Editor's Notebook: Organizing Around the Customer

Organizing marketing around the customer is one of the most difficult challenges we face. We know it's essential, but simply gathering usable data is a never-ending task, never mind reorienting strategy, communications, sales support and all the rest. Buying and conducting research, tapping the knowledge of customer-facing employees, sifting through endless data, building workable CRM systems—it's no wonder marketers often just go with past experience and gut feel. To make matters worse, budget cuts and the race to promote new offers push research even further down the list.

Pardon us for saying so, since it seems both obvious and self-serving, but the realities of a continuing soft economy make research that much more important. Marketers without an exceedingly good grasp of customer wants and needs in sharply defined segments won't get far on good looks and strong capabilities alone.

This customer-obsessed issue of the E-ZINE is filled with material on buyer priorities, market research, and events that feature yet more customer information. Our main goal, as always, is to provide useful insight into marketing and the market. But we're also interested in your thoughts on the customer conundrum. What have you done to organize more effectively around the customer? How are you managing the tension between greater need for customer understanding and fewer resources to get it? Can organizing around the customer go too far?

—Rob Leavitt

Did I mention upcoming events? Check out a host of customer-obsessed events below.

What's Hot: Balancing Research Priorities

Strict limits on research dollars have become a way of life for IT and services marketers. Research was one of the first categories to take a hit with the marketing cutbacks a few years back and marketers at even the largest technology firms have learned to make do with fewer sources and studies.

A common response to the cutbacks has been to focus on less expensive, more tactical-oriented research. Generic subscriptions, broad market forecasts, and worldwide tracking studies are out; targeted initiatives to support sales efforts are in.

Specifically, this means smaller and more customized studies in such areas as:

• Understanding customers' business issues in targeted segments
• Analyzing top priority vertical markets
• Testing value propositions and messaging
• Assessing the competition, especially in relation to new offers
• Evaluating opportunities with small and medium-sized businesses

The narrowing of many companies' research agendas is understandable given current conditions. And in many cases, marketers have turned the necessary budget constraints into more effective programs. Back in the days of more lavish spending, reams of data simply gathered real and virtual dust—which was sometimes a good thing given the wacky visions and guesstimates that often passed for legitimate research.

A key question, however, is whether companies are striking the right balance in their research agendas. There are at least three issues to consider.

1. The research mix. Even with a shorter-term focus, do you have the right mix of research activities to gather the right data and to do it fast enough to make a difference? Is the research program rigorous enough to give you high confidence in the results? Are you using both qualitative and quantitative methods in the most appropriate ways? Are you paying at least some attention to all key audiences and constituencies—not just customers and prospects but also employees, partners, and third-party influencers?
2. Static data vs. actionable information. Are you devoting enough energy to analyzing, sharing, and explaining the data internally to make sure it has an impact on strategy and planning? Are you reality-testing findings with sales, delivery, and other organizations? Are you putting enough time into turning the findings into thoughtful and actionable recommendations? Less expensive studies that are not used are just as wasteful as more expensive ones.
3. Tactical Execution vs. Strategic Vision. Are you still paying enough attention to the medium- and longer-term threats and opportunities that will affect the business beyond the next few quarters? Focusing limited research dollars on existing customers, prospects, and competitors is sensible, but not to the extent that it totally crowds out assessments of broader trends, emerging competitors, and opportunities for future growth.

"It's not surprising that marketers are concentrating scare research dollars on projects that help generate more business as soon as possible," notes Julie Schwartz, ITSMA's vice president of research. "The problems come either when they move too quickly without thinking through the best approaches, or when they do it to the exclusion of all other research. Research is more important than ever in today's market, and it is crucial that marketers maintain a sophisticated and balanced approach no matter what their level of resources."

—Rob Leavitt

Features

New Opportunities? Customers Show Less Loyalty to Existing Vendors

For many years, ITSMA research has shown that past experience with a services firm was the number-one factor influencing future buying behavior. Customers have always liked to do business with known entities, and services firms have had great success orienting marketing and sales strategies around customer penetration. In fact, ITSMA's most recent services sales performance study confirmed that an average of 83% of services revenue was attributed to repeat customers.

According to ITSMA's latest customer survey, however, such loyalty appears to be on the wane.

A comparison of ITSMA's 2003 customer survey with a similar survey in 2002 confirms that customers no longer place as high a priority on past experience with a services vendor. In 2002, past experience ranked highest when customers cited the single most important criteria for vendor selection, outranking such other criteria as technical expertise, ability to deliver, and price. This year, however, prior experience dropped to seventh place, below such other criteria as delivery guarantees, technical expertise, available resources, and price (Figure 1). Even when asked to rate different vendor selection criteria on a five-point scale, respondents ranked prior experience far below most other criteria.

Figure 1: Customers' Top Vendor Selection Criterion: 2003 and 2002

Today's risk-averse and cost-conscious customers value ability to execute and deliver at a lower price above all else. No longer content to coast on the aura of past relationships, they are demanding proof of performance for each and every potential engagement. They are more sophisticated, more diligent, and more confident that they can select the right vendors at the lowest possible cost. Past relationships still help, of course, but they are no guarantee of contracts, especially when another qualified firm is willing to negotiate.

Declining customer loyalty is certainly not good news for most vendors. Yet the flip side of declining loyalty is increased opportunity to win new customers. If customers are more willing to work with vendors with which they have no prior experience, this opens the door to competing vendors even in situations of long-term customer/vendor relationships. Most customers are not looking actively to switch, and need a compelling reason to do so, but there is no question about their increased openness to new vendors.

—Julie Schwartz, jschwartz@itsma.com

Read more about ITSMA's recent customer research in Customers' Changing Priorities: What You Need to Know to Position Your Company for Growth. This ITSMA Update is available without charge to ITSMA members and for sale to all others. Details at: http://www.itsma.com/research/abstracts/u0042.htm.

Attracting Customers' Attention: CIOs Sound Off

With customers becoming more open to switching vendors regardless of long-term relationships, marketers need to redouble efforts to get in front of new prospects as well as doing everything possible to maintain their base. But attracting the attention of extremely busy CIOs, to cite one prime target, is no simple task. Three CIOs at ITSMA's recent Chief Marketers' Conference discussed the challenge.

Armand Morin, Private Healthcare Systems: I think there's still much more supply than demand out there right now, at least around health-care. I get more calls and emails than I can handle. We do try to speak to many [vendors], but I don't have the business for the volume of contact we're getting. I think most of them are awfully good vendors or service providers, but the volume just isn't there.

So how do you get in there? I haven't heard many new value equations coming out. I'm hearing the same stories over and over again. To the extent that a vendor or service provider can show results that are relevant to our industry, I listen to that. If someone says, "Here's what else I'm doing in health-care," and they can prove it, I listen to that for sure.

James MacDonald, Fidelity Management and Research: I would say two things in our space. We've laid out what we're trying to do this year. So we're pretty receptive to software vendors or service providers that want to come in and talk about those issues. But you have to be sensitive to people's time. There's a portfolio manager at Fidelity that when you go in his office, he turns over this little timer and whatever you have to say, you have to say. I wouldn't go to that extent, but if you get a half an hour, that's pretty good. I think you can do your update in half an hour.

Also, if I get a call from another CIO in this area who said, these guys really did a good job for us, I would meet with them because... that carries an enormous weight with us.

Peg Nicholson, Acushnet: I just met with somebody referred to me by another CIO who I respect and that was how he got in the door. I would also just recommend that you invest in CRM. I hate getting multiple calls from the same company from different people. I mean that's really unproductive.

MacDonald: I can't tell you how often I talk to other CIOs to get references. I get 30 to 40 calls a week from vendors and I try to call back as many as I can, but I also talk to maybe five CIOs in our industry a week and I've never had a call not returned or not talked to them. So there's a discussion that goes on about can these folks do what they say they're going to do. And if there's a bad reference out there, I think it's probably getting around and needs to be addressed.

Read additional comments from these three CIOs in Rationalizing IT: CIO Perspectives on IT Investments and Vendors. This ITSMA Viewpoint is available without charge to ITSMA members and for sale to all others. Details at: http://www.itsma.com/research/abstracts/v0020.htm.

Research Desk:

CIOs Project More Optimism for IT Spending (Tech Poll)

CIO Magazine's Tech Poll provides a monthly assessment of technology buying trends from a broad cross-section of chief information officers (CIOs), mostly from North America. The latest survey, conducted August 7-14, 2003, suggests that CIOs project a gradual pickup in IT spending over the next 12 months.

Key findings:

• CIOs plan to increase technology spending 6.4% over the next 12 months, up significantly from their July projection and the most optimistic projection since May 2002.
• Small and medium-sized businesses are the most optimistic. CIOs from firms with fewer than 100 employees project spending increases of some 14.6% over the next year, while those from firms with 100-1,000 employees project increases of 8.4%.
• CIOs in business services, telecommunications, retail, finance/banking, and travel reported stronger than average projections; those from health-care and state and local government organizations reported weaker than average projections.
• Spending projections for seven of the eight specific IT categories measured in the survey showed increases from the July survey; only the infrastructure software category showed a slight decline in projected spending.

For Gary Beach, publisher of CIO Magazine, the new Tech Poll data suggest that CIOs are finally gearing up to spend more money. Although projections have generally overshot the subsequent reality during the last several years, Beach sees a number of factors coming together to support increased IT investments. These include a continually increasing application backlog, the relatively broad base of projections for spending increases, and the substantial changes among CIOs themselves since the downturn began. "CIOs lost a lot of respect because of Y2K and the dot-com collapse. There is now a more systematic realization that they have to be true business partners with the business units and they have accepted responsibility for aligning technology with the business," he says. The upshot, according to Beach, is a CIO community with more sophisticated plans, greater internal support, and a more realistic sense of what is possible.

August Tech Poll figures are based on 206 survey responses, with 96% from North America. CIOs made up 90% of the total respondents. Large firms with more than 5,000 employees represent 21% of the results. The respondents represent a wide range of industries, including technology services, manufacturing, finance, state and local government, health-care, and wholesale and retail distribution.

For complete survey results, visit http://www.cio.com/techpoll.

New ITSMA Report Details Brand Preference for Enterprise Network Services

ITSMA's newly available brand tracking study, Competing for Leadership in Network Services: Buyer Preferences in the Enterprise Market, provides in-depth data and analysis on how enterprise buyers perceive 22 leading firms that provide network professional services and remote network management and maintenance services. Based on interviews with 300 business and IT executives from seven vertical markets, the report highlights:

• Unaided and aided awareness of network services firms
• Firms that buyers are most likely to call
• Familiarity, favorability, and preference towards specific firms
• Perceived credibility of different services firm partnerships
• Market positioning of leading firms
• Importance of various attributes of networking services firms and ratings of attributes for specific firms
• Sources of information that influence buyers
• Primary decision makers during the stages of the purchase cycle

Companies covered in the study include AT&T Solutions, Avaya, BearingPoint, Cable & Wireless/GC, Cisco Systems, Dell, EDS, Getronics, HP/Compaq, Hitachi, IBM, IBM Global Services, Lucent Technologies, MCI WorldCom, Microsoft, NextiraOne, Norstan, Nortel Networks, Siemens, Sprint, Unisys, and Verizon.

ITSMA's new report, Competing for Leadership in Network Services: Buyer Preferences in the Enterprise Market, is now available for sale at member and nonmember prices. Visit http://www.itsma.com/research/abstracts/BNE002.htm for details.

ITSMA Brand Tracking Research: Competitive Positioning In Key Services Markets

ITSMA's brand tracking research provides critical market data and recommendations at extremely reasonable rates. Market-based multiclient studies enable participating companies to analyze customer awareness of top providers, knowledge and preference of different firms, competitive positioning, desired attributes, and much more. Upcoming studies include the following:

• 2003 Telecom Services—Service Provider Market (Recently launched; secondary sponsorship still available)
  http://www.itsma.com/Research/prospectus/mk0399_bnwsp03.htm
• 2003 Managed Services—North America (Recently launched; secondary sponsorship still available)
  http://www.itsma.com/research/prospectus/mk0374_ms03.htm
• 2003 Managed Services—Europe
  http://www.itsma.com/research/prospectus/mk0398_eums03.htm
• 2003 Storage Solutions
  http://www.itsma.com/research/prospectus/mk0367_strg03.htm
• 2004 Professional Services and Solutions
  http://www.itsma.com/research/prospectus/mk0402_ps04.htm

EuroNotes: Broad Tech Focus Masks Different Priorities Among Euro Financial Services Firms

Over the past few years, the financial services industry in Europe has gone through tremendous changes, most of which have had substantial technology implications. Examples include the move to interactive channels, regulatory changes such as Basel II, and the widespread push for new business models, partnerships, channels to market, and product diversification.

Not surprisingly, technology is top of mind for most business leaders and CIOs in financial services, according to recent ITSMA research with senior decision makers in the U.K., Germany, and France.

Digging into the data, however, one finds important differences among IT and business buyers within the three countries. For marketers attempting to increase business in this critical vertical, understanding these differences is key to success.

ITSMA surveyed executives from 90 financial services firms across the three countries, of which 42% were CIOs and 58% were either COOs or heads of lines of business. The survey, conducted jointly with analyst relations firm Tiger Lily, covered such issues as top business priorities, awareness of different IT providers, the impact of various marketing techniques, and the role of third-party influencers.

Both CIOs and business leaders put technology concerns high on their priority lists, but the specific technology issues keeping them up at night were distinctly different. Broadly speaking, CIOs are more concerned with infrastructure issues, including integration, security, storage, and reliability. Their business management counterparts focus much more on IT costs, change management relating to new technologies, and the relationship between technology and business models.

Different concerns are also evident across the three countries. For example, although CIOs in all three countries, not surprisingly, are concerned with controlling and reducing technology costs, those in the UK are relatively more focused on innovation issues while those in France are more concerned with operational risk.

On the business management side, executives in the UK highlighted new competition from other countries more than did their peers in Germany and France, whereas those in Germany and France spoke more about regulatory compliance issues.

National differences reflect, at least in part, different attitudes toward technology. Many German managers consider themselves operating at the cutting edge of new technologies, while many in France view themselves as sticking more to the technological mainstream.

Differing priorities among different types of financial services buyers suggest the importance of ongoing and in-depth customer research. Although there are clearly some common themes that can speak to a broad financial services audience—such as maximising the value of IT and aligning IT with business strategy—it is typically the more targeted and nuanced value propositions that carry the day.

—Bev Burgess, info@itsma.com

ITSMA Europe's recent briefing, Understanding and Engaging Buyers in Financial Services, provides extensive data and analysis from the ITSMA survey in the UK, Germany, and France. The briefing is available without charge to ITSMA Europe members (password required) and for sale to all others. Details at: http://www.itsma.com/research/abstracts/olbeu090403.htm.

More EuroNotes

Marketing Toolbox: Tools for Listening to the Customer

Gaining useful insight into customer wants and needs does not have to mean extensive research projects—useful as those can be. Simpler tools to listen to customers can provide extremely helpful ideas, cautions, and warning signs. The key is to use the right tool at the right time for the right information needs.

ITSMA's Tools for Listening to the Customer provides a checklist of 13 basic tools for gathering information and insight from customers, with brief descriptions as well as advantages and disadvantages of each tool.

Download the Tool: http://www.itsma.com/research/current_tool.htm.

More Marketing Tools (membership online access required)

Upcoming Events

More and more technology vendors are shifting to a "solutions" approach in promising to solve customers' business problems. But what do customers think about the vendors' solutions push? Join ITSMA president and CEO Dave Munn and vice president of research Julie Schwartz for an in-depth review of ITSMA's latest research into customers' wants and needs for technology solutions.

What Do Customers Want? Buying Priorities for IT Services and Solutions
September 23 Online Briefing (No charge for members)
http://www.itsma.com/Events/event_desc/03OB09N12.htm

Customers today seem to want it all: high value and low price, immediate delivery and a year to decide, trusted advisors and flexibility to jump ship for a better deal. Join Julie Schwartz, ITSMA's vice president of research, to analyze ITSMA's latest data on what customers today value most.

Best Practices in Services Marketing in Europe
September 25 Marketing Roundtable (Frankfurt, Germany—Invitation only, no charge for members)
http://www.itsma.com/Events/event_desc/03RT09E10.htm

ITSMA Europe's Marketing Roundtable provides senior marketing executives and other marketing leaders with the opportunity to discuss urgent issues in services marketing with peers from other companies. Discussion topics will include thought leadership marketing, relationship marketing, market segmentation, and marketing-sales alignment.

Marketing Returns: Leadership, Innovation, and Results MarketingServices/2003 Annual Conference—October 20-22, Claremont Resort and Spa, Berkeley, CA Final days for early-bird discount—Deadline September 15: http://www.itsma.com/events/event_desc/03AC10N13.htm Marketing is back! As tech spending begins to grow again, marketing is exerting greater leadership in defining new opportunities, refining the customer experience, and measuring the business return on marketing investment. ITSMA's annual conference is the premier event for marketers interested in the latest strategies and tactics for generating growth in technology services and solutions. This year's conference will emphasize emerging opportunities for growth, new approaches to marketing and selling solutions, best-practice peer sharing and networking, and presentation of the 2003 Services Marketing Excellence Awards—all inspired by the great food and surroundings at the Claremont Resort and Spa in Berkeley, CA. Featured speakers include: Howard Rheingold (keynote speaker), author of Smart Mobs and one of the foremost authorities on the social implications of technology Michael Winkler, Executive Vice President and Chief Marketing Officer, Hewlett-Packard Brian Fugere, Partner, Deloitte Consulting Chelsea Hardaway, Global Director, Brand Communications, Deloitte Consulting Leigh Alexander, Vice President and Chief Marketing Officer, Unisys Sangita Singh, Chief Marketing Officer, Wipro Technologies Brian Eckert, Executive Vice President, Marketing, Dimension Data Cary Fulbright, Senior Vice President, Marketing, salesforce.com Shahla Aly, General Manager, Services Strategy, Microsoft Larry DeBoever, Chief Research Officer and Executive Vice President, Hitachi Consulting Peter Solvik, Managing Director, Sigma Partners; former CIO, Cisco Systems Philip Oliver, Vice President, ITSMA; former Vice President, Worldwide Strategy, IBM Global Services Dave Munn, President and CEO, ITSMA Julie Schwartz, Vice President, Research, ITSMA And more! Pre-conference workshops on October 20 highlight new tools and techniques for marketing solutions, selling solutions, and managing channels. Learn more and register online at: http://www.itsma.com/events/event_desc/03AC10N13.htm. Conference sponsored by: Premier Sponsor Rainmaker Systems is a leading outsource provider of sales and marketing programs for service contracts. Rainmaker's cost-effective programs generate new service revenues and promote customer retention for its clients. Visit us at http://www.rmkr.com. Sponsor High-tech manufacturers such as Juniper Networks use Encover's applications to increase renewal revenue, reduce the cost of sales, and increase visibility into their installed base. Visit us at http://www.encover.com.

Complete 2003 Events Calendar
http://www.itsma.com/aspfiles/Events/calendar.asp

Event Sponsorship Opportunities
http://www.itsma.com/Events/other_desc/sponsorprg.htm

Do you have a services marketing question?
Visit Ask ITSMA to access our experience, insight, and research results.

(c) Copyright 2003, ITSMA

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About ITSMA
ITSMA specializes in helping companies market and sell services and solutions more effectively. As a membership organization, we provide research, consulting, and training to the world's leading technology, communications, and professional services providers to generate increased demand, strengthen customer relationships, and improve brand differentiation. ITSMA is based near Boston, and has offices in London and Tokyo. Learn more at www.itsma.com.