Evaluating Ideas: Criteria to Foster Customer Intimacy

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When developing Service Chains™ it is important to evaluate their business value and your ability to implement them in the market. At McMann & Ransford, we recommend tracking the following criteria to help foster customer intimacy:

  1. Strategic Importance
  2. Financial Importance
  3. Market Attractiveness
  4. Demand & Delivery Potential
Please keep in mind that each criteria directly relates to the overall portfolio. As your business grows you will want a portfolio of True Solutions™ that a) builds intimacy with key executives above the safety line, and b) builds critical mass of the solution business, and pulls through product directly.

1. Strategic Importance 
The Breadth of Revenue Stream reflects the size of deals and or ability to directly pull through significant product deals. If this was an "intimacy-only" offer, by definition it would rate low on breadth of revenue but would still be strategic if it added new intimacy needed. But it might not be strategic if the intimacy it drove was accomplished elsewhere in the portfolio. Further, the breadth of revenue could be high if it drove large solution deals or outsourcing but these may or may not be strategic depending upon other offers in the portfolio that might achieve a duplicate effect. Note that offers that drive significant product deals are almost always strategic even if duplicated in portfolio - because by definition large product deals are the primary reason for having a solution business

Client Relationship Impact deals with the intimacy delivered and the importance of the service chain. If it deals with an issue that is "jugular" for a key executive or client it produces a high factor on client relationship impact. Also, if the deal is large and causes the client to change its business practices - think outsourcing - it probably has high client relationship impact.  
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The two factors together provide indications of the strategic impact of the Idea and its related service chain. 

I also want to introduce a type of idea that does not directly relate to a service chain called an umbrella idea. Umbrella ideas are ideas that drive large decisions but might include several service chains. Think, for example, of moving a client into a new business model, or region. We are not going to have space in this note to cover them in detail, But, I wanted to introduce the thought that there isn't always a one-to-one relationship between a strategic idea and a service chain. 

2. Financial Importance 
Average revenue per account deals with both the revenue driven by the service chain (or group of service chains in an umbrella idea). Again, "intimacy-only" solutions may rate low on this measure, but might have financial importance because of their influence on the solutions portfolio. Another consideration: does the idea drive large product deals?  Is it driving significant revenue?
d_financial.jpg 
Offer mix and portfolio fit. I have to mention here that although we appear to use the terms "offer/solution" and "service chain" interchangeably, they have subtle differences. This deals directly with the issue of rounding out your portfolio and assuring that you have customized, meaningful intimacy offers. Intimacy offers are often the most difficult to get our clients to create (especially meaningful ones) and embrace because they require deep vertical knowledge and often are far from their traditional business. This criteria should also drive interest in outsourcing offers which have long term contracts and force interest in direct product pull through offers.

3. Market Attractiveness 
Projected Market Size deals with number of transactions that can be reasonably expected from the market, specifically - number of potential clients that could buy the offer. These projections should take into account where the market is in the absorption bell curve. Is the offer creating a market? early in market? in the middle of the market? or late to market? 

I have experienced many clients that want to bring offers to market late in the cycle. I'm not sure why this is so prevalent, but it should not be done. Typically, these types of companies are also the least comfortable bringing an offer to market early in the curve. 

Potential Market Share deals with the issue of the number of people that could buy the offer what percent will buy yours. It is best to be conservative about this calculation. One thing to keep in mind is that some markets are so large compared to the penetration needed for success that performing detail calculations of this are not necessary. 
d_market.jpg
One last thought: sometimes markets are relatively small - think aircraft components manufacturers, or telecom providers suppliers - for them, the value of the intimacy offers dominates the discussion of the idea.

4. Demand and Delivery Potential 
This criteria deals with your ability to get to market, get deals, and deliver the promise. Sales Capacity deals with number of resources that can perform idea-selling activities for the offer. This means they are trained and equipped to conduct idea and stakeholder meetings and perform the linkages throughout the service chain. This is no small feat. As we've discussed, idea selling is much more about advising the client rather than traditional selling. 

Delivery Capacity deals directly with number of trained resources available to deliver the dream and participate through the sales cycles. 

d_demand.jpg
Many companies short-change this investment in the misconception that these people are a cost item not a revenue item.

Putting it all together
In summary, once you have scored an idea you can apply weighted averages of the different criteria - driven by the gaps in your portfolio. This provides the mechanism for making idea in/out decision. The chart below serves as a simple example:

d_weightedavg.jpg
 

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About this Entry

This page contains a single entry by Dean McMann published on April 20, 2010 6:45 AM.

Customer Intimacy: A Step by Step Approach to Getting Started was the previous entry in this blog.

New Practice Issues in Customer Intimacy is the next entry in this blog.

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