Developing Multichannel Strategy

ontogenesis Multi- bank line Strategy Dr Stan Maklan and Dr Hugh Wilson Cran eye socket client Management Forum in coaction with IBM Business Consulting serve Contents A strategical come on to bring 1 Process over diorama. 2 ill-treat 1 Identify problems and opportunities.. 4 monetary value decline. wear out node run across 4 Improved access 5 ill-treats 2 and 3 Current and future dry land depth psychology .. 6 Define the foodstuff place placeing bet onground . 6 gross taxation labyrinthianness intercellular substance Product insurance insurance coverage social function oc topical and future put in 8 Building stick out pass on image 10 timber 4 Assess alternatives and choose 13 pass on curves how guests c atomic turn of events 18 for alternatives .. 13 Cost abridgment . 4 Prioritisation intercellular substance .. 15 quality 5 death penalty. 18 Metrics 18 exam naked persuade drawstring of mountainss. 19 node look freighter non c solely off stunnedcomes . 9 Experimental design helps 19 regorge out.. 20 People must champion overb gray-headed slipway of reckoning.. 20 Management, non technology, guides argumentation mental institution 21 Summary comments . 3 Step 1 Identify the nature of the problem or opportunity .. 23 Step 2 Conduct a current invoke analysis .. 23 Step 3 Create a future state Product coverage play . 23 Step 4 label potence juvenile subscriber line arrange . 23 Step 5 flee precedency impertinently expect compasss and roll out achieverful pilots. 3 Appendix 1 directional policy ground substance .. 24 1 Cranfield node Management Forum in collaborationism with IBM Business Consulting Services auspicates number 1 Process Overview .. 2 stick out 2 Analysis and Generating Alternatives .. 6 contour 3 gross revenue mazyness Factors and burdens . 7 send off 4 gross gross revenue composite plantity home run .. propose 5 Current reporting office IT Service s Provider . 9 auspicate 6 Redrawn Coverage Map (Future). 10 Figure 7 Current dramatics Sales Led Combinations.. 11 Figure 8 skip line of descent Chain .. 12 Figure 9 seam Curve .. 13 Figure 10 Cost Comparison Field that versus Multi-Channel 14 Figure 11 Prioritisation Matrix 6 Figure 12 Example of Prioritisation Matrix.. 17 Figure 13 guiding Policy Matrix. 24 2 evolution multi- lineage outline A strategic burn up to courses Distri saveion and argument-to-market transcription intaked to be an afterthought for approximately marketers. Once the difficult judgements intimately product range, footing and promotion were made, television line of work system was controld by objective scotch and logistic factors, such as minimum hostel size and tape drive comprises.The internet, coupled with a proliferation of decomposable global supply fibrils, has elevated logical argument choice to the pantheon of critical merchandising issues. clients make transmit choice s alongside their product- suffice choices and brook suppliers to offer gross taxation, merchandise and returns across multiple take online, band and physical presence. Offering on the whole(prenominal) distribution air choices to all clients across all products and do is too personifyly for some(a) companies. For some companies, ancestry scheme is now e very(prenominal) bit as critical to their success, as argon brand and product range policies.Companies must now determine how to servicing incompatible nodes through a combination of impart that meets client take at a competitive toll. The strategic marketer wants to move the current-fashioneds of pedigree dodge beyond distri preciselyion represents and efficient order sizes by determining how assembly line strategy seduces product- suffice innovations, descends address and ameliorates guest loyalty. A sure-fire vallecula strategy delivers differentiated solutions to different node segments whil st meet the marketing, gross gross gross revenue and table service requirements particular to severally productservice.Balancing the claims of clients and the characteristics of individual products and serve, identifying trade-offs, identifiable follows to be borne by separately pathway and creating node economic value through channel innovation be the marketing challenges companies face. 1 growth multi-channel strategy Process overview Channel strategy typi strainy develops in an ad-hoc manner. Analysing a clubs channel policies is sometimes akin to an archaeological tour one digs through time discovering layers of historical decisions, gross gross revenue partnerships and guest deals.We believe that at that place is great benefit for most companies in treating channel strategy nurture as a wait on. Just as strategic marketing planning revolutionised the way marketing plans were positive, a organized onslaught to impart go out improve companies chances of accomplishing their strategic channel objectives. We have developed a simple sue tackwork to help marketers meet these channel challenges (Figure 1). Figure 1 Process Overview Step 1 Problem probability Step 2 Current State Analysis Step 3 Future State Analysis Step 4 get hold of Step 5 Implement Cost Experience Access trade Context Channel Coverage Maps Channel Chain Development Channel Curve Prioritisation Matrix node be People Metrics Step 1 Identify problems and opportunities The action begins with the ecesis identifying problems and or opportunities. We categorise these into tercet characters court reduction, improvement of node experience and improving node access. Often companies ar faced with a need to do a combination of these three. Steps 2 & 3 Current and future state analysis These gives make extensive habituate of legal documents developed by the Cranfield Customer Management Forum.Step 2 begins with traditional market place analysis identificatio n of node segments and precession product (service) offers. These offers and customer segments be grouped in a channel coverage stand for current and future. The lay out identifies logical bundles or groups of solutions and customers which form the stem for development of separate channel set up, combinations of channels that serve the customer at from separately one aim in the purchase and service process. Step 4 Choose Evaluates distributively channel chain for its cost and ability to repay customer value.The latter is estimated through channel curves, a enquiry establish proficiency that evaluates customer preference for apiece channel at each point in the purchase and service process. Finally, a prioritisation matrix is developed that identifies the most main(prenominal) channel investment fundss to be made. 2 develop multi-channel strategy Step 5 Implement writ of execution is a critical element of channel marketing. Channel innovation is challenging for sha pings beca utilization of the people issues involved customers and gross sales people.This divide of the report embellishs the importance of test marketing channel innovation, aligning salary plans to desired behaviour and ensuring the new channel system is able to take c ar from customer experience, and adapt as it is rolled out. 3 growing multi-channel strategy Step 1 Identify problems and opportunities There ar a confine number of famous examples of reinventing industries through channel innovation E-Bay and Amazon ricochet to mind immediately. Those companies started from the white sheet of write up or the third process stage of the above model.The firms participating in our collaborative research project atomic number 18 all naturalized players in their markets with existing channel structures. They whitethorn be responding to low cost, internet pure play competitors. For established companies embarking on channel strategy development, it is worthwhile to engage sr. counseling in a discussion about the objectives of channel policies. Our experience suggests that it is useful to frame the discussion around a limited number of strategic objectives cost reduction, modify customer experience and purify customer access to the family (e. g. overage). Cost reduction Cost reduction is self explanatory. Many established firms face the twin challenges of customers expecting their traditional personal (expensive) sales and service whilst free to pay removely at prices charged by new competitors in operation(p), for example, only via the internet. BTs Major Business unit, dedicated to serving its biggerst customers, faced mediocre such a challenge. Traditional telephony revenues were flat or declining as cost fell end-to-end the industry. Growth was generated through add-ond sales of IT related solutions such as routers and servers.Margins are lower in IT versus telephony and the channel norm was different indirect channels and self servic e over the internet. BT could non profitably compete in the new areas whilst retaining its channel structure and cost. By allocating sales tasks sensibly betwixt field sales, desk base sales and the internet, BT decrease costs as a percentage of revenue through channel strategy whilst increasing market coverage. Improved customer experience Improved customer experience is linked with customer belongings and outgrowthd recommendation.Companies unremarkably measure give away indicators of their customer processes (e. g. telephone answering, complete orders on time, resolution of customer problem with source phone call) to illustrate the efficiency of their customer cutment but they measure their long suit with customer triumph scores. There are very fewer executives today that live to espouse their need for amend customer satisfaction this is rapidly graceful the m early(a)hood and apple pie of boardroom conversation. But improving customer experience commonly entai ls costs better people, better systems, much capacity.Of course, every partnership wants improved customer experience at lower cost per customer, but this is rarely possible. Often the strategy is to encourage 4 Developing multi-channel strategy self ordering and service online and convincing oneself that customers genuinelyly prefer this experience. This is non al slipway true, nor is measuring customer satisfaction always instructive. growth customer satisfaction does not necessarily throw customers buying behaviour and customers fly to competitors for different reasons than they remain loyal. The message is clear.Customer experience is an essential part of marketing and customer retention, particularly in the services sectors. But companies loafernot invest on the basis of more is better. Companies need to understand how customers value each element of the package of benefits they receive and how they make trade offs mingled with them how untold experience would a cus tomer sacrifice for lower prices online? How will improved customer experience lead to stage personal credit line outcomes? Lands End, a successful mail order clothing retailer, embraced the internet early on.It soundless interchange clothes to people not able to try them on in a shop, so the addition of the online channel to its traditional telephone-catalogue one, was not too difficult. It uses the internet to extend and enhance its customer experience by providing complementary services. For example, one enkindle design and dress up a virtual personal model to sample clothing virtually. Nonetheless, Lands End displays prominently its toll free number so that online customers kitty immediately access helpful call centre staff.It also offers real time chat and personal assistance. Lands Ends investment in the online channel was not justified by reduced call centre costs it is in that location to allow for a better customer experience. Improved access Finally, improving cus tomers access to your products and services is a basic tenet of good business and a traditional channel strategy objective. With new technology, companies can offer unprecedented access to sales, service and customer data ubiquitously. Companies can now access customer segments all the same un fieldable or unprofitable to serve.BTs Major Business social units channel innovations not only reduced its costs, but forgeted BT to increase account penetration. For example, a BT handbill Director capacity negotiate the regenerate to sell leased lines (typically low value items) to each branch of a discipline financial services company. Whilst the deal is negotiated with the customers channelise office, it is sold branch by branch with a desk-establish telephone channel. Previously, the Account Director would have had to organise field sales people to call on each branch uneconomical. Improved access increased sales.Many domain agents offer online services to improve customer acce ss to their databases of properties and, more importantly, improve access to updates in property details. Whereas, previously, potential buyers would need to call agents on a regular basis and receive posted updates of properties, changes in prices or competing bids, now they can be notified online or via SMS messages. 5 Developing multi-channel strategy Steps 2 and 3 Current and future state analysis Strategic alternatives can be developed through analysis of current channel combinations and generating imaginative new ones.See Figure 2. The cocksuckers used for analysing the current state and determining the future state are identical so these steps are discussed together. Figure 2 Analysis and Generating Alternatives Define the Market Context Define the market localize customer segments Determine product-service priorities Generate Channel Strategy Alternatives Sales obscureity Matrix -product complexity and customer value 2. Product coverage map -current state analysis 4. Gene rate alternative channel fetter 3.Future coverage map Create productcustomer combinations Define the marketing context Whilst the focus of this reputation is channel strategy, the framework illustrates that channel strategy should be considered in the context of the companys product (service) strategy. The salient aspects are Agreeing the market exposition as consumers or end customers would define it. Mapping the flow of goods and services through to the end customer to determine who buys what from whom. Segmenting the market into distinct, needs based customer segments.Setting appropriate investment strategies for each productservice market on the basis of your competitiveness in the market and the markets inherent drawing card. Normally, this is through with(p) with the guiding Policy Matrix, a strategic marketing planning tool described in Appendix 1. The market context illustrates the major market segments and the strength of existing dissemination networks from suppl iers through intermediaries (hereafter the channel chain). It also determines the anteriority productsservices for channel investment. It provides the necessary background 6Developing multi-channel strategy data for analysing current channel policy and generating alternatives for the future. Sales complexity matrix The first step in the analysis of the current state is to determine the sales complexity for each of the priority offers (combinations of product and or service) determined above. The more complex a product (service) is to sale and service, the more complex, personal and interactive the effort required by the company. Conversely, buying low cost, low risk, docile to configure products can very much be done directly by customers online.Most often a sale, even for complex solutions, is made through a combination of channels, but one channel is designated as the lead or prime channel. Sales complexity is one of two prime determinants of the dominant channel the opposite is how important the customer. Sales complexity can be estimated as a weighted average of scores for each of the headstone components of sales complexity. allow us take the persona of an IT service supplier. It provides three types of services information processing system installation, configuration of sales and marketing software applications and marketing consulting.Under each of these three service headings there are three to five more specialised service offers. For example, the software configuration services comprise the installation of complex front office solutions, databases, data mining tools, sales force automation systems and simple contact prudence systems. The company determines factors that comprise sales complexity and then determines a weighting for each factor to arrive at the pastime list and weightings (Figure 3) Figure 3 Sales Complexity Factors and Weightings Complexity FactorOrder size the bigger the order, the more complex Limited customer famil iarity of the product or service less customer lie withledge creates more complexity Length of the sales cycle per second long sales cycles increase complexity Difficulty configuring installing the more difficult to configure, the more complex the sale Training the greater the requirement to train customers in the use of the application/equipment, the more complex After sales service the more service required, the more complex the sale Weighting .15 . 25 . 10 . 20 . 20 . 10Against each of the services offered, the company scores each of the complexity factors from one to ten in order to create a weighted average score for each line of service (Figure 4). 7 Developing multi-channel strategy Figure 4 Sales Complexity Score Order size Limited Customer knowledge Sales cycle Configuration Training Service Sales Complexity Score Weighting screening Configuration Front Office Database Data Mining Tools Sales Force automation Contact Management Hardware Deployment Desktop wanderi ng(a) phone organizer laptop Consulting Service DB management Sales Network Customer strategy 0. 5 10 7 3 5 2 8 6 4 7 5 5 3 0. 25 7 6 9 5 2 2 5 7 3 5 7 10 0. 1 7 6 3 5 2 2 5 7 2 7 7 7 0. 2 7 9 5 7 2 3 6 7 3 8 8 6 0. 2 7 8 9 6 2 3 4 5 3 6 6 NA 0. 1 4 3 5 4 2 3 4 4 4 7 7 NA 7. 15 6. 85 6. 3 5. 5 2 3. 4 5. 05 5. 85 3. 6 6. 2 6. 7 7. 3 Product coverage map current and future state The product coverage map identifies how we privation to reach our customers as a function of the complexity of the product-services that we sell to them and the sweetness of the customer. It determines the lead channel for combinations of customer segments and product-services from the perspective of the companys strategy.The customer perspective is developed in the next phase (channel chains) and overlaid onto the coverage map to provide a counterbalance surrounded by company and customer agendas. The coverage map is constructed sequentially from the following Sales complexity scores on agreed dimensio ns to generate a continuum from simple to super complex. The products and services considered in this phase are normally those identified as important from the Directional Policy Matrix. Major customer segments ideally defined in the first stage (Marketing Context). Developing ontiguous blocks of customer-complexity service space. The company in this example identifies its priority customer segments from the market context and they are listed below in reverse order proprietor managed businesses mid(prenominal) surface retail financial services providers Large professional services companies Figure 5 illustrates two axes of the coverage map (1) customer segments (prioritised) and (2) product-services rank in order of complexity. 8 Developing multi-channel strategy The nerve center of the matrix describes how the company sells each productservice to each customer.These are, in order of INCREASING cost customer self-service on the net (I), desk-based sales conducted by telepho ne (T), distribution partners (D)1, and field-based account tutors (FS). Figure 5 Current Coverage Map IT Services Provider High Complexity product-service Sales Force Automation Appl. Low Complexity product-service Consumer Strategy Owner Managed Businesses Medium Retail financial Services Large Professional Services Front Office practise Database Application Sales Data Mining Network Mgt Tools Database Mgt PDA Deployment Laptop Deployment Desktop Deployment Contact Mgt Application FS FS T I I FS D FSD D T FS D FS I T I D FS T T I FS FS D D T T FS FS FS FS FS I = self service over the internet, T = Deskbased account managers D = Third party distribution partners FS = Field sales account management There are obvious anomalies in the coverage map illustrated in Figure 5. Expensive field account managers sell some very simple products-services perhaps there is a culture that an account manager handles 100% of the customers requirements. electrical distributors sell the companys complex database applications and sales networks to very large companies for historical reasons does the company lack sales expertise in these areas? barely, the distributors whitethorn dis-intermediate the company and take defend of key accounts, so is this a wise policy? To confesser managed businesses, some of these complex services are sold via the internet which has a low success probability. Even clearer, owner managed businesses need some help to understand these services. Figure 6 illustrates how the company assigned a lead channel for each product-service and customer segment combination to consider the merchandising demands of the product-service and the size of the sales opportunity.These new coterminous blocks of customer-solution become the unit of analysis for the next stage of the process building combinations of channels to serve each block (channel chains). much(prenominal) distribution partners are often known in the IT industry as VARs or Value Added Reselle rs. They are often small to medium sized IT services firms that provide specialist industry or application expertise. 1 9 Developing multi-channel strategy Figure 6 Redrawn Coverage Map (Future) High Complexity product-service Low Complexity product-service Sales Force PDA Automation Laptop Desktop Contact Mgt Deployment Appl.Deployment Deployment Application Consumer Strategy Owner Managed Businesses Medium Retail Financial Services Large Professional Services Front Office Database Sales Data Mining Application Application Network Mgt Tools Database Mgt D D D D T T T T I I I FS FS FS D D D T T T T I FS FS FS FS FS FS T T T T I I = self service over the internet, T = Deskbased account managers D = Third party distribution partners FS = Field sales account management The redrawn coverage map focuses zippy field sales preferences on change large, complex solutions to the biggest, priority customer segment.Distributors sell large, complex solutions to smaller, lower priority segmen ts. Desk-based sales teams handle the middle ground modest complexity across customer segments. Self service over the internet is reserved for the simple products-services and lower priority customers who are considered to buy largely on price and for whom a lower cost sales model is needed in order to be competitive. This practise puts some structure on the channel strategy but it is not realistic in the modern world for one channel to manage an opportunity through the sales and service cycle.Whilst the company now has a lead channel for each opportunity, it needs to build secondary channels to reflect customer segment preferences and manage scarce resources optimally. Building replenishment channel chains The channel chain maps out how we can reach the contiguous groups identified in the redrawn product coverage map. If the product coverage map allows the company to find a intellectuale for how it wishes to serve customers, the channel chain analysis encourages the company to t hink about creating customer value through channel innovation.Different customers have different needs for information, counselling and deem at different stages of the sales, service and customer development cycle. For reasons of simplicity and accountability, legion(predicate) companies insist that one person (or team) take complete responsibility for all communications with a customer at all stages of the cycle. This may be a luxury few firms can afford today. Additionally, many customers wish to supplement their traditional customer managers with immediate answers online whilst their account manager is other than occupied.Failure to provide a mix of channels can frustrate clients and give out valuable business development from account managers. Channel chains allow companies to think creatively about how to engage with a customer in the manner most 10 Developing multi-channel strategy valued by the customer whilst allocating customer management resources optimally. Figure 6 id entifies 4 contiguous blocks of channel lead and productservice solution field sales, distributor, desk-based and internet.Each of these blocks should be analysed further to create business rules for the management of opportunities through the sales, service and customer development cycle. Figure 7 illustrates the current channel chain for the contiguous block of selling complex applications to large customers. There are a number of shortcomings with the current channel chain from the perspective of the company. The limited field sales resource is stretched by taking full responsibility at all stages of the customer engagement cycle.Whilst customers appreciate this simple and personal service, sales people do not have sufficient time to focus on ontogenesis big opportunities. During the early stages of a customer engagement, the channels operate in separate silos largely and respond to enquiries that come to them instead of operating to a locate of business rules that determine wh ere the opportunity is outstrip handled. Figure 7 Current Field Sales Led Combinations Marketing activities Deskbased (telephone) Internet Distributor Field sales Operations Stage wind instrument generation interrogative sentence Qualify lead Proposal Follow up good Implementation Assess new customer needs Customer developmentFigure 8 illustrates the provide of the creative process that generated a framework for team based selling integrating a number of channels that aligns the appropriate channel to the different tasks. Valuable field resources are focused upon the tasks for which they are unequalledly and best suited generating compelling sales ends and closing the sale. Integrating the internet and desk-based channels into the process under the leadership of the field sales force, qualifies out myopic leads apace and therefore allows the company to pursue more sales leads.The teambased selling approach provides better response to customer queries 11 Developing multi-cha nnel strategy throughout the selling engagement and reduces the cost of sale to the company. So the tack on channel chain increases the number of sales opportunities, reduces the cost of sale and increases the sales success rate. Figure 8 Alternate Channel Chain Marketing activities Internet Deskbased (telephone) Distributor Field sales Operations Stage Lead generation Inquiry Qualify lead Proposal Follow up Close Implementation Assess new customer needs Customer developmentSimilar channel chain reengineering is done for all four coverage map blocks identified in Figure 6 to generate strategies for improving sales effectiveness and increasing sales coverage. It remains to assess the impact of deputy channel chains on the calculate customer and develop a full costing for each to ensure that channel strategy maximises customer value as well as company efficiency. 12 Developing multi-channel strategy Step 4 Assess alternatives and choose The assessment of exchange channel chains is based upon two criteria cost and customer value. Channel curves how customers value alternativesCustomers have their own criteria for assessing how well a company manages the supplier-customer kind. Channel curves assess how well different channel chains deliver against customers key criteria. Customer research generates a list of key criteria and the weighting of each criterion in the customers total assessment of a supplier. Judgement and research suggest how each chain delivers against each criterion on a one to ten home. The result is a weighted average inferior(prenominal) score for alternate chains. Figure 9 illustrates this for our case example how large professional services firms assess IT suppliers channel chains.The new, abstruse channel chain generates a slightly higher weighted average customer utility score but the difference is likely within the margin of wrongdoing of the method. The extensive personal contact of the traditional channel chain generates small advantages for the most important customer criteria but this is offset by a entangled chains ability to respond very quickly to simple requests and greater access to good resources 24/7 because field sales people do not have the deep technical know-how that is available via the desk and online channels. Figure 9 Channel Curve Weights 10 3 . 18 . 17 . 15 . 10 . 08 . 02 Traditional chain (Weighted Ave . 66) Alternate chain (Weighted Ave . 69) 5 1 le op pe of es ie y e er liit q qu na e so pll er Pe s sim tto se a al on o os sp o op re pr d id e ap at R ur cc ac e,, ett pl m se om tis C C er xp le s ca n ni m em c ch bl T Te ro pr off p h hi rs ce ic ne r rv wn s se O ed iis s om es st iin us us C bu y m m n nd U ds an s st er The channel curve analysis reassures the company that the mixed channel chain is no less preferred than its traditional approach and 13 Developing multi-channel strategy enerates a list of key issues that the mixed chain must address intimate knowledge of the customer business for example. These can be translated into key rhythmic pattern against which to assess the new chain. Cost analysis Cost reduction is always of interest to companies designing their channel policy and in this illustration, necessary for the company to remain competitive. Other companies talent find that boilers suit customer utility falls with some new channel chains and they would expect a significant cost reduction in order to compensate for potential lost business.Conversely, some firms may design more expensive channel chains that are highly valued by customers and they need to know how much incremental cost will be generated. Costing channel chains is a involvement of detailed estimation of the degree to which different customer groups will use different channels and each channels effectiveness at converting inquiries into sales. The exercise generates metrics for efficiency (cost) and effectiveness ( transmutation or attainment of other objectives) that will enable managers to assess channel policy continually.In this case, the IT services provider compared the cost of traditional field sales force against a team-based multi-channel approach as illustrated by Figure 7 and Figure 8. In this illustration, revenue increases 50% whilst costs decrease so that the cost per order falls by almost 3%. This results in sales costs, as a percentage of total revenue falling from 23% to 15. 6%. Figure 10 Cost Comparison Field Only versus Multi-Channel Field Only Sales process Inquiries Qualify Proposal Follow up Close Assess new opportunities Customer development Revenue Total cost Cost per order Cost ? 000 2000 3500 4000 2000 200 Cost per process ? 0000 50000 hundred thousand 200000 20000 Multi-Channel Cost ? 000 1200 3000 4000 3000 240 Cost per process ? 10000 30500 80000 200000 10600 Customers 100 100 70 40 10 10 Customers 120 120 85 50 15 15 10 50M 200 11900 20000 15 75M 240 11680 10600 1190 1160 14 Developing multi-channel strategy The sa les processes above are taken directly from Figure 7 and Figure 8. Lead generation and implementation costs are not affected by the channel chain in this case example so they are excluded from the cost analysis. For purposes of manifestation, we fill that the current channel chain generates sales of ? 0M through 100 orders. The new channel chain will allow more inquiries to be processed but there is no difference in the percentage of inquiries that pass through to proposal and are followed up. The closing success rate is slightly higher in the new channel chain because field sales people are focused on critical junctures of the sales process. The big difference is in the costs of qualifying each lead, generating a proposal and following it up. Prioritisation matrix The generation of alternate channel chains is both a rational and creative exercise.In the examples we present, some channel chain innovations are obvious this is for presentation purposes. Some of the most exciting ma rketing developments over the past ecstasy have resulted from very radical approaches to channels. The use of a comprehensive set of tools and frameworks should not diminish the creativity of managers in thinking about impudent ways to meet customer needs. For example, online betting exchanges, such as Betfair (www. betfair. com), reduce customers cost, improve their access to betting occasions and for the first time, allow them to back and lay bets.The incumbent fixed odds, high street betting shops are responding but the online new entrants generated this innovation. Thinking creatively about channel chains for each contiguous block of customer-solutions will create a number of channel chain combinations that customers will value and may be cost effective. Few governing bodys, if any, can implement many channel chains simultaneously due to the complexity involved implementation is discussed in the next divide of this paper. A simple means of setting priorities amongst channel combinations is suggested the prioritisation matrix illustrated in Figure 11.This matrix is defined by two axes attractiveness of the channel chain to the organisation and attractiveness to the customer. It results in four solutions and attendant generic wine strategies for each. 15 Developing multi-channel strategy Figure 11 Prioritisation Matrix attractive force to organisation High magnetic to organisation Revenue potential Increased coverage Margin improvement bring down complexity Fit to strategy go of implementation selective trials with consumers Priority investments Attractive to customer wash room Cost Speed of response approachability Product information Ease of useLow priority investments Partner Break into stages Gain experience Watch and set Low Low High Attractiveness to customer Much of the analysis required to complete the prioritisation matrix has already been done. Understanding the attractiveness to the customer and key dimensions of attractive ness are generated by the channel curve analysis. The attractiveness to the organisation is largely done the prioritisation matrix adds some new dimensions, such as ease with which the company can implement the solution, fit to overall strategy and ability to reduce sales complexity in the organisation.The four generic strategies corresponding to the boxes of the matrix are Invest The channel chain is attractive to both customers and the organisation so it is a winwin. Selective trials The channel chain is attractive to the organisation but not to the customer. present judgement is needed. Is the potential gain, for example in cost, worth the loss of customer satisfaction? Will customers contemplate to accept the new channel chain? Will they defect if unhappy? Will competitors follow our lead so that this channel chain becomes the industry norm? Can some negatives with the new chain be overcome?Find clever solutions These options are highly valued by customers but not by the org anisation. Perhaps they are too costly, too difficult to implement or operate or do not fit with the overall strategy. Can you partner with other firm to reduce the cost and complexity? Can the new chain break the solution into smaller, more manageable pieces or be utilize in stages? Perhaps you can trial the new chain and learn how to implement it at lower cost. At least, one needs to hold in a watching plan on these channel combinations lest competitors implement them first and take valuable customers.Low priorities These are valued neither by the organisation, nor its customers, so are generally not done. 16 Developing multi-channel strategy The organisation must agree a carapace on which to grade high-low on the two axes and normally this is done on a scale between one and ten. The matrix itself is populated with channel chain investment options illustrated by circles and the size of each circle can be scaled to reflect the cost or potential revenue benefit. This is illus trated for our IT services company in Figure 12 below.Each channel chain investment is described by its chief characteristic for example one says field sales automation and that is the channel chain that essentially enhances the productivity of the current field sales chain. The diameter of the circles represents the investment being made by the company in channel innovations. Figure 12 Example of Prioritisation Matrix Attractiveness to organisation Revenue potential Increased coverage Margin improvement Reduced complexity Fit to strategy Ease of implementation High Attractive to organisation Distributor extranet Field sales automation Desk based sales Customer portalAttractive to customer Convenience Cost Speed of response Availability Product information Ease of use Low Field sales Low High Attractiveness to customer In this example, we can jut out that the largest channel investments are in chains and solutions that are least attractive to customers. The channel inve stment most valued by customers (more field sales people) is unattractive to the company and not receiving a lot of investment. Perhaps this is the most attractive to customers because they are not used to team based, multi channel selling from the company.Perhaps they are not convinced that the company can implement it effectively and are worried that service levels will fall. The two projects that are in the top right quadrant receive the smallest investment. The prioritisation matrix suggests that the company should increase investment in the portal and extranet. Field sales automation is not what customers value so that might be implemented selectively. Desk based sales might be critical to making team selling work but it tryms to dominate the investment portfolio. Perhaps it could be introduced more slow to allow funding to be redirected to projects of higher customer priority.Field sales investment is valued by customers but is not attractive to the company can investment b e more selective until other channels abut their value to customers? 17 Developing multi-channel strategy Step 5 Implementation Developing new channel chains is a change computer programme and most managers have first hand experience of change. This white paper does not wish to summarise the vast literature and experience of change management in its final section. We will highlight some unique aspects of channel chain change programmes that merit attention.This section discusses Design of metrics Piloting channel chains with customers Rolling out new channel chains and ongoing development thereof Metrics The prime metrics for assessing and managing the development of channel chains are illustrated by Figure 10, the cost and variation analysis. Ultimately, the organisation wishes to sell more at lower cost per sale. Alternate chains are developed and their efficiency and effectiveness are measured. Achieving the targeted ROI for such investments is usually contingent upon a few key conversion and cost estimates.However the role of channels in marketing strategy goes beyond sales and most companies adopt a balanced scorecard type approach comprising Financial measures such as costs per sale, sales costs as a percentage of revenue, number of sales, average order size, conversion from inquiry to sale and repeat purchase rates. Reputation measures the impact of alternate channel strategies on customers perception of the organisation modernity, professionalism, value for money, value for time, knows-mybusiness, easy to do business with and other relevant measures.Relationship measures include the number of senior level contacts with a client per annum, the breadth of those contacts (in the case of the IT company it might measure marketing film director contacts), frequency of customer interaction, customer satisfaction, customer willingness to recommend our company. Knowledge tries to measure how much we know about each customers behaviour, attitude and pur chase process. People looks at the completion to which our own customer facing people are satisfied, engaged, productive, supportive of the business overall goals, feeling confident about their customer management competencies. 18 Developing multi-channel strategy For a comprehensive review of metrics see the Customer Management Forum white paper Measuring multi-channel effectiveness using the balanced scorecard. Testing new channel chains Channel chain innovation represents two challenges 1. Channel innovations are complex change programmes that require sales people to embrace new ways of working and are often accompanied by complex new technology. Unlike backoffice automation, channel chain mistakes impact customers and there are few second chances if customer service levels erode as new ways of working bed down in the organisation.The business case is normally theoretical and assumptive. We have described the stages of developing new channel chains and highlighted the need to seek customer research at key intervals. Where the brief is cost reduction, savings can be forecasted. However, where the brief is to enhance customer experience and extend the offer, it is difficult to be sure to what extent improved customer experience leads to changes in customer behaviour. It is intuitively appealing to assume that a better experience improves customer satisfaction and that higher levels of satisfaction generate more purchases.Intuitive yes, but often wrong. Regrettably, proving empirically the consanguinity between customer satisfaction and behaviour is fraught and companies must test this in their own specific context. 2. Customer research cannot predict outcomes Whilst the process outlines some of the customer research activities that can be undertaken during the development of new channel chains, research experts have long realised that customers cannot predict how they will fight down to situations that they have yet to experience.So extensive surveys, o bservation of customer behaviour in research laboratories and even examples from other industries do not predict behaviour. This is not to say that research is a wasted effort, only to suggest that research does not substitute for testing channel innovation on a small scale before proceeding to reorganise ones entire channel strategy. Experimental design helps Given the difficulties identified above, companies need to prove channel innovation in the marketplace with real customers. However this process must be managed carefully in order not to damage vital customer relationships.We recommend that companies create an experiment where a small, but sufficient number of customers are exposed to the new channel chain. Key metrics, discussed above, are determined in advance of the experiment and they can be assessed in-market. 19 Developing multi-channel strategy On the basis of discover changes in customer behaviour, Sales ability to work in the new channel chains and the ability of the companys processes to support the channel innovation, a company can invest with much greater confidence. Roll outSome of the case studies produced by the Cranfield Customer Management Forum illustrate how a successful pilot improves the chances for a successful roll out. With hard establish of the benefit, people are more willing to support the changes required to scale the pilot into a full channel programme. People must support new ways of working The channel innovations we have seen at the Cranfield Customer Management Forum typically involve a company piteous from a very dominant single channel (e. g. field sales) to a broad, team-based multichannel strategy.Case histories explored by the Forum illustrate a number of issues Field sales forces feel curseened over their ability to control the customer experience (who is saying what to MY customers? ) and a potential reduction in status. There is often the unstated worry that senior management is evaluating critically individu als operational performance and ready to micro manage customers from head office. Finally, and perhaps most importantly, there are worries over fee. Introducing team based selling with a view to reducing sales osts is often interpreted as a threat to sales peoples current wages structure. How will sales incentives be shared between the channels? Managers of new channels, such as desk-based sales and the internet, do not know how to integrate with field sales operations. They are not sure how to measure success what is their contribution to an overall sales target perhaps under the control of a field sales director? Their teams tend to be remote from the customer and field sales so personal relationships and trust are hard to develop.Companies do not know how to compensate each channel. During the introduction phase, management wishes to reassure the field that its compensation will not be reduced so that incentives for new channels represent added cost. This is not sustainable. T eam based selling often requires new technology and that entails risks of the technology not working, or people not operating the new technology properly. Customer facing technology is particularly speculative as valuable customers experience your teething problems. 20 Developing multi-channel strategyThe Cranfield Customer Management Forum has documented successful channel innovation in such circumstances. The elements common in such cases are The implementation of the channel innovation is not rushed. There is adequate time to consult with sales people, train people in ways of working, build teams between the old and new people and just get used to the idea of change. It is not uncommon for channel change programmes to last for three to four years. Of course, throughout that period, innovations are being introduced but at a pace that the organisation can manage.The customer relationship manager remains in control of the overall engagement with his or her customer. The relatio nship manager is fully conscious(predicate) of the activities of other channels with his or her account and can override the policies and recommendations of the system, retaining full control over the customer experience. Software is tried and tried and true thoroughly by live sales teams before large scale rollout. Support for changes in working serves are severely undermined when promised technology that makes it all work disappoints its users.People feel let down by the company and qualm the motives behind the changes. There is a frank and open discussion about compensation. Companies cannot be expected to fund double or triple compensation for the sake of harmony. However, the compensation system must encourage team selling. In the BT example of selling leased lines to bank branch offices, desk based sales people receive bonuses for each sale made. At the same time, the national account (field sales) manager for that bank is credited with the sales made by desk based sales a gainst his or her overall target with the bank for the year.The relationship manager is therefore rewarded for the successful desk based sales campaign. In this way, there is alignment between the channels compensation plans. Management, not technology, guides channel innovation In all the cases of successful channel innovation reviewed by the Cranfield Customer Management Forum, we found that CRM technology played an essential role in enabling new ways of working to be managed at a large scale consistently. However, successful companies did not begin by plectrum an application and then building processes that embed the application in their organisation.They started with a clear view of what they were trying to accomplish and used approaches akin to channel mapping and channel chain development to achieve it. 21 Developing multi-channel strategy Once they understood the channel chains that they were trying to implement, they make a comprehensive set of business rules around ea ch chain. This allowed the company to have rules for such events as major customers making enquiries online, telephone based sales campaigns to major customers and avoiding conflicts with distributors sales campaigns.These rules took time to develop and often were built with the help of outside consultants. The rules are managed by very senior sales managers as they represent the underlying logic of the channel strategy. For successful companies, the allotment of sales complexity scores to products and services is a top management issue as is the process by which various channels will work together. In order for the rules to be dynamically updated, there are important governance structures established for team based selling.Each company finds its own way to integrate the policies, investment, people development and compensation of its channels. However these policies are not developed in isolation of the overall customer relationship strategies. Resource owners are not free to do a s they entertain senior managers must live the team-based values that they espouse. 22 Developing multi-channel strategy Summary comments Traditionally, channel was a poor relation to other elements of the marketing mix.New technology and business models have changed this 180 degrees scholarship and managerial practice are catching up to this new reality. We develop a systematic five step plan for companies to develop their channel strategy. Step 1 Identify the nature of the problem or opportunity Is the motivation for channel innovation cost, improving customer experience, increasing customer access or a mix of the above? Step 2 Conduct a current state analysis First look at the market context define the market, determine and establish priorities between customer segments and inally determine and set priorities between product-service offers. Then determine the complexity of each priority product service offer and rank the offers in order of complexity. using the Product Coverage Map, identify the lead channel for each priority customer segment along that ranked order of complexity. Identify anomalies. Step 3 Create a future state Product Coverage Map To address these anomalies, identify major groupings of offer-customer with lead channels. Draw channel chains for each grouping.Enter into a creative exercise to develop better channel chains for each grouping. Step 4 Evaluate potential new channel chains Evaluate in consideration of customer preference (Channel Curve analysis) and cost. Set priorities between alternatives. Step 5 Pilot priority new channel chains and roll out successful pilots. Consider that channel innovation is a major change process. inquiry and adoption of best practice alone will not provide the leadership necessary for successful channel innovation. Customers cannot evaluate that which they have not experienced.Best practice fails to account for the context-specific nature of each companys customers, ways of working, established Sales practices and information technology expertise. In implementation it is important to ensure that customer-facing people support new ways of working, implementation is not rushed to meet artificial schedules, customer managers retain control of the process and act as guardians of the customer experience and there is effective feedback between those leading the change and those affected by it.Despite the difficulties in channel innovation, for many companies it is a must-do activity. Since best practice is very emergent, there are opportunities for companies to generate real competitive advantage through channel strategies. 23 Developing multi-channel strategy Appendix 1 Directional policy matrix The Directional Policy Matrix (DPM) is a strategic marketing planning tool that allows managers to make investment decisions across a portfolio of opportunities. Figure 13 Directional Policy Matrix MARKET SEGMENT