CRM: It’s About Prospecting, Too

When most of us think about managing customer relationships, our focus tends to be on current customers, on up-selling and cross selling, on account penetration, on increasing lifetime value.

But the techniques and strategies of CRM apply equally well to prospecting. In fact, you might say that the “relationship” with customers that needs to be “managed” begins way up front, at the very first point of contact. If you limit your thinking about customer relationships to the point beyond the transaction stage, you are wasting an opportunity to gain true competitive advantage.

A number of companies have cottoned on to this opportunity, and are successfully applying the strategies of identify, differentiate, interact and customize to one of the most productive elements of the prospecting tool kit: lead generation. Lead generation simply means getting prospective buyers to raise their hands and show some kind of interest in your product or service–or at least identifying themselves as having a business problem that your product might solve. The second, and very important, part of lead generation is a process known as qualification, where the validity of those inquiries is verified, and the leads are evaluated for their readiness to buy. Once the lead is qualified, it is ready to be passed to a sales team, whose job it is to go close the business.

AMD’s Lead Management System
Consider AMD, the $4.6 billion computer chip maker based in Austin, Texas. AMD’s chips are bought by the computer makers like Compaq, Dell, Gateway, Hewlett Packard, IBM and Micron. But companies and individuals then buy the computers themselves, resulting in a highly complex demand chain for the chip manufacturer.

In the summer of 2000, the AMD marketing communications team led by Marsha Fatino was struggling with a vexing challenge: an increased level of concern expressed by their largest chip customers about lack of support in the marketplace. We get plenty of pull marketing from Intel’s ad campaigns, they grumbled. What are you doing to help us sell?

Fatino knew she could never secure the kind of budget it would take to compete with Intel’s famous brand awareness campaign. So she turned to CRM. The first step was an analysis of the customers’ real needs, and a search for the greatest points of leverage. The biggest wallets among the end-buyers, those with the best potential for growth, turned out to be the “commercial” segment, or large and medium enterprises likely to buy high volumes of computer equipment.

The next step was to design a program that would help her customers find new business in this segment, without spending huge amounts of money in the search. The answer was lead generation, powered by electronic communications. Fatino’s team ran a pilot program that summer to test the waters. It showed immediate promise.

The key differentiator lay in using customized email messages to qualify the inquiries. For the pilot program, Fatino had generated 4000 inquiries through direct mail to rental lists. To keep the pilot manageable, the team further culled the 4000 down to the 250 inquiries with the highest potential for a large sale in the near term. They then devised a series of outbound email communications to the top inquirers.

Fatino’s team was convinced that each email communication needed to be a relevant as possible, to capture the attention of a business buyer suffering from a crowded inbox. So they devised a series of hand-crafted messages that would both refer to the content of the inquirer’s own responses to previous messages, and at the same time capture new information for future messaging. For example, the first outbound email referred to the SKU interest mentioned by the prospect in the first inquiry, and it asked him which benefit–scalability, reliability or manageability–was most important to his company. As more data points were gathered, the process developed into a fairly complex matrix of variable messages for the relatively small number of inquiries. Clearly, the system was crying out to be automated.

But first it was important to test and refine the process. The first step was to rank the lead qualification criteria appropriate to AMD’s commercial segment, so the inquiries could be sorted. The team decided that the most important driver of quality was authority, meaning, was the prospect a decision maker. The next most important criterion was timeframe: how quickly was the prospect looking to make a purchase? Finally, the inquiries were to be ranked by the intended purchase volume.

The next step was to identify the message variables that were most meaningful to the prospects. These turned out to be their preferred computer brand, the evaluation criteria they use in the purchase decision, and, no surprise, incentive messages to motivate them to act. The AMD team then engaged the services of a local agency, Oak Sanderson, who built a Web-based application to support the program.

The result was an end-to-end lead management system that sorts inquiries by various qualification criteria and automatically separates them into three categories. The “hot” leads, where the decision maker plans to buy 50 or more computers within the next six months, are sent directly to business development, sorted by rep. The sales reps receive weekly emails notifying them of the leads in the system. They then log on using a password, view the lead information, and make a direct contact with the prospective customer. As they work the lead, the reps update the account status in the system, which gives the marketing team a clear picture of the situation.

Leads that are “warm,” meaning that the decision-maker has a 6-12 month buying horizon, go into the customized outbound email process. The Oak Sanderson system reviews the data points from the original inquiry, and generates a series of customized email communications, each building on the last, until the prospect indicates that he’s ready to buy within the next six months.

The “cold” inquiries that don’t plan to buy within 12 months go through a double process of outbound personalized email communications, in hopes that they will develop into warm and eventually hot leads. If not, they are returned to the marketing database for re-promotion.

The automated system became an instant hit. The sales reps and channel partners are enthusiastic–and marketing communications is enjoying a new-found appreciation from an previously indifferent set of colleagues. From its beginnings as a small pilot, the system is now used for inquiries from all sources, trade shows, seminars, advertising, online sources and direct mail campaigns. Best of all, senior management at AMD has vowed to increase the funding for the program–always a good sign.

The success of the program has, not surprisingly, spawned a number of plans for enhancements. Recognizing the power of one-to-one communications on converting prospects to qualified leads, Fatino’s team now plans to create a customized email-based program for ongoing cultivation of current customers. So CRM is coming full circle at AMD.

IBM’s PartnerWorld program
Another example of using electronic CRM techniques for new-customer prospecting can be found at IBM. This $90 billion behemoth has successfully migrated in the last decade from a single channel sales strategy to a multi-channel marketer. Now fully a third of IBM revenues come from resellers and distributors, whom IBM calls its “business partners.” The partners allow IBM to cover the global market much more effectively than it could with its own house sales force (affectionately known as the “blue suits”). The partners also add considerable value to the IBM products, whether it’s writing industry specific software, or bundling the products with the services and support that end-user customer’s need.

As effective as reseller coverage can be, multi-channel distribution introduces some risks. For one, the partners are all independent business people, often representing a number of manufacturers. IBM needs to compete, in effect, for their loyalty. Furthermore, these resellers are often excellent at sales and service, but relatively week at marketing. It behooves IBM to apply its considerable marketing muscle to helping them be successful.

Which is why IBM has instituted a broad program of partner support, known collectively as PartnerWorld. PartnerWorld offers training and incentives for IBM’s community of 90,000 business partners worldwide. Its primary delivery system today is a website (www.ibm.com/partnerworld) where business partners can manage their relationship with IBM, learn about new products, prices and services, and–significantly–get marketing and sales support.

Among PartnerWorld’s marketing support functions are:

• Partner Plan, a tool that helps the partner write a sensible, attainable marketing plan. It forces the participant to set clear objectives, and then it suggests detailed activities that will enable the plan to be achieved.
• Business Partner Connections, a service that allows partners to meet one another, to blend their skills and make more comprehensive offerings to customers.
• Business Partner Events, which helps partners exhibit at trade shows and conferences.
• Partner Rewards, a frequency program that tracks to partners’ sales levels, and allows them to cash in the rewards for training or demand generation programs.
• Co-marketing, which deploys IBM’s marketing expertise and resources to generate demand for the partners, and help them be successful at finding new customers and sales opportunities.

The Co-marketing program is managed worldwide by Rita Burdell, an IBM program director based in Atlanta. “Co-marketing is my baby,” says Burdell. “Especially Campaign Designer, the piece that allows a partner to create marketing materials quickly and cheaply, and have IBM send them out to customers and prospects.” The program originated in the U.S., but is now also available to partners in Canada, Europe, and Australia/New Zealand, with a pilot underway in Mexico. The Co-marketing website supports English, Spanish, French, Italian and German languages.

Burdell and her team create templates based on existing IBM campaigns, and load them into the web-based Campaign Designer tool. The partners can then go in with a password, select the campaign that interests them, and order it up to be sent. The partners can upload lists of their own customers and prospects, or they can ask IBM database marketers to help them pull appropriate names from the IBM house files or rental lists.

The templates contain a shell of the campaign materials, including the art picked up from IBM’s television or print advertising, plus the key campaign messages. Beyond that, the materials can be completely customized by the business partners themselves. Partners can attach their own logos, their contact information, their photos and signatures, and details of their service offerings and pricing. This way, the partners feel that the output is “their” communication, but IBM still enjoys considerable control, ensuring that the message is on-brand, and does not stray from corporate marketing-communications guidelines. If the partner has any trouble working with the web-based tool, there is an 800 number available for additional marketing consultation and support.

With a completed template and the names selected, the partner then instructs IBM to produce the piece. In the U.S., IBM has contracted a variable printing facility to laser-print the partner’s message and put the piece in the mail stream. In the rest of the world, the production is handled by IBM’s direct marketing agency of record, OgilvyOne. But because the system is entirely web-based, even production approvals are a snap: the proofs are sent around via email. No more expense and headaches of over-night mailings here and there around the world.

Campaign Designer is not limited to traditional direct mail. Depending on the campaign, it is just as likely to offer the partner his choice of telemarketing scripts, website content, banner ads, print ads, collateral pieces, seminar invitations, and email copy, along with an array of direct mail pieces, postcards, and executive letters.

The email copy and telemarketing scripts are available to registered business partners at no charge. For postcards and solo mail, the partners can pay using Market Development Funds or credit cards. IBM charges at cost, but at co-mingled volume discounts, resulting in prices far lower than any given partner could procure for himself. A postcard campaign in the U.S. will cost about 48 cents, and a solo mail piece about $1.30, including postage.

Beyond cost, another key benefit is speed. A partner selects a campaign via the Web today, and can expect it to be in the mail within two weeks.

Burdell’s group introduced a response management module to the Co-marketing program in 2001. With this enhancement, IBM increases its chances of tracking responses–always a thorny problem in lead generation, and particularly so when the leads are worked by third parties. Under the new process, the responses go directly to a third-party clearing house, instead of directly to the partners. The clearing house tracks the responses, enters them into the system, and delivers them via the Web to each partner. While there was some initial concern that the partners would be nervous that their leads might be co-mingled with those of a competitor, in fact they have been very pleased with the program. IBM never sees the opportunity itself, so there are no worries about security or lead poaching. The new process relieves the partners of the chore of managing incoming business reply cards, faxes, email and 800 number calls. And the leads are sorted and shipped to them daily, so they can assign each incoming lead to one of their reps or hand it off to someone else.

From Burdell’s perspective, the response management module allows her reliable insight into campaign ROI, for the first time. She now receives reports on the number of tactics, the number of touches, the response rates and the number of active opportunities. With this information, she can pinpoint campaign expense-to-revenue ratios and be sure things are operating at maximum efficiency.

Perhaps the most important benefit of the Co-marketing program to the business partners is that it harnesses IBM’s marketing expertise for their use. In short, the partners are getting an instant outsourced marketing department, staffed by experienced professionals, and using all the latest tools and techniques. Tracy Kleszczynski, marketing manager at IBM business partner Aspen Consulting said of Campaign Designer, “I couldn’t believe how simple it was to produce this mailing. We clicked on the picture we wanted, tailored the copy and we were ready to go in the same day. We saved a lot of time and money using this tool. Would we use it again? Yes. It’s so user-friendly, costs less and is so much more efficient than going outside to accomplish the same thing. And, we’re convinced we’ll see better results.”

For 2002, Burdell has plans to expand Co-marketing to additional countries, and to add new campaign elements, such as a monthly web-based newsletter and a subscription service so partners can order up customized email newsletters about various IBM products and services.

IBM has long been a sales powerhouse. With the Co-marketing program within PartnerWorld, they are now supporting their third-party distribution channel with both sales and marketing. The partners appreciate the support, which enhances their loyalty to IBM. The corporation is helping them generate new business, which benefits both the partners and IBM itself. And IBM is applying the power of electronic CRM, to helping its partners succeed.

Lessons Learned
Both AMD and IBM have developed robust prospecting programs using customized one-to-one communications, and both companies learned a number of lessons along the way.

• If you are starting from scratch, start small. AMD had no database, no marketing automation technology, and only a smattering of one-to-one marketing knowledge and experience in house. So as they built their pilot, they also trained themselves and their company in the principles of one-to-one communications.
• Get your budgets in place early. AMD lost valuable time in the process when it had to downgrade its efforts due to lack of budgetary support early on.
• Leverage e-marketing as much as possible. Email is very cost-effective versus postal mail. “I am surprised direct mail is still around,” said Kelly Jackson, AMD’s marketing manager.
• Be prepared for a fast-paced environment. Burdell is pleased with IBM Co-marketing’s progress, but she also cautions that she must work to streamline it more, and make the campaign turnaround time even faster to keep up with customer expectations.
• Move early to engage all parties. The more the business partners and the IBM worldwide marketing teams are involved in the planning stages, the more successful the lead generation campaign.
• Educate and preach internally. IBM’s business units and partners are coming on board with PartnerWorld Co-marketing at a rapid pace, but it takes constant communication to explain the value and help migrate them from a sales focus to a marketing mindset.

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