Dwivedi

Welcome to the Management Consultant Blog managed by Jay Dwivedi. Complete list of articles is in Knowledge Bank.  To find specific article, please search.  Please visit iProceed for more information.

Thursday, September 30, 2004

Extract value from existing customers

When economic times are hard, consumers (and businesses) get scared and spend less. For instance, right now there are several drivers for lower consumer spending:
  1. Fear of job loss (due to outsourcing, offshoring, etc.)
  2. Continued drop in incomes (lower wages, higher health insurance costs, higher energy prices, etc.)
  3. Overall social/political environment (risk of terrorism, war in Iraq, lack of a clear plan on economy from either political party, etc.)
What can businesses do when consumers are not shopping?
  1. Pay more attention to those consumers that are shopping. Treat them better than ever before, offer past-customer only discounts, followup individually to find out how satisfied they are with their past purchase, etc.
  2. Develop a strategy to increase order size.
  3. Offer credit for purchase of large-ticket items.
  4. Online commerce option. As consumers spend more time at home and surf the Internet (and not go to the mall and make impulse purchases), give them the choice to make impulse purchases while they surf the web. It is a good time to invest in your website and making it ecommerce-enabled. (Related article: eCommerce for small businesses)
  5. Pass on the savings from ecommerce to your customers in form of free shipping.

Related article: How to develop a new strategy when consumers don't spend

Tuesday, September 28, 2004

Business opportunity in healthcare

Let us review some recent statistics:

  • Number of uninsured Americans = 45 million
  • The amount workers paid for premiums rose 36% on average from 2000 to 2004 -- nearly three times faster than average U.S. earnings

iProceed forecast

  1. The number of uninsured Americans will rise even faster since we do not expect any change in public policy
  2. As individuals/families find it difficult to pay for healthcare and small businesses (many of them already do not provide health coverage) stay away or drop healthcare coverage, number of uninsured will grow even more.

Opportunity to provide healthcare for uninsured Americans

  1. It is estimated that 36 million American live below the poverty line and if we assume that all of them do not have health insurance, that leaves us with 9 million Americans who most likely have jobs but not health coverage. That is a pretty sizeable number for any marketer.
  2. Illegal immigrants, who do not always get counted in a lot of these statistics, also do not have any health insurance. Most estimates put number of illegal immigrants at 8 million. Assuming that half of them have jobs, that means that 4 million of these people will be able to pay for health insurance if it were available and affordable.
  3. Conclusion: Approximately 13 million people will be interested in some sort of health insurance if it was available at a reasonable cost.
  4. The way the current American healthcare system is set up, our analysis does not see that there is any hope for uninsured residents in America (legal or otherwise). However, these individuals fall sick like anyone else and need access to reasonable medical services.

Proposed solution

  • Entrepreneurs need to think a new business model for the uninsured - one that includes a large offshore component using tele-medicine. The doctors can be based in inexpensive locations like The Philippines, India, Ireland, and other English-speaking countries in Africa (essentially following the model already successful in IT).
  • Some nursing staff will be based in the United States but the insured individuals will need to learn a few basic things like measuring their own heartbeat, pulse, temperatures, etc. and other good health practices by attending training sessions and through e-learning.
  • For non-emergencies, one can call an 800# for medical advice and doctors can either recommend OTC drugs or arrange to ship prescription drugs by overnight delivery.
  • For emergencies, a network of doctors will be available, and patients will need to pay based on a high deductible.
  • The option described above will be available only to reasonably healthy individuals. People with more complex medical situations will need to sign up for premium service that will allow them more frequent access to doctors but since the bulk of the work will be done in an offshore location, the cost to the individual will still be lower than current premiums.

Recommended article: How to identify new business opportunities?

Monday, September 27, 2004

To blog or not to blog?

That is a question that many executives will need to answer soon. At iProceed.com since we discovered the power of blogs (lead generation, communicating with clients on a broad range of topics beyond what we do in an engagement, customer education, quicker indexing in search engines of time-sensitive articles, etc.), we have been pleading that more business leaders need to start blogging (Related article: Business bloggers wanted).

It seems that there is some progress in that direction, though a quick search will still produce only a small number of hits on business related topics. Fortune is reporting that Microsoft, Sun, Yahoo, Google, Intuit, Monster.com, Maytag, and others are now letting their employees blog.

Blogging is the cheapest and most effective way to communicate key messages (though it may be hard to control the message when several people freely speak their minds without editorial axing by the PR department). While we found Jonathan Schwartz's comment that "Blogs are no more mandated at Sun (Microsystems) than email. But I have a hard time seeing how a manager can be effective without both" quite insightful and bold, we are wondering if the tendency of corporate America to tightly control what is said and when will make it harder for many risk-averse companies to embrace a revolutionary communications technology. Or will it be that market forces (that eventually forced almost every company to embrace email and Internet) will also force them to embrace blogs?

Related article: How-to guide to blogging for newbies

Friday, September 24, 2004

Customer relationship management: how to maximize ROI

Over the years we have heard a lot criticism of investments in two areas of information technology in particular: customer relationship management (CRM) and enterprise resources planning (ERP) softwares. Let us address only CRM in this article and how you can maximize the ROI on the CRM investment. (Related article: How to improve customer service using a formal customer relationship management program?)

Reasons why customer relationship management may not produce desired ROI

  1. Choosing the wrong CRM solution (either because of price or due to poor understanding of your needs and how they match with the software's capabilities)
  2. Lack of customization
  3. Not enough training to users (thus, lower adoption rates)
  4. Not using as recommended
  5. Not using enough
How to maximize the ROI of a customer relationship management software investment?

  1. Unless there is a technical problem with the specific piece of software installed in your business (and if you have bought from a leading CRM company like Siebel, PeopleSoft, SAP, etc.), there is no reason to blame the vendor. CRM software is no longer a beta-stage product. It is fairly well-tested and used widely with most of the major bugs already worked out. So use it as recommended and make sure that you insist on your employees making it part of their work and you will see results.
  2. A software that is so broad in scope and affects so many departments in a company requires a change in culture. This can be accomplished by extensive training and implementation in stages. That way you will have enough time to ensure adoption and to train employees in proper use.

Recommended article: Key account management strategies


Wednesday, September 22, 2004

Customer relationship management alone drives value

We recently discussed value creation strategies with a rapidly growing firm. They were experiencing heavy turnover among their customer base and did not know what was going on since their product was clearly superior to anyone else out there. One of the casualties of rapid growth is poor customer service to existing customers. While this is understandable (particularly in the case of startups), it is inexcusable and potentially disastrous, as was the case with this firm.

Why customer relationship management (CRM) is needed?
  • The #1 reason is that in absence of a structured process, employees can get distracted. New business is always more exciting (bonuses, promotions, etc.) to employees than keeping existing customers happy. One company that we worked for had salespeople to sell and account executives to manage the account afterwards. Fair enough. The problem: the account executives were lower in hierarchy than sales executives. If an account executive performed well, s/he could be promoted to sales executive. The result: Maintaining an account was considered less important and customers fled as soon as a major competitor moved in with a more customer-centric strategy.
  • While you must already know this, but still it is good to repeat it: the cost of acquisition of a new customer is several times higher than retaining the business of an existing customer. A well-designed CRM program allows you to keep the turnover close to zero because you keep your existing base happy.

How to leverage customer relationship management programs?

  1. Work with the leaders in the CRM space for your industry vertical (e.g. Siebel CRM for everyone, Medfone for healthcare, Salesforce for sales, OnContact for sales and customer service, etc.). A CRM program has to incorporate the need for data but balance it with the personal touch that has been the cornerstone of service for decades.
  2. Customize the program for your business. Even if you opt for a solution designed for your vertical, make sure that you redesign it for customers. Customers are human beings and most sales decisions are still emotional.
  3. CRM is not a substitute for customer pampering. You still need to sit in front of the customer and ask about her daughter's ballet lessons or son's performance in the little league.

Related article: How to listen to your customer's needs for service?


Sunday, September 19, 2004

American competitiveness threatened

iProceed has been arguing that we need to transition from being a knowledge economy to a wisdom economy since parts of economies of countries like China and India are already operating as knowledge economies (Related article: Knowledge economy becomes global). To expedite the transition of US economy to a wisdom economy, two things are critical: education of younger Americans and retraining of older Americans who are increasingly being pushed out of jobs that they did all their lives and do not have the skills to do what may be needed in a rapidly changing economy in which many services can be provided from almost anywhere. (Related link: End of knowledge economy; birth of wisdom economy)

It was, therefore, sad to read the findings of the study by National Center for Public Policy and Higher Education that we get a F grade in affordability of education. It may be worthwhile to point out that we already are lagging in producing enough "technologists" compared to India and China. Education in both India and China is so inexpensive (cost of education as a percentage of median household income) that it is technically free to study.

We are also seeing some competition emerging from rather unlikely places. In biotech, Singapore is emerging as a strong competitor (Related article: Will biotech save American economy?). And knowledge workers are not just in China and India any more. Even countries like The Philippines and the UAE have potential to grow into strong competitors leveraging their educated workforce. (Related article: Knowledge workers everywhere)

Recommended articles:

What do we need to do to transform America into a wisdom economy?

China becomes a tech superpower

Thursday, September 16, 2004

General Motors embraces embedded advertising

It is not a big secret any more among the advertisers that traditional advertising ROI has rapidly dropped. In fact it continues to surprise us that there is still so much advertising budget for television despite the low return. Sometimes you actually wonder why some companies continue to waste their dollars on what everyone knows does not work effectively. (Related article: Traditional advertising in danger)

When we proposed the 3Es of advertising, we were not sure how many advertisers we will see who will embrace embedded advertising but one example that we want to point out is that of General Motors giving away over 200 cars to the audience in Oprah's show. Wow! What a smart move? The publicity is incredible and would not have been possible even if they had spent $100 million on traditional advertising. The overall cost to GM: less than $10 million.

Tips on implementing embedded advertising

  1. Think outside the box. An emerging high-end restaurant in the Boston area recently served dinner to a group of entrepreneurs, management consultants, and venture capitals attending a conference. Price charged: $0. ROI: Infinite. We have already brought our clients twice at the restaurant since then.
  2. Make it obvious but keep it subtle. In our analysis, we have found that the value derived actually declines if you push it too hard. So do not call it the "ABC dinner". Instead dazzle the target with an excellent "customer experience" and then let them find out who created it. (Related article: How to create a delightful customer experience?)
  3. No matter what you do but think of something that is associated with a repeat experience so that every time the target customer does it again, s/he can establish the connection with your brand. The most effective embedded advertising is the one that becomes part of the everyday experience.
  4. Focus on quantifiable results. Oprah just did not give away the cars. The audience was chosen on the basis of their "need" for a new car. That is what results in "stories" and stories are what people talk about ("word-of-mouth") rather than yet another pen that you gave away at a conference that people left in their hotel room because they couldn't find enough room in their suitcases to bring all the junk home.

Thursday, September 09, 2004

Growth opportunity in serving non-banking consumers

While it was no surprise to us that growth continues to be the #1 challenge for business leaders what did surprise us somewhat was that, in a Bain & Co.'s survey, three out of four executives said that finding the next wave of profitable growth will be the most difficult in their businesses' history.

We at iProceed believe that growth is never there for everyone to just see and grab; innovative companies connect the dots to identify growth opportunities. (Related link: A series of articles on new growth opportunities identification). Over next couple of weeks, we will be discussing a series of new growth opportunities identified by us. In this article, we want to start off by discussing a tremendous growth opportunity to serve those Americans (and while we have not yet profiled consumers outside the US, the number is much larger) that do not have any relationship with a bank for whatever reason.

Attributes of non-banking American consumers

  • Estimated to be approximately 30-35 million.
  • Over half of them hold steady jobs and receive regular paychecks.
  • Almost half of them are interested in ecommerce and other benefits of having a credit card.

How to serve non-banking consumers?

  1. Just because they are disadvantaged in some way, don't try to screw them. Learn from the example set by many banks that have allowed Mexican immigrants to open bank accounts without insisting on a US driver's license.
  2. Along the same lines, try not to charge very high fees for the service. Lower your risk in other ways but not by screwing the consumers - it will only turn them away and any business model based on screwing your consumers is not a robust model.
  3. Make it convenient. One major reason they are not in the mainstream banking system is that it continues to be cumbersome and inconvenient for vast majority of low-income people. Understand their needs and then design your offering

Related article: How to develop a high-value company using ethical practices


Friday, September 03, 2004

Data mining of blogs to refine advertising strategy

In July 2004, we had made a bold suggestions to advertising executives: leverage the power of the bloggers and use them in your guerilla marketing efforts. We had suggested that advertisers approach the bloggers and work with them to create buzz. Yes, it can be an efficient and time-consuming process to approach bloggers (many of them are not businesses, some do not even disclose their real identities, while others are just skeptical of corporations who want to influence their message), but a new service will make this easier than ever. What this company is offering is data mining of blogs. Blabble, while still in beta mode, will allow you to find who is talking about your products/services and what are they saying.

Why data mining of blogs makes sense?

  1. Blogs are just starting to explode. Their very independent nature makes them attractive to consumers who can read unadulterated commentary.
  2. The young generation does not care about the political correctness of established media outlets. They would rather hear from someone like them than a large corporation with its army of PR experts and marketing types.
  3. Data mining will allow a company not only to assess impact of its actions in literally real time (you can make that happen by starting a blog yourself). This data can then be used to refine the message within a matter of hours rather than weeks and months.

Suggested road map for advertising executives

  1. Analyze what kind of data are you mining now, how old it is by the time you get to see the reports, and how long will it take you to react to it. Will it really have any meaning by the time these steps are completed?
  2. Think of blogs as another advertising channel different from search and contextual advertising.
  3. If you don't know what blogs are, how powerful this trend is, and the remarkable impact it is already having on commerce, do some research on blogs, or even better, start blogging yourself.

Related article: 3Es of Internet Advertising


Thursday, September 02, 2004

Bath & Body Works to provide luxury for the masses

We have been discussing a company that we like a lot: The Limited Group. In our previous article, we discussed how Victoria's Secret has gone through a business model transformation recently. This time we want to review how one of their other divisions, Bath & Body Works is pursuing the strategy of providing "luxury for the masses".

Luxury for the masses


We have been converted to the philosophy of "luxury for the masses" because of several economic indicators in 2004 (we have written extensively on these indicators and rather than providing many links here, we encourage you to do a search instead on our website to read the detailed analysis):

  1. Some 1.3 million Americans slid into poverty in 2003 despite the economic recovery.
  2. The percentage of the U.S. population living in poverty rose to 12.5%from 12.1% in 2002.
  3. We have as many as 36 million poor Americans now.
  4. Income of Americans (who are still employed) continues to fall.
  5. iProceed.com expects taxes to rise in 2005, further reducing disposable incomes of Americans.
  6. The unemployment rate is not expected to change and may even go up as the offshoring trend continues.
  7. The fiscal health of the US is shaky (implications: lower government spending).
  8. The small number of new (white collar) jobs being created pay significantly less than what these Americans earned during the 90s.

What are the implications?

Americans are increasingly forced into a lower quality of life but the transition is not going to be easy for most families (we have seen this happen in Japan during the 90s; it is now being played out in America). While some consumers may be naive enough to screw up completely and file for bankruptcy, we expect most consumers will make lifestyle adjustments in line with their incomes (as almost all Japanese have done). Or in other words, they will purchase more of mass-merchandise products but marketed (by clever companies) as luxury products.

That is what Bath & Body Works does exceedingly well. Now that you can purchase Henri Bendel product line in their stores in the malls, you know very well what the strategy of The Limited Group is.

What can you, as a business leader, learn from The Limited Group?

  1. Watch carefully what other companies are doing, particularly those selling products to middle-income Americans. Product categories to track are electronics, automobiles, apparel, etc.
  2. Review your business model and introduce two things in it: simplicity and flexibility. The economic environment is changing too fast and if you do not have the simplicity and flexibility in your business model, you may not be able to transform quickly enough.
  3. Watch your customers. Never lose track of what is happening in the lives of average Americans. So, as we always say, get out of your office and go talk to a few housewives some where.

Related article: Americans become poorer. What does it mean for businesses?