time, communications and customer contact can be a hefty portion of our cost to serve. The challenge is to maximize the effectiveness of this tool while minimizing the costs.

The good news: we have at our disposal more options today than we have ever had. Communications have evolved from face to face discussions, smoke signals, telegraph, and telephone to modern technology such as email, websites, and GPS, etc. We have all heard that communication is a two-way street. In business today, communication is more like a five-lane super highway. New methods of communication, such as e-commerce, are radically changing the cost of communication and customers are rapidly accepting new forms of interaction. These new methods of communicating are fundamentally different and have significantly different costs associated with them.

To reduce customer management expenses, organizations should use the lowest cost medium that delivers the highest value to the customer. It is important to note that there is not necessarily a direct correlation between the cost of the medium and the perceived value of the contact from the customer standpoint. For example, a customer may value a telephone call (a lower cost contact of approximately $35) more than a face-to-face contact from a field representative (the highest cost contact of approximately $300-400) for certain types of information transfer (such as to communicate a delay in product delivery). It is important to understand that each medium has unique capabilities and may be able to accomplish what another medium cannot. The optimal return from a customer management system is realized when an organization is able to effectively integrate various communications and thereby maximize the value to the customer while minimizing the cost to the organization.

Example 1: Download a PDF article on this subject
Example 2: Download a PDF article on this subject

Customer Contact Matrix

The Customer Contact Matrix is a planning tool that ensures the investment of sales costs is appropriate for the expected return in sales or revenue. The tool (or plan) aligns sales and marketing investments with the revenue potential of different grades of customers. The objective is to maintain approximately the same level of sales and marketing investment for each grade. If the Expense to Revenue ratio is significantly higher for the less valuable accounts, investigate ways to reduce the level of investment to align with the return – while still pro-actively managing the relationship with ALL grades. Download a PDF article on this subject

Integrated Account Management

The spiraling cost of keeping field sales reps on the road and collapsing margins from mature products have been a major contributor to entire industries either disappearing or having to radically change how they go about their business. In order to remain competitive, organizations have been forced to better leverage the high cost of face-to-face visits with lower cost methods of communication with customers. Integrated Account Management is a formularized method for conducting this iterative process of learning from the customer and then providing value to the customer. Today’s companies must continually refine their mix of communication media and look for ways to provide equal or greater value to the customer while maintaining or reducing the cost to manage those relationships. This refining is done by modifying the media used to manage the customer and the frequency with which those media are used.

Example 1: Download a PDF article on this subject
Example 2: Download a PDF article on this subject

Grading

The primary reason to grade customers is to ensure that the investment in those customers matches the expected return. Grading allows marketers to:

• Manage the cost side of the sales and marketing budget
• Manage the sales and marketing expense-to-revenue ratio by aligning sales and marketing investments with the grade’s potential return
• Identify and divest unprofitable sets of customers Download a PDF article on this subject

Lean Six Sigma

Do not be intimidated by the terminology of Lean Six Sigma. The methodology is – simply put – about reducing the complexity in your sales and marketing processes and implementing new, improved processes that function more reliably, effectively, and repeatedly. Could Lean Six Sigma help with your expense reduction objectives? Ask yourself the following questions:

• Are we being asked to continually deliver more and better results, with the same or fewer resources?
• Do the individuals working within the sales and marketing area feel stressed, over-worked, and have to put in long hours?
• Is there re-work and error within our processes (leads not followed up on, missed proposal deadlines, customer dis-satisfaction)?
• Do we have hand-offs to other functional areas, that don’t always work seamlessly and require time for follow-up and tracking?
• Are we engaged in some activities that are not adding value and are requiring time and resources that are distracting from key customer-facing activities?

If you can answer “yes” to any of these questions, Lean Six Sigma may be appropriate. The methodology includes tools and approaches which allow you to re-engineer your process -- simplify, remove the errors, and streamline for greater velocity at a lower cost. Download a PDF article on this subject

Value Stream Mapping

Who’s on First? Does it ever feel as though there is confusion within your organization as to who does what and to whom when it comes to managing customers? Worse yet, is there confusion surrounding what activities are actually providing value to your customers? There is a way to obtain tangible answers to all of the above questions and that method is Value Stream Mapping. Value Stream Mapping is a facilitated process to get a clear picture of a current process and how to improve that process. It is a diagnostic tool to understand the current environment and identify areas of waste. Once the current environment is clearly understood, an organization can then prioritize the necessary actions to improve that process. By eliminating the waste, an organization is able to lower its costs while still providing equal or greater value to its customers. In the end, everyone knows who is on first and both the customer and the organization win. Download a PDF article on this subject