The Retail Insurance Summit Latin America 2012, October 8-11th 2012

at the Miami Beach Resort and Spa, Miami Beach, FL

On Monday, October 8th 2012, I was joined by about 150 delegates who attended this Latin American Insurance conference. Hanson Wade, the conference planning company (headed by Nicola Freeman along with David Gonzalez and her staff), did an excellent job organizing the event which had simultaneous language translations from/to English to Spanish and Portuguese.

The range of topics was broad and included many diverse perspectives. I kicked off the 3 day event with a workshop entitled: “The New Normal: Insurance Marketing and Distribution in a Multi-channel World” that consisted of 4 parts:

Part 1: Industry Overview – which centered upon 4 key insurance marketing trends:

Part 2: Distribution Update and Sponsored Insurance Programs

Here I covered distribution including 7 insurance distribution trends that I believe will shape the next 5-10 years:

Related articles/sites

• Doubling Down on Differentiation (thesavvystrategist.com)
• A Recommended Format for a Strategic Marketing Plan (password protected – please contact Bill Tyson for the password)
• Wisemuv’s website
• Cumbre Internacional de Seguros Masivos LATAM 2012″ (Retail Insurance Summit Latin America 2012), October 8-11th 2012 at the Miami Beach Resort (thesavvystrategist.com)
• 2012 Social Media Trends

This is a photo of one of my favorite places to vacation: Convict Lake, near Mammoth Lakes, CA. Pretty sweet trout fishing if I may say so myself!

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• a research report which explores the issue of entrepreneurship in an industry. (thinkingbookworm.typepad.com)
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On March 17th 2012, I had the honor and privilege to present to a very special industry group, AIPAGIA.  While my attendance was brief, the time I spent with the members of this industry group was incredible. It was very reminiscent of my past participation at similar conferences when I was a member of AIPAGIA back in the late 1990s.  There was a tremendous amount of energy, collaboration, collegiality and idea exchange at the conference that you tend to miss in larger insurance industry venues and forums.

I would like to to take this opportunity to thank AIPAGIA President Michael Barron, Gloria Grove, George Bode, and Tom Koch for inviting me to present to the AIPAGIA membership my thoughts and views on the major trends, new realities and opportunities that exist in the affinity insurance industry. In addition, I’d like to thank Al Drowne of Axis Capital, who worked with me on the original  whitepaper focused on this topic. And last but not least, Gillian Johnson of Comperemedia for sharing her extremely valuable study on top 5 bank direct mail volumes research report.

Also, thanks and kudos to Dave Brennan, Tom Bohde and the rest of the Met Life team in sponsoring this event along with what turned out to be a major contribution they made towards the success of this conference.

Presentation Topic: The Changing Face Of Affinity Group Distribution

The insurance industry and the traditional affinity group business model is undergoing profound change and being redefined by four primary forces:

1.  Fatigue (marketing, product and service) Distribution, Technology and Competitive pressures forcing business model transformation.
2. Consumer behaviors that require new, relevant marketing, sales and integrated distribution approaches.
3. The blurring of the lines between insurance products and services.
4.  Legal and regulatory challenges - in addition to major reforms, there are many legal challenges designed to protect the consumer privacy and ensure equity (through minimum loss ratio requirements, etc.).

Click here to download the presentation

Research Tools, Materials and Videos

At the top of this blog is a section entitled ”Useful Links (to online resources)” i.e.links to many research sites that I use to track major trends. Another tool I use is “Google Alerts” that I set-up for tracking trends on such topics as: Life Insurance, Group Insurance, Healthcare, Health Insurance, Disability Insurance, Healthcare reform and many of the companies I follow.

On the right-hand side of this blog are links to some of the many research papers and articles that I used for this presentation.

And last but not least, here are some pertinent videos on recent trends in affecting markets, business and marketing:

Here is a Wall Street Journal video on the return of 3 million manufacturing jobs aka”on-shoring”

http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf

Tony Hawk, Skateboarding Icon, and how he is using Twitter:

Trend Hunters.tv always has interesting trends that cross many genres including pop culture, business and communications.

Download and Read the the IBM report (See Blogroll link)

See Seth Godin’s perspective on marketing in 2012. He talks about the permanent recession, the concept of “racing towards the bottom” and the disruption occurring in advertising.

See IBM’s Take on how marketing is changing. “5 years from now you will not recognize this profession.”

Mary Meeker‘s 2011 Major Internet Trends

See a “Day in the Life of a Kiva Robot”. On March 20th 2012, Amazon.com announced that it just bought Kiva Fulfillment systems for $775 Million.

The end of the Credit Card? See the interview of Dwolla’s Milne on his Mobile Payment System.http://bloom.bg/GEklko#ooid=pqd2I4NDrwIHShd1AwEWesQJ62QtVIBK

During the past year and a half, I have been working with a variety of different client companies to develop and improve their distribution networks. Distribution really matters when you consider that, on average, half of the price of the product is absorbed by activities related to getting that product from producer to the purchaser as an integral part of the value chain. [1]

As a case in point, in the individual life insurance business, distribution costs can exceed 100% of the first year premiums.  Many of the top companies, such as Coca-Cola, who have formed superior distribution relationships, excel while others who treat distribution in a cavalier manner seem to stumble along towards mediocrity and even failure.  With the increased fragmentation of markets, media, globalization and the proliferation of more players operating as distributors, distribution is increasingly more complex and harder to manage.

In “marketing 101”, we learned all about the importance of the 4 P’s of marketing where E. Jerome McCarthy, proposed a Four P classification of the marketing mix, in 1960, which has enjoyed wide use.[2] One of the critical 4 P’s is “Place” which includes distribution. Distribution is the pipeline or path(s) a product or service takes from producer to purchaser.  The paths to the customer impact your brand and the customer experience so it is critically important that distribution consistently delivers on the brand promise. In some cases, the producer of goods or services decides that a direct distribution model provides the highest level of control and therefore, is the most desirable distribution method. In other businesses, an indirect or intermediary model is considered the most appropriate distribution method.  Some businesses choose to deploy both a direct and indirect approach – which is akin “to having their cake and eating it too”.

Back in the early days of the Internet “disintermediation” was considered a constant challenge or threat to the traditional distribution models – particularly in the insurance industry – with the rise of direct-to-consumer insurers and aggregators that supplanted field agents with lower cost call center agents. Traditional distribution-based companies like Allstate (with their recent acquisition of Esurance and Answer Financial from White Mountains Insurance Group for $1 billion in cash) are exploring direct-channel distribution approaches out of necessity.  Distribution is an evolutionary pursuit and requires thoughtful discourse among the leaders of the business who are involved in the strategic planning process.

The Indirect, Intermediary Approach

With the indirect approach, determining “Best strategic fit” for the “Place” (of the 4 P’s) and placement of your product or service requires the careful consideration of the following: distribution objectives, value chain analysis, product and distribution fit and matching distribution with customer segment needs.

5 Common Distribution Objectives include the following:

• Obtain a premium price for your product that provides superior profit vs. the competition.
• Favorably position your company in a poorly differentiated marketplace.
• Achieve the right match of distribution to key product requirements (decision support and target customer segment(s)).
• Meet the growing and changing demands of your customers: transparency, value, accessible, convenient, green, friendly, etc.
• Leverage data mining (including traditional data mining, web mining and social mining), advanced analytics, marketing best practices (segmentation, content, messaging, imagery, creative and format) and sequencing that achieves the best product offer >through the optimal channel >at the best time > directed at the right prospect (aka what I like to call the “Holy Grail of Direct Marketing”).

The Importance of Formulating Distribution Objectives that Covers the Value Chain Activities

The value chain is the essence of the organization’s business model.  It is a term popularized by Michael Porter in 1985 that describes the actual activities your business performs and how these activities create value (a product or service) for the end customer.  (Source: Competitive Advantage: Creating and Sustaining Superior Performance by Michael Porter).

More specifically, it is the sequence of activities your company performs to design, produce, sell, deliver, and support its products. In turn, your value chain is part of both your competitive advantage and a larger value system – the larger set of activities involved in creating value for the end user, regardless of who performs those activities. Typically, competitive advantage stems from the combination of a strong customer value proposition and the organization’s value chain and it’s ability to perform similar activities better than rivals (through operational excellence) and certain unique activities that rivals may not perform. Furthermore, in the book Understanding Michael Porter, the author states:

“Competitive advantage is not about beating rivals; it’s about creating superior value and about driving a wider wedge than rivals between buyer value and cost. Competitive advantage means you will be able to sustain higher relative prices or lower relative costs, or both, than your rivals in an industry.”

(Source: Magretta, Joan (2011-11-22). Understanding Michael Porter: The Essential Guide to Competition and Strategy (Kindle Locations 985-991). Perseus Books Group. Kindle Edition.)

An analysis of the value chain begins with Peter Drucker‘s two simple questions that start to define the fundamentals of the business and the business model: Who is the customer? and “What does the customer value?” The strategist then looks at what the predominate distribution model(s) is/are active in the industry, what rivals are doing, the cost drivers, performance metrics, opportunities for differentiation, better ways to deliver the product and ways that distribution can enhance the value proposition. Michael Porter states this best:

“Thus the value proposition and the value chain—the two core dimensions of strategic choice—are inextricably linked. The value proposition focuses externally on the customer. The value chain focuses internally on operations. Strategy is fundamentally integrative, bringing the demand and supply sides together.” 

Source: Magretta, Joan (2011-11-22). Understanding Michael Porter: The Essential Guide to Competition and Strategy (Kindle Locations 1559-1560). Perseus Books Group. Kindle Edition.

Taking the formulation of objectives one step further, the product producer/manufacturer develops distribution objectives with intermediaries in mind, who, in turn, create value in one or more of the following ways:

• Provide Market knowledge, domain expertise, intelligence, support and positioning the product via customer value proposition and points of differentiation, tailored to resonate with a specified target market.
• Offer what I call real “Paths of least resistance” to accelerate new market entry and/or current market initiators, customers, decision makers and buyers.
• Enables your company to “tap into” a wellspring of trust and leverage from channel partner experts, consultants and influencers who have a relationship and history with the prospective client/consumer/end-user.
• Offer resources and scalability– via shared service capabilities in the form of:
  • Forward flow: market research, co-marketing, demand generation, lead generation, lead qualification, quotation/proposal preparation, sales and promotional support; product management, negotiation of terms, point-of-sale transactions, supply chain integration, systems, delivery, problem solving, operational integration, training, order fulfillment.
  • Backward flow: billing issues and handling cancellations/returns, renewals, retention, “win back” programs, data sharing (CRM), etc.
• Synergies – through co-development of new products, capabilities, risk sharing and/or reverse flow opportunities (reciprocal arrangements).
• Added competitive advantages – or points of differentiation gained from intermediary products in the form of product line extensions and/or enhancements.
• Pursuit of common financial goals – they also aspire to meet the same or similar financial (i.e. production, sales and profit) goals. See Strategic Marketing Plus, LLC Channel Partner Scorecard spreadsheet.
• Information and knowledge sharing – a necessary feedback loop to improve efforts along the marketing, sales and customer decision journey (See McKinsey Quarterly June 2009).

Achieving Strategic Fit Between Product and Distribution 

Strategic fit between a product and a given distribution strategy is realized when, versus other alternative forms of distribution, value can be increased at the same or lower costs.  As an example, consider an outside sales team that, when compared to an inside sales team, is less productive in generating revenues yet costs significantly more than an inside sales team. As a manager, all other things being equal, a concerted effort should be made to shift more of the sales resources from outside to inside.

Fit Requires Consideration of these 9 Attributes

Friedman and Furey, in their book The Channel Advantage, have identified these 9 critical attributes to consider when determining fit between product and distribution:

1. Definition – the extent to which product is known and recognized by the customer or end user.
2. Customization – the amount of product adaptation, if any, required by the customer.
3. Aggregation – is the product stand alone or does it need to be bundled (example: smart phone insurance sold in conjunction with the smart phone product).
4. Exclusivity – the uniqueness of the offer (common in both sponsored or direct channels).
5. Customer education and training needs – before and after the sale.
6. Substitution – the ease with which a product can be replaced by a competitive offering (i.e. auto insurance).
7. Maturity – the stage in the adoption phase or product life cycle – more mature products require low touch and vice versus.
8. Customer downside risk – the potential consequences of a wrong decision, the switching costs involved (and the associated risks a customer faces in switching from one product to another – and maybe back again).
9. Negotiation – the degree to which the scale and complexity factor into the transaction.

(Source: Gorchels, Linda (2004-04-23). The Manager’s Guide to Distribution Channels (Kindle Locations 1336-1337). McGraw-Hill – A. Kindle Edition.)

Product and Channel Fit By Customer Segment

Once all product attributes are considered and finalized, the distribution approach needs to be tailored by the product and customer segment.  The following is an example for insurance products that require different distribution approaches based upon the relative price to the customer, product complexity and acquisition cost.

Common Types of Distribution Relationships:

1. Value Networks and Marketing Channels[3].   A value network is a combination of two or more value chains operating together to form a network. Philip Kotler provides these two definitions for distribution and marketing channels:

“A Value Network is a system of partnerships and alliances used by a firm to source, augment, and deliver its product or service offerings…

Intermediaries that help get the product from manufacturer to business, consumer or end users form the Marketing Channel(s).”

2. Captive (company-owned and operated), Exclusive (through appointed independent organizations) and Non-exclusive distribution arrangements. Typical boundaries in scope of distribution relationships include:

• By Geography
• By Vertical (single industry i.e. affinity)
• By Horizontal (multiple industries)
• By Product line
• By Market – B2B, B2C or, however else you finely slice the market(s).

3. Direct and Indirect. Indirect has one or more intermediary levels or layers beginning with the manufacturer. Example: Insurance industry, from producer to purchaser, in cascading order, there are 2 to 4 tiers to distribution for any given product line:

• Insurance Company
• Aggregator, Wholesaler, Program Manager, Broker, MGA or MGU
• Sub producer, Agent, Advisor or Financial Planner
• Consumer

4. Embedded or Standalone– where your product or service is embedded in another product or service or sold standalone.

5. Value-added, Broad-line or Fulfillment Distribution:

• Value-added – focuses on products where there is a limited number of distributors, usually in early market entry stage and very common with technology companies.
• Broad-line – provide the mainstream market coverage in terms of both products and market coverage.
• Fulfillment – where products are bought, not sold (i.e. office supplies).[4]

Common Characteristics of Robust Distribution

Robust distribution, what is also called “Best fit”, supports the whole reason for engaging with intermediaries – knowledge, resources, expertise, market presence, etc. and is key to execution of the strategic plan -

• Similar or the same Target Customer(s) – where the intermediary has a presence, and ideally, an installed client or customer base that can be leveraged.
• Operates a network of professional distributors - who meet certain minimum requirements (licenses, credentials, appointments, approval process, contractual agreements in place, etc.), adhere to guidelines, rules and written procedures and/or standards (quality standards, Service level agreements, minimum production levels, production quotas, etc.).
• Adds value – as mentioned above, to a set of complimentary products and/or services.
• Repeatedly, Efficiently and Productively delivers – the product or service to the intended purchaser on a consistently basis thereby delivering on the producer’s brand promise.
• Speeds up the sales cycle - and purchasing process and embraces continuous improvement initiatives.
• Possesses similar logistical and operational integration opportunities - similar operational characteristics, systems, touch points and service capabilities that can be leveraged.
• Competitive intelligence – keeps an external market focus and operates as part of an “early warning” system to signal competitor moves and changing market dynamics (both good and bad).
• High touch/Low-touch decision support and direct and indirect considerations, as described above. See the following example:

Preventing Channel Conflict

The distribution channel champions, stewards or managers of distribution relationships must prevent, detect and minimize any channel conflict immediately.

Using Benchmarks, Key Performance Indicators (KPIs) and a Scorecard to Set Goals and Evaluate Performance

It is critical in any relationship to establish benchmarks, KPIs, distribution relationship goals (including training, etc.) and periodically evaluate the performance of the channel partner(s). In addition to listing the contact people responsibilities and roles, typical performance measures include:

1. Sales forecast – by product, by target market, units, lives and total revenue.
2. Marketing Campaigns – description.
3. Sales contest(s) – Budget vs. Actual.
4. Market Development Funds– Budget vs. Actual.
5. Marketing, Communications and Promotional Funds – Budget vs. Actual.
6. Persistency /Client and Customer retention and Agent turnover.
7. ROI: Total Revenue/Total Cost – Forecast vs. Actual.

Distribution Partner Agreements

The distribution partner agreement outlines the specific contractual terms and conditions of the relationship between the parties. Incentives, rewards and recognition should be built into these agreements to reward the best performing distribution partners (and their front line employees).

8 Trends that Will Shape Insurance Distribution Over the next 5 Years

An alarming 63% of Insurers do not consider their current distribution model as a source of competitive advantage. (Source – Accenture Study “Accenture Global Survey Finds Insurers Will Invest $84 Million, on Average, Over the Next Three Years To Improve Distribution Strategy”, May 24, 2010)

Here are some of the distribution trends I see emerging:

• Insurance company investments in emerging technologies, aligning IT infrastructure, data mining techniques and integrating CRM with distribution – enabling mobility and integrated, real-time communications to support, connect and engage agents and consumers.
• Increasing shift from mandatory, defined benefits to defined contribution benefits – which involves a broader broker skill set (and training)  that includes a web-based, voluntary sales approach in addition to traditional face-to-face sales.
• Insurance Company’s focus on lowering acquisition costs.
• Agent/Broker as Adviser – subject matter expert, Choice editor, navigator, simplifier and advocate.
• A much more intensive Regulatory climate with more pricing transparency.
• More pressure on Agent Compensation through Minimum Loss Ratios.
• Underwriting and deeper process automation via artificial intelligence, by-passing the agent and alleviating them from some of the mundane administrative tasks they now handle.
• Distribution diversification – 75 percent of insurance companies said that developing relationships with “non-tied” channels (independent agents and brokers, and others) was a main priority. (Source – Accenture Study – “Accenture Global Survey Finds Insurers Will Invest $84 Million, on Average, Over the Next Three Years To Improve Distribution Strategy”, May 24, 2010). ♦

Bill Tyson is the CEO and Owner of Strategic Marketing Plus, LLC, an independent consultancy firm specializing in strategic marketing, distribution and sales optimization based in Santa Rosa Valley, CA. See http://www.strategicmarketingplus.com

Copyright, The Savvy Strategist, All Rights reserved. 2011-2012. If you want a .PDF of this post please contact Bill Tyson below.

In this day and age, which is defined by volatility and uncertainty, multichannel marketing can be an organizational capability that provides a business with a strategic advantage.  By its very nature, multichannel marketing, with all of its moving parts, is the key to building stronger lifetime value through longer term relationships with your customers, before, during and after purchase. Having spent the past 20 years in various marketing leadership roles, I know firsthand the tactical challenges marketers face in trying to orchestrate successful multichannel campaigns. It isn’t easy but, to me, the rewards in terms of profitability can be significant so it makes sense to make this a key competitive advantage.

Top Down, Bottom Up or Side to Side?

From a strategic standpoint, it is critical to have a top down approach to the process, people, technology, partnerships and infrastructure necessary to enable effective multichannel marketing.   Once the multichannel infrastructure and network is in place it then requires aligning and tightly integrating all of the tactical elements of marketing—strategy, budgeting/spending, channel management, targeting, creative and messaging—with the journey that consumers or businesses undertake when they make purchasing decisions around your products and services. Once the “decision journey” is identified, defined and mapped it is then necessary to ensure that the customer value proposition and multichannel capabilities are linked and can live up to the brand promise. In other words, no matter how the customer chooses to interact with your business the customer experience must be seamless, consistent and the brand promise is maintained throughout the entire experience.

Multichannel Marketing Defined

My definition of Multichannel Marketing is presented here in 2 parts:

Multichannel marketing - is a marketing methodology that uses two or more different media approaches to reach and influence a target audience in a single campaign. 

Furthermore, Multichannel marketing is usually supported by:

one or more inbound response channels, that, when combined, produces a single, return-on-marketing investment result.

A good example of this definition is Eddie Bauer’s multichannel approach. Their approach is referred to as a “bricks, clicks and flip” approach that leverages Stores, The Eddie Bauer.com website and their catalogues where ordering can be done through any of these inbound response channels (store, online or call center).

Why is Multichannel Important?

Here are 4 of the many reasons why multichannel is important:

• Multichannel buyers generate more revenue, purchase more items, purchase in more categories and all of this more frequently than single channel buyers. (1)
• According to a 2009 study by McKinsey & Company, consumers who shop across multiple channels will spend on average 4 times more annually on purchases than those who shop via a single channel.
• Multichannel drives higher customer satisfaction levels, higher cross sells and retention levels. (2)
• Heavy users – have demonstrated greater preference for shopping in multiple channels. (3)

Multichannel Marketing Options

“The medium is the message – and never before has there been so much different media and, hence, so many ways to shade, inflect, blow out, or screw up your message.” – AdWeek: Media Plan article, July 2011.

According to our definition above, a subset of multichannel marketing is media selection. The media selection of a given multichannel campaign is critical since it can add to the complexity and effectiveness of the outcome, including the ROI.

A common way to look at multichannel marketing is to separate it into inbound and outbound media channels.

Outbound Channels:

• Direct mail
• Tradeshows/seminars/events
• Email
• Web sites, Microsites, PURLS
• Contact Centers (Telemarketing)
• DRTV and Radio
• Mobile/SMS/Chat/Apps
• Brick and mortar stores
• Other (newspaper, out-of-home ads, etc.)

Inbound Channels:

• Paid search/Pay per click
• Search Engine optimization
• Blogs and social media
• Word-Of-Mouth (WOM)
• Viral video

The outbound channels are more traditional and “one way” communications and as such, are “marketer lead”, are becoming more expensive from a cost per lead perspective and less effective in generating responses than inbound channels, all other things remaining equal. (Source: “Marketing Data:101 Charts and Graphs of Original Marketing Research” by Hub Spot.)

The important distinction between the two categories is the simple fact that inbound channels are customer-lead channels that encourage and encompass “two-way interaction” capabilities.  As one executive recently stated, we are increasingly living in an opt-in world. Inbound channels are opt-in, sometimes even permission-based and most importantly, they drive engagement with the customer. On average, the cost per lead is significantly less for inbound channels.

Multichannel Dimensions

From a strategic perspective, in addition to the managing the channels marketers have to consider and manage these different dimensions of multichannel marketing:

1. Managing the allocation of Marketing spend across two or more channels.

2. Channel-specific promotional events that can vary by:

• Sequencing of events,
• The Timing,
• Testing and learning protocols:  targeting, product positioning, offer, format, messaging and pricing.

3. Channel Adoption Duration – which is the time it takes for customer to adopt a channel.

4. RFM analysis:

• Recency – or, the time between transactions.
• Frequency – # of Transactions (i.e. per campaign, per year, or however you define this metric) and the
• Monetary value – basket size and cumulative “share of wallet”.

5. The customer view of your operational performance via multi-channels:

• Time between order, fulfillment and delivery.
• Any real or perceived breakage in the sales process.
• Accessibility and convenience.
• Richness of the information presented.

6. Customer interactions: as customer relationships grow, develop, deteriorate and dissolve based upon the customer experience with 2 or more channels.  (Journal of Marketing, April 2007, Page 116.)

7. Post-acquisition behaviors – your ability to carefully support withdrawals, cancellations, cross sells, upsells and add-ons.

8. Return-on-Marketing-Investments (R.O.M.I.) – analysis and insights, by channel and channel combinations.

9. A commitment to transparency and compliance – including your ability to track, record and archive customer interactions, calls, problems and disputes.

 Addressing Common Multichannel Pain Points

Here is a brief list of challenges or common pain points the strategist encounters in the development and execution of multichannel marketing efforts:

• Channel Silos: online/offline, inbound/outbound.
• Complexity – the proliferation of New Channels.
• Determining the ROI of some of the channels (i.e. social media).
• Synchronization – the managing multi channels, simultaneously.
• Costs of Resources to support the efforts. This includes the deliberate avoidance of over investing in what McKinsey calls the “3 Es Trap”:  investing to provide “Everything to Everyone Everywhere.”[2]
• Tracking and reporting across multichannel campaigns – to arrive at a single ROI.
• Cannibalization – or the fear of cannibalization.  Walmart’s online sales are a mere 2% of total sales and the reason for that is fear that the online channel will cannibalize in store sales. Store managers managing warehouses of 40,000 feet still wield a tremendous amount of power. As a result, Amazon’s online sales of $34 billion per year is still 3 times that of Walmart.com – but Walmart intends on changing that with the purchase of Vudu (a low cost, on-demand, movie streaming site).

The Traditional Sales Funnel/Process Has Changed

Here is a look at the traditional sales or purchasing funnel.

“Consumers are moving outside the purchasing funnel—changing the way they research and buy your products. If your marketing hasn’t changed in response, it should.” -McKinsey Quarterly, 2009 #3

In the traditional funnel metaphor, consumers start with a set of potential brands and methodically reduce that number to make a purchase. And then, re-emerge in some cases to make an additional purchase.

The traditional sales funnel has changed to something like this, which is more of a lifecycle as shown by the series of concentric circle than a single event:

McKinsey developed this lifecycle model by examining the purchase decisions of almost 20,000 consumers across five industries and three continents.  The emphasis here is delivering a great customer experience throughout what they call a “consumer decision journey”.

Managing Systematic, two-way Interactions

Their research showed that the proliferation of media, channels and products require marketers to find new ways to get their brands included in the initial-consideration set that consumers develop as they begin their decision journey. We also found that because of the shift away from one-way communication—from marketers to consumers—toward a two-way conversation, marketers need a more systematic way to satisfy customer demands and manage word-of-mouth. In addition, the research identified two different types of customer loyalty, challenging companies to reinvigorate their loyalty programs and the way they manage the customer experience.

Finally, the research reinforced our belief in the importance not only of aligning all elements of marketing—strategy, spending, channel management, and message—with the journey that consumers undertake when they make purchasing decisions but also of integrating those elements across the organization. When marketers understand this journey and direct their spending and messaging to the moments of maximum influence, they stand a much greater chance of reaching consumers in the right place at the right time with the right message.

Conclusion

In the final analysis, to gain a strategic advantage, you must have all of these elements in place:

1. A common definition of what Multichannel Marketing truly is.
2. Formulation of the multichannel strategy.
3. Organizational alignment around the people, processes and technology to be able to execute such campaigns.
4. A complete set of multichannel and media options, both inbound and outbound, at your disposal.
5. Knowledge and understanding of all of the various dimensions of multichannel marketing.
6. The ability to address and eliminate any “pain points” associated with these multichannel efforts.
7. Development of a map of the Customer Experience or Customer Decision Journey to determine all of the potential lifecycle touch points, customer interactions and the use of channels for each so you provide a seamless and consistent experience across all channels.
8. Development of Key Performance Indicators and ROI targets. Tracking and measurement is paramount.
9. Once cross channel tracking and measurement is accomplished, then the optimization effort can proceed.

In the final analysis, managing the “points of influence” throughout the customer life cycle will determine whether you merely meet customer expectations or delight them.

For more information, see Multichannel Power.com web site I created to share articles and where you can download the presentation entitled: “Customer Experience Marketing” featured at the recent Professional Insurance Marketing Association (PIMA) conference, July 28th 2011.

Bill Tyson is the CEO and Owner of Strategic Marketing Plus, LLC, an independent consultancy firm specializing in strategic marketing and sales optimization based in Santa Rosa Valley, CA. For more information see: http://www.strategicmarketingplus.com and his website dedicated to multichannel marketing called MultichannelPower.com

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