Operationalizing Research

I just finished a project interviewing some of our leading Vocollect customers who have implemented voice in a workflow other than selection. (For those of you who don't know the distribution center space, selection or "picking" is the most labor-intensive operation in the DC with the most product touchpoints and therefore the most common place to implement voice-directed picking.) The next task: operationalizing these results with the salesforce.

I suddenly realized at the end of the project that I didn't know enough about what our salespeople are doing on sales calls today, so I spent some time on the phone with the team members. I learned some important things that will help me create a sales tool that the salesperson might actually use. In the process, I also collected some best practices that I can consolidate and share along with my market research.

In my experience, marketing departments all too often create products, programs or promotions without enough input from sales. I recently described this to my friend Prakash, one of our product managers, as "projectile vomiting over a wall." After a short while, the salesperson is more likely to put up an umbrella to avoid the vomit rather than putting up a bucket to try to catch your marketing spew. Just getting input from the sales guy does not mean you have to listen to everything he says, but you might get a better result in the implementation.

Market research and customer intelligence both improve the effectiveness of the sales team but only if sales actually believes and uses the information.

No More Holiday Bonus

What does 99.6% accuracy mean in distribution centers? To the casual observer, it would mean that on average, 1 of 250 orders have errors. In market research, however, we have to look at the sample frame, or the source of the data compared with the total census of all instances. In this case, the sample frame is often customers (or other ship locations downstream of the DC) who complained or otherwise adjusted the order when it arrived.

Customers who did not complain could have been of three types: 1) customers who did not notice or otherwise care about the error; 2) customers who got the right amount of product, or 3) customers who got too much product and kept the overshipment for themselves. There might be lots of reasons for customers to keep over-shipments, including the cost of sending them back, the desire to make up for lost profits elsewhere, or even good old-fashioned five-finger discount (aka shrink). Nevertheless, the fact that these customers don't complain means that actual error rates are likely upwards of 1 in 250.

Hence the story my lead generation guy tells about a checking in on a customer who implemented Vocollect(R) Voice: his DC's downstream customers were very pleased with the improved accuracy, but they asked the DC manager, "What happened to all the extra stuff you used to send us?" The answer: the DC didn't mean to send it in the first place.

Improving accuracy means decreasing largesse for the downstream parts of the supply chain. In this case, that's a holiday bonus that isn't good for business.

Steve Jobs Revisited

Okay, I might have to take back some my earlier post on Steve Jobs. Although he is still reportedly a poor people manager, this story about Apple's legendary customer service does change my view. Look in particular at the very end of the article.  Are you listening, Andrew Mason?

Global Accounts

One of the first things I promised my new boss that I would do at Vocollect would be to try to increase our "share of wallet." Even for B2B customers, share of wallet is a critical concept: how much of the total potential spend do you have? We sell primarily to the distribution center (DC), so if we have a customer with four DCs and we have Vocollect(R) Voice in one DC, we have 25% market share.

Ask yourself which is easier: expanding from one happy DC into the other three or introducing a completely new customers to the concept of the voice-directed distribution center? Based on the obvious answer to this question, we have started to look for places that we have business in one geography and get referrals to other parts of that company in another geography. It's a lot easier to say to an American distribution center manager, "We work with your DC in France" than it is to say, "Let me explain a technology you may have never heard of before or don't understand and try to convince you why it applies to you."

The concept of improving share of wallet by looking beyond your region can apply to many B2B companies. Do you sell only in one country but have a customer with overseas branches? Do you do business with a customer who is trying to expand in a new region? Does your product or service work with only minor adjustments (including minor channel changes) in a market with the same language? Each of these situations present opportunities to expand your business that may cost you a lot less than finding new customers.

By the way, expanding share of wallet also makes it a lot harder for your competitors... a fact that many companies ought to consider in this age of value-conscious business shoppers.

The Value of Market Research

My old market research professor Anand Bodapati at UCLA Anderson School of Management used to spend a lot of time warning against doing market research without understanding the goals of the project and the business decision that the research will help to answer. This emphasis counts as one of the reasons that I consider my time in Professor Bodapati's class some of the best spent hours of my academic career.

When should a company do market research? The answer to this question ought to depend on the value of the research versus the potential profitability. Many business schools teach a traditional method of evaluating this value based on Bayes' Rule, a technique that has some support and lots of criticism, some of the criticism going back thirty years or more.

What's a marketing manager to do? I say, apply a few rules of thumb if you don't have time to do the full analysis: Do market research when...

1. ...the outcome of your business decision is truly in doubt. This rule implies avoiding market research both when the outcome is almost certain success and when the outcome is almost certain failure. See more on the "expected value of perfect information" for the reasoning behind this rule.
2. ...the magnitude of expenditure (or the cost of failure) is at least several times that of the market research (I often use a 10x multiple). This guesstimate ensures that you spend money where you can expect the greatest return from learning. The method also preserves focus on the projects that are most important, a critical factor when you need to communicate results to the wider organization. Wide communication of market research results is, in my opinion, too often shortchanged in large companies.
3. ...you have the possibility of really upsetting your customers by messing up. See my recent post for more on this one.
4. ...senior executives, salespeople, or other individuals with a lot of influence start making questionable statements that could contradict reality in strategically important ways.

And why am I thinking about this topic today? My boss reminded me about #2 today...proving that even the best of Data Geeks sometimes forget their own rules in the excitement of gaining new customer intelligence.

Check the Facts

Vice President Joe Biden recently got in trouble with the conservative media for claiming that cities like Camden, New Jersey and Flint, Michigan would see a rise in robberies, rapes and other violent crimes because they have had to cut police forces in half due to budget woes. Of course, Biden was arguing for Obama's new jobs bill, but I immediately thought of the more interesting data question.

The problem with determining the relationship between police force size and crime rates is "simultaneity bias." This term refers to the two events you wish to study tending to happen at the same time regardless of causality. In this case, governments tend to increase the police force when they notice a rise in crime or even in anticipation of this rise. Therefore, it is hard to see which comes first, the chicken (crime rates) or the egg (police force size).

One can overcome this problem by looking for individual events in which one factor changed for exogenous reasons--reasons outside the normal timing. There is an excellent summary of some of this research here:

http://www.majorcitieschiefs.org/pdf/news/more_policing_does_matter.pdf

The upshot is that cutting or raising the police force does have both an apparent short-term and an apparent long-term effect on crime. Nevertheless, the range of response varies significantly in the available research, some suggesting that a 50% drop in police force could mean only in the range of 10-15% rise in crime.

In a business context, simultaneity bias comes up quite a lot when looking in the rear-view mirror of one's business. For example, an increase in size of sales force is often accompanied by increase in marketing spend. This simultaneity confounds examining the effects of each investment. That is why I often recommend running experiments changing only one variable, or changing different variables in different territories or regions, before making such investments throughout the company.

Too bad Joe didn't find a source for his facts before he met the press. I hope he finds my blog.

When Did You Last Click Through To An Internet Ad?

Rule one for advertising: break through the clutter. That applies to B2B companies, too. Their buyers are humans, just like everyday consumers.

Rule two: differentiate from competitors by demonstrating why your solution works better. Yes, this matters for B2B companies as well as B2C brands. Perhaps even more.

That's why this terrific Verizon ad works so well. It might be the only B2B advertisement online that I have clicked on for the past year.