Strategy plan
YOUR TASK
Starting from the objective stated to you, use the problem definition framework to determine if the question needs to be re-defined. What is the right question that EthniCal leadership should be asking?
Leadership’s question: how to optimize customer retention (through loyalty program, even scaling back on customer acquisition efforts)
Question needs to be redefined
How can we increase our revenue
What’s the objective that we achieve:
Ultimate goal:
How EthniCal could increase its revenue.
More specifically:
How to increase our competitiveness to create our sustainable advantage so as to constantly increase our revenue?
Reasons why the question needs to be re-defined:
Though retention strategy may help Sam to achieve the goal and increase revenue, it is limited. Even we win back the customers, with the price competition, our total revenue may still decrease. There are many different ways to increase the revenue, instead of choosing to directly compete against the BC2K.
Failure to grasp the essence of problem
The key to this problem is to improving the performance of EthniCal company. There is no point in fighting against our competitor if we are damaging ourselves in a considerable extent. Therefore, all of our strategies should serve one goal -- improving our performance.
Solutions:
Increase product quality, develop different group of customers
Seek low cost suppliers to reduce the cost of goods to increase profit margin
Instead of maintaining the current customer base or winning back the lost customers, focus on new customer base like high-end handicrafts
This exercise should be approached in two steps:
Step1: construct an issue tree which breaks down the issue (erosion of Ethnical revenues) into all possible drivers. If defection of existing customers is one explanation, what are some others?
Step 2: for each driver, identify the data you will need to confirm or rule out that factor as a possible cause. The company’s CEO and Head of Marketing currently receive a set of KPI’s to track sales trends and portal activity, which are shared with you. Is this sufficient to answer the questions, or do you need additional data?
YOUR TASK
• Develop an issue tree to show the possible causes of the sales decline
• Leverage the information in the KPI report as best you can to diagnose the issue
Possible causes of the sales decline:
Losing existing customers
Can’t attract new customers
Information in the report:
EthniCal Cumulative Unique Customers: the increase of Cumulative Unique Customers is decreasing year by year, it means that the ability to attract new customers is decreasing
Loyalty Program Offer Redemptions:
Analyst told to andrew that Actually we are doing excellent job, our redemption rate is 97% percent. There is only tiny space we can improve. So we should focus on customer acquisition instead of customer retention
Andrew thinks we still have space to improve the L program. Because the first-time loyalty program registrations have sharply declined in 2016 and He has many good ideas to improve customs retention.
Analysis
Compare to the loyalty program, decline in new consumer has big influence on the decrease of our company.
Analysis: Besides, the decline of the growth of loyal customers is not because of the loyalty program is bad but because we are losing new customers
35% decline in new consumer acquisition, which caused the actual decrease in first time registration for the loyalty program. So we have to acquire more customers first, once we achieve that, we still want him to keep this good record of loyalty program, to convert those new customers to loyal customers.
Then andrew asked how they can assure that the customer acquisition can do well, because he can assure that he can do better in the customer retention
Then the analyst said that they will do a regional test first to test their strategies to see if attracting new customers can turn over the revenue, just give them a chance to test it.
Andrew agree the analyst to set some Pilot to test our strategy to increase our revenue and told analyst to talk to sherin and sam.
3/17
YOUR TASK
Develop a stakeholder engagement plan for the people listed above, to make them aware of your findings and recommendations. Your plan should address the following:
· Understanding each stakeholder. Where are they coming from, what motivates them?
· How are they likely to respond to your findings and recommendations? What opportunities will they see, or what obstacles might they create?
· What are the pros and cons of your being “embedded” within the Customer Retention function?
· What is your priority of engaging stakeholders based on the criteria discussed in class? Is there an order in which you should share your results with them? Are these all 1:1 discussions, larger meetings or some combination of 1:1 and group conversations?
The output from this exercise should be a plan describing the sequence of meetings, stakeholders in each, your objectives for each meeting and the strategy you will take in each discussion.
Prioritize importance of stakeholders at a given point in time based on
• Input – expertise and feedback is needed
• Influence– authority to permanently change or stop the project
• Proximity – degree of involvement of the stakeholder in the project
• Urgency – importance of the work or its outcomes to the stakeholder and their preparedness to act to achieve these outcomes
We ranked the stakeholders according to their degree of resistance, we determined that we should persuade Customer Acquisition Lead (Brian) first, because our recommendations of attracting new customers matches his needs for more budgets and resources for customer acquisition, so he and me are natural alliance. However, since Brian just joined Ethnical recently, he doesn’t have much authority in this organization.
Then Brian and me will move to Sherin as she is experienced in using data and analytics, she is more willing to understand my analysis and recommendations if I give her solid evidence.
After we convinced Sherin, Brain, Sherin and me will come to Sam. All sam care is to increase revenue, make the company successful. And Sam respects and trusts Sherin greatly. With Sherin’s support, we believe that we can reduce Sam’s resistance and persuade him that the declining new customers is the key issue, put our effort in customer acquisition program is the necessary way to save our business.
Finally, we will come to Andrew. He might be the toughest guy so I need to find as much as alliance first. Tell him that his team already did a good job, what we are doing is not challenge his position and deny his performance. We still need his contribution to maintain our existence customers. However, the margin benefits loyalty program can bring is low, therefore, we will not give more budget to him, and provide more resource, start to put more effort in customer acquisition.
Pros: As a part of retention team, I am able to get thorough understanding about the retention strategy and overall situation, which has helped us to persuade Andrew that retention team already did their best. As long as the team keep the performance, we will keep the existence customers.
Cons: we can not get our leaders’ support. Our whole team is in favor of retention strategy, giving us little internal support.
2. Brian: Reports to the Head of Marketing, Sherin. He is concerned that the resourcing decisions on acquisition vs. retention are always made on the basis of opinions and not facts. He need more support on new customer acquisition.
Sherin: Focus on analysis. Sherin is very experience in analytics. By showing her our detailed analysis, we are persuade her easily.
Sam: Focus on result. We can visualize the benefit of our analysis to persuade him that we can indeed increase the revenue of the firm, thus helping Sam to raise more funds for expansion plan.
· Plan your communication to each group as a simple and engaging narrative of your findings and recommendations, using the Pyramid Principle if it is helpful
· What is the best way to share your actual results? Are there creative ways to visualize or tell the story instead of using standard charts?
· Be clear about your recommendations and the roles/responsibilities of the stakeholders you are speaking with
Situation: with new competitor getting into the market, we are losing revenue by 37% from last year.
Complication: our strategy now is focus on customer retention. However, retention is not the best way to turn over the current situation, because our offer redemption rate is 97% last year, besides, there’s only small difference between the growth of first-time loyalty program registration and the growth of new customers in 2016, which means that most of the new customers joined the loyalty program, that is pretty good. In the meantime, our new customer growth rate is decreased by 35% from last year.
Question: what is best way to increase our revenue? Retention or acquisition?
Answer: as marginal benefit of loyalty program is small, we should now focus on customer acquisition.
In terms of visualization, Except for the standard chart that is hard to get the main point, we will also use conceptual line without numbers for revenue, because we only need to show the decreasing trend of revenue. For the decrease of new customer growth rate which is 35%, we will put this number very hugely and colored it red on the slides to catch the stakeholders’ attention and show the seriousness to lose so many new customers and it’s more illustrative.
· Talent Acquisition and Retention: this function will sit within Human Resources and will be responsible for the design and implementation of strategies for employee hiring and retention as EthniCal expands it’s staff.
Need to hire right talents that fit with our organizational value.
We think that the talent acquistion are the most important thing we should do first.
· Revenue Management and Demand Forecasting: this function will sit within Finance and will work closely with Marketing on strategies for revenue optimization through pricing and demand optimization.
Decide the price which can bring the largest profits based on our supply and demand
· Shipping and Logistics: this function will sit within Supply Chain and is responsible to optimize the fulfilment and delivery of merchandise to EthniCal’s customers. It will also implement more rigorous methods for inventory management across EthniCal’s nationally-distributed warehouses.
Need to find
· Partnerships: this function will sit within Legal and will be responsible for due diligence on suppliers/partners in other countries to ensure full compliance of their local practices with US laws and regulations. Their work will involve extensive reviews of financial reports, filings and public domain content about the suppliers/partners.
Evaluate different suppliers/partners based on
· Data Management: this function will sit within IT and will revamp EthniCal’s infrastructure to ensure fast, efficient data feeds to support new and existing functions so that access to information is no longer a barrier.
Cleaning, processing the data to assist future analysis.
Build metrics and KPIs to enhance understanding of the overall situation.
First, Talent Acquisition and Retention, because Data management as a fudemantal department that support our analysis,
Part I (Day 3 Morning)
· For each of the new functions, list out the decisions that are necessary to successfully carry out their responsibilities
· Identify potential opportunities for analytics to guide decisions in each area
· Prioritizing according to business relevance and impact to identify a recommended set of areas that the new analytics function will support in addition to Marketing
[Note: the Data Management function is a partner whose role is to configure information for reporting and analysis. They will set up the data streams and data integration needed for Analytics to effectively support the other functions.]
Two main reasons:
HR serves as the foundation of the daily operation of our firm. Without a normally-operating HR department, we can hardly ensure the operational efficiency of all the other departments.
2. Since we are a very young firm, we are not equipped with sufficient number of qualified employees. Especially, right now in our IT team, we only have people who are skilled in website optimization, we still people expert in other fields
The reason why we think this function is our first priority is that without talents, we will be constrained. The firm currently does not have any analyst who can help to conduct analysis, let alone to say a whole analytics team. We need to hire more talents first to ensure we can progress into next step.
Talent Acquisition and Retention
employee hiring
Quantify the specific attributes that the position demands and embed them into the models. Decide whether or not to hire the candidate based on the degree of match generated by the model.
employee retention
Quantify the performance of employees by the key indicators of their job. For example, for sales team, their main performance indicators include new customers acquired, monthly sales and number of sales attempts. Our approach here is building a model consisting of these factors to generate a numeric figure showing how well the specific employee is doing.
presentation
• Develop a 15--minute presentation with 6 slides to summarize
• Current state
• Vision
• Evolution of people/culture， “ processes，“ technology
• Overall roadmap
• Share presentation responsibilities across team
Anallytics will support all functions as mentioned earlier. From talents acquisition to hire right people that fit with organizational value, to determine the right price to optimize our revenue and profits, and as well as optimize our supply chain to increase our margin. Analytics will help us in many aspects. At full maturity, we will at prescriptive level of analytics. However, that does not mean we do not need descriptive and predictive analytics. All of these three levels are interconnected. we want to move into prescriptive stage, we have to excel in descriptive and predictive first to ensure our solution is not biased. We have to enhance our understanding first by using descriptive analytics, then to make our prediction using predictive analytics. And finally using prescriptive analytics to formulate the solution.
At the maturity stage, though we can rely on analytics for automation and product development for end user, we will still combine our experience and knowledge when making decisions. Sometimes analytics even though can offer us the optimal result, we have to make sure such solution is compatible with our organizational value to stay close with our consumers. So instead of completely relying on analytics, we will use a hybrid system that combines our personal experience, organizational value and analytics to make the best decision and continuously improve our business performance.
So lastly, competitive advantage. By using analytics, first of all, we will increase our efficiency of decision making. A mature level analytics will significantly reduce our workload when balancing every side of ideas, hence help to choose the best answer quickly. Also, reduce the risk of making poor judgement. Math never lies, but intuition will. We will use analytics to avoid risky investment, and ensure our performance stays at high level.
