One of the great benefits customer lifecycle programs bring to the party is unearthing cross-divisional or functional profitability opportunities that otherwise would fall into the cracks between units and not be addressed. What I think most managers in the omni-channel space may not realize (yet) is how significant many of these issues can be.
To provide some context for those purely interested in the marketing side, this idea joins quite closely to the optimizing for worst customers and sales cannibalization discussions, but is more concerned with downstream operational issues and finance. Cost shifting scenarios will become a lot more common as omnichannel concepts pick up speed.
Shifty Sales OK, Costs Not?
Why is cost shifting important to understand? Many corporate cultures can easily tolerate sales shifting between channels because of the view that “any sale is good”. On the ground, this means sourcing sales accurately in an omni-channel environment requires too much effort relative to the perceived benefits to be gained. Fair enough; some corporate cultures simply believe any sale is a good sale even if they lose money on it!
Cost shifting tends to be a different story though, because the outcomes show up as budget variances and have to be explained. In many ways, cost shifting is also easier to measure, because the source is typically simple to capture once the issue surfaces. And as a cultural issue, people are used to the concept of dealing with budget variances.
Here’s a common case:
Continue reading Omni-Channel Cost Shifting
The following is from the December 2009 Drilling Down Newsletter. Got a question about Customer Measurement, Management, Valuation, Retention, Loyalty, Defection? Just ask your question. Also, feel free to leave a comment and I’ll reply.
Want to see the answers to previous questions? Here’s the blog archive; the pre-blog newsletter archives are here.
Q: I am a big fan of your web site and read your Drilling Down book. Great work!
A: Thanks for the kind words!
Q: I was wondering if you could help me picking the right control group size for a project of ours? The population is 25 million telco customers that for which we want to do a long term impact analysis (month by month) in regards to revenue increase versus control group. The marketing initiatives are mix of retention, lifecycle and tactical/seasonal activities. We want to measure revenue increase through any of the marketing activities compared to control group.
A: Great project, this is the kind of idea that can really improve margins if you can find out which specific tactics drop the most profit to the bottom line.
Q: I have searched the web for some help and found calculators that say: On 25 million and smallest expected uplift of 0.1% and highest likely rate of > 5% the calculator gives 250k (1%). Is that sufficient to calculate the net impact on the remaining base? Would be very grateful if you could give me your thoughts.
A: Well, it could be and might not be…
Continue reading Choosing the Size of Control Groups