In the January 2007 issue:

• Editor's Note: New Year, New Look
• What's Hot: Account-Based Marketing for Partners
• The Interview: An Interview with Fred Reichheld
• On the Job: The EMC Customer Success Network
• EuroNotes: Meet ITSMA Europe's New Managing Director
• Research Desk:
  • Three Steps to Proving the Value of Your Solutions
  • Ask ITSMA: How Important Is Global Consistency?
• News & Notes: Moving Up

Editor's Note

New Year, New Look

By Rob Leavitt

By now, most of us are past the holiday celebrations and New Year's resolutions and back into the daily grind. But it's still early enough in the year to be focused on new launches, and it is with great pleasure that I introduce the E-ZINE's fresh new face. As I hope you’ll agree, we've made it cleaner, more colorful, and easier to scan.

We've kept our core commitment to providing useful and provocative research, analysis, and opinion on core services marketing topics such as the continuing move to solutions; the changing role of marketing; the rise of account-based marketing; new approaches to marketing and sales collaboration; and customer experience and loyalty. As you'll also see, we've expanded our content to include more news from ITSMA member companies (and we welcome your suggestions on that front). And we've given individual articles their own Web pages, so you will no longer have to scroll through reams of archived E-ZINEs to search for that one specific piece you were hoping to find.

Making the E-ZINE more readable and making past articles more easily accessible are two of the ways we’re supporting our members and friends. If there is any other way we can help you in the year ahead, don't hesitate to let me know. And certainly let me know what you think of the new design.

What's Hot

Account-Based Marketing for Partners

By Steve Hurley,  shurley@itsma.com

News flash: Account-based marketing (ABM) for partnerships and alliances could be the sleeper story of 2007 for services and solutions marketing. Just as you're getting comfortable with the idea of bringing marketing into the sales process for individual customer accounts, the notion of applying the same approach to working with strategic partners is beginning to emerge—and the potential seems enormous.

ITSMA developed the ABM methodology a few years ago to help companies get greater impact from their account planning processes. By leveraging the full powers of marketing and integrating them with the strategic sales development plans for a single account, our member companies have discovered that good things happen, including:

• More frequent, substantive, and executive-level client discussions
• More innovative thinking around the client’s issues
• More efficient use of the time spent on the account by the sales team

Not surprisingly, this usually results in more real business opportunities, a greater number of inked deals, and more members of the account team going to Barbados as part of the President’s Club.

We know the model works for single accounts, but can it be applied to alliances? Can we begin to talk about "partner-based marketing?" Although we don't yet have many data points, our analysis and experience to date suggest that the ABM model can indeed be adapted to work effectively with strategic partnerships and alliances.

The ABM approach works with alliances because the main drivers are similar enough for it to fit. In both cases the primary goals are the same:

• To strengthen marketing and sales collaboration in areas of critical business importance
• To deepen and strengthen client/partner relationships and position your company as a more strategic partner
• To generate greater revenue and profit

The main difference, of course, is that with partner-based marketing (PBM), the key external relationship is with your partner, not your end client. And the revenues and profits are generated by selling with and through your partner to end users instead of selling directly to end users.

This is not to say that there are no differences between ABM and PBM. For those who have already tested the ABM waters, there are several important distinctions to consider:

1. Target account motivation. Customers are often reticent about fully opening up to an IT provider, even if they understand the benefits of ABM. They need to be truly convinced that you have their best interests in mind as you discuss business opportunities. Partners, on the other hand, should more easily open the door. They signed up in the first place because they felt you could help them make more money. Convincing them that you want to help them make even more money should be a no-brainer.
2. Partner participation. Successful ABM initiatives usually include client participation; doing ABM with the client is far better than doing it to a client. But we usually suggest limiting the amount of time that the client is directly involved in the planning process (for instance, including one or two client executives for several hours within a two-day planning workshop). With PBM, however, the partner will likely be more fully involved in crafting the plan.
3. Business imperatives. In a typical ABM model, we look at what the client needs to do to be successful, using tools such as scenario planning. For PBM, we spend much more time on the "alliance imperatives"—specific actions that will break down the barriers to successful partnering. While business imperatives for target accounts tend to be strategic initiatives, such as mergers and acquisitions, moving into new markets, and developing new offerings, alliance imperatives are typically focused on improving the "ease of doing business" between the two companies. There might be occasions to co-develop new offerings or solutions with the partner, but one of the most important obstacles to generating more business together is simply understanding how to "play in the same sandbox."
4. Campaigns. PBM marketing campaigns might well be directed at the end user, but they are just as likely to be targeted at the partner's marketing, sales, and delivery teams. Along with focusing on the benefits of your joint offerings, such campaigns are intended to help the partner's professional staff understand how to communicate the value of the joint offerings to the end user.

Although the differences between account-based and partner-based marketing are indeed important, most of the learning and processes from your ABM program can be repurposed for PBM. Selecting the right partners, doing deep-dive research, understanding the business imperatives, and so on are all critical to PBM and follow pretty much the same script as those efforts for ABM. But the tantalizing promise of applying ABM methodologies to partners is that instead of impacting a single account, a single PBM initiative can ultimately impact a veritable gaggle of accounts.

The technology industry is awash in underperforming partnerships, yet the importance of making partnerships work continues to grow. Partner-based marketing could just be the way to help those relationships achieve their true potential.

New Thinking

Promoting Loyalty Through NPS: An Interview with Fred Reichheld

Fred Reichheld, a best-selling author and consultant whom The Economist has dubbed "the high priest of loyalty," recently sat down with ITSMA to discuss why customer loyalty is so central to business success, how a measurement tool called the Net Promoter Score (NPS) can help companies generate more loyal customers, and how marketing can help.

ITSMA: Your newest book, The Ultimate Question, has enjoyed phenomenal success. Tell us, what exactly is the ultimate question?

Reichheld: In my opinion, the one question that companies need to be asking their customers on a regular basis is: How likely would you be to recommend our company to a friend or colleague? This one question will help you figure out who your loyal enthusiasts are—those people who generate positive word of mouth—and who among your customer base is going to be out there badmouthing you to their friends, family, and colleagues.

Now, most companies have always known that customer loyalty is important, but in today's competitive market, loyalty is the most important factor for generating true, sustainable growth. This is especially true in the IT industry, which has an unfortunate history of selling products and services that represent huge investments for customers, and which those customers then have a very difficult time migrating away from. In essence, many customers get trapped by their IT providers, which stick them with products and services contracts that generate profits for the provider at the customer's expense. These unsatisfied customers frequently get even in ways that hurt a company's growth, such as driving up service costs by reporting numerous problems, demoralizing employees with complaints and demands, and complaining to colleagues and friends. So, making sure that you acquire and retain loyal customers is essential to long-term survival, and what I call the ultimate question will help you to do this.

ITSMA: What is a Net Promoter Score (NPS), and how does it help companies generate more loyal customers?

Reichheld: At its core, a company's NPS is a trustworthy metric that shows how the firm is doing in terms of customer loyalty. Traditional customer satisfaction surveys are highly unreliable for all sorts of reasons that most marketers understand well. In fact, according to our research, CEOs only mention customer satisfaction scores to financial analysts 3% of the time, because nobody puts much stock in those numbers.

The first step in generating increased loyalty is the ability to benchmark where you are. Your customers' answers to the ultimate question will segment them into three different groups: promoters, who answer 9 or 10 on a 0-10 scale; passives, who answer 7 or 8; and detractors, who answer 0-6. You can then calculate your NPS by taking the percentage of customers who are detractors and subtracting that from the percentage who are promoters.

But the NPS system goes way beyond benchmarking. The real goal is to harness the feedback you're getting from customers and use it to drive change throughout the organization. GE is a great example of a company that's doing just that: CEO Jeff Immelt has decided that GE will use the NPS system across the entire business. He reports NPS numbers to financial analysts and uses them to help determine compensation. The company knows this is a long-term (read 5- or 10-year) initiative that's being driven by marketing and the Six Sigma Change Management group, and the end goal is to act on customer feedback to continuously improve the customer experience, thereby increasing loyalty and growth.

ITSMA: What should marketing's role be in driving customer loyalty?

Reichheld: First, marketers need to start thinking more like auditors: Sure, it's hard to come up with really reliable, trustworthy numbers for measuring customer satisfaction and loyalty, but it's hard to come up with financial numbers, too, and the finance department does it every day. Figure out what the right metrics are and then track them. I truly believe that NPS is the one core customer metric that all companies should track.

Second, marketing needs to sell the idea internally that increased loyalty leads to increased growth, and ensure that the management team is totally bought into the idea. This is the only way that change will really happen. You want your line-of-business managers to start thinking not about how to improve profits in the short term but how to improve the customer experience, which will lead to greater profits over time. You want your delivery people to proactively go to customers to find out how they've helped them succeed or fail and then to make changes if necessary. Marketing's role here is highly strategic; it's all about driving change.

ITSMA: How can companies get started?

Reichheld: Once a company has decided that driving customer loyalty is a top priority, it needs to put processes in place for getting the right feedback from the right people at the right time. At Bain, for example, we ask two questions:

1. How likely would you be to recommend our company to a friend or colleague?
2. Would you be willing to talk to us about your score?

Every six months, we go to senior people—decision makers who generally don't have time to fill out lengthy satisfaction surveys—and we ask these questions. Because we respect their time and act on their feedback, we get a 60% response rate, which is pretty impressive for senior executives. But acting on the feedback to increase your scores is key. If you collect the data but never use it, nothing will ever change.

On the Job

The EMC Customer Success Network

By Meghann Wooster, info@itsma.com

For its first 25 years, EMC Corporation didn't have a central customer reference program; it didn't need one. But when the company began to diversify its portfolio through acquisitions, customers demanded proof that EMC could succeed in areas where the company hadn't played before.

In early 2003, the corporate communications team was asked to develop a central, scalable customer reference program that could help both the sales force and the marketing team. Until that point, according to Theresa McClure, director of the Customer Success Network (CSN) at EMC, "References were closely held in confidence by individuals in different organizations, limiting our ability to leverage them across the company. We also overused the references we did have and occasionally even hurt our relationships with those key customers."

The secret to success, the company knew, was to build a program that held as much value for customers as it did for EMC. "Our goal in developing the Customer Success Network was to give back to our customers as much as they gave us as references," said Mark Fredrickson, vice president of communications at EMC. "Customers have dozens of vendors vying for their time; we needed our program to be so valuable that they'd want to spend their extra time with EMC."

Building Reference Relationships for Mutual Success

One of the first things the team did was to interview executives, field personnel, marketers, and customers to gain insight into how to structure the program so that both customers and EMC would benefit. They discovered that:

• The company could save 100,000 hours of sales research per year by providing easy access to qualified references.
• Rather than earning points or discounts, customers want a more strategic relationship with EMC and networking opportunities with their peers. They also want EMC (and other providers!) to respect their time and not flood them with requests for references.

Armed with this information, EMC developed the CSN, a program that has, at its core, a mandate to advocate for the customer and ensure reciprocal value. CSN sponsors a number of programs that are mutually beneficial for both customers and EMC, including:

• Reference roundtable calls
• Networking events
• Customer recognition ceremonies

Reference Roundtable Calls

One particularly successful element of CSN is its roundtable calls. To reduce reference burnout and accelerate market acceptance of new solutions, the CSN team launched live, peer-to-peer audio networking calls during which a customer will describe his or her environment, reasons for deploying the solution, the benefits his or her company has received, and the issues they faced. Participants who have dialed into the call (prospects considering the solution being described) have the opportunity to ask the speaker questions. Because there are multiple prospects on each call, the roundtables significantly reduce the number of reference requests answered individually.

According to McClure, the roundtable calls are one of the most valuable marketing tools EMC has ever developed. The customers who serve as references on the calls—which have been attended by as many as 60 prospects—are incredibly confident in the EMC solution they have deployed. The calls not only infuse the prospects with confidence in EMC, but they also build loyalty with the presenting customer, who gets recognition from his or her peers for being an "expert" on the cutting edge, doing with technology what his or her peers are only thinking of doing.

Networking Events

Beyond respect and recognition from peers during roundtable calls, CSN members also get access to exclusive networking events at a number of industry tradeshows and conferences. According to McClure, "Whenever there's a place where our customers congregate, we want to be there, adding value." For example, at the Storage Networking World conference this past fall, CSN members were invited to EMC's special hospitality suite. There, they could speak with Mark Lewis, EVP and chief development officer at EMC, as well as executives from Avamar, a hot-off-the-presses EMC acquisition. "Getting insight into EMC's strategy and R&D agenda from such high-level executives is a huge value-add for our customers," said McClure. "It's a very enticing reason for becoming a member of the CSN."

Customer Recognition Ceremonies

To improve customer retention in the program while driving new memberships, EMC introduced the Information Nation Awards in 2006. The awards recognize the company's top ten reference customers at a major customer networking event. By taking the time and making the effort to publicly show appreciation for the efforts of its customers, EMC further strengthens key relationships and builds loyalty.

Looking Forward

The next step in the development of the CSN, said McClure, is to build an online community where members can interact with each other and with EMC. Although this idea is still in the early planning stages, EMC hopes to leverage the success of Studio D, an online community for customers interested in content management. (Studio D was originally built by Documentum, a company acquired by EMC in 2003.) In this way, EMC hopes to extend the reach of CSN beyond the 2,500 key customers already involved with the program and build stronger relationships with more of its customer base.

Results

EMC's Customer Success Network has garnered and nurtured the trust of the company's most valued customers. In 2005, its first full year of operation, CSN influenced roughly $1.5 billion in revenue, improved the productivity of the sales force, and had a significant impact on customer loyalty. As McClure put it, "When you put the customer first, success will follow."

EuroNotes

A Word With Robert Bailey, ITSMA Europe's New Managing Director

By Meghann Wooster, info@itsma.com

Robert Bailey, ITSMA Europe's new managing director, recently sat down with us to discuss his experience in the services sector, what he sees as today's major EU trends, and where he wants to take ITSMA Europe in the year ahead.

ITSMA: First off, a warm welcome to ITSMA.

Bailey: Thanks very much; I'm happy to be here!

ITSMA: Our members are curious to learn more about your background. What did you do prior to joining ITSMA?

Bailey: For the last six years, I've been at SITA, a global telecommunications and IT services company serving the air transport industry. Initially I headed up Marketing and Business Development for the EMEA region, but I also gained valuable experience in a variety of other business and strategy roles. Market conditions after September 11, 2001, were pretty harsh, and I was tasked with repositioning the company, our portfolio, and our service offerings as we adapted to the new market conditions. One of the key successes was the transformation of SITA from a technology- and product-oriented organisation to a services integrator and professional services business. This involved establishing multibusiness unit solutions portfolios, building global marketing and sales capabilities, and communicating the changes to company stakeholders.

Before SITA, I worked in a variety of roles for Galileo International, Swissair Group, and Traviswiss. At Galileo, one of the big issues was aligning sales and marketing activities throughout Europe and moving the sales force from product selling to more of a consultative, solutions-oriented approach, so my experience there is quite relevant to a number of ITSMA members. I was also heavily involved in identifying new market opportunities and mapping the portfolio to those opportunities, targeting our product and service offerings to different customer segments. At Traviswiss, I was the managing director right when the company spun out of Swissair, so I was there helping to create the brand and get the word out to the market through a full-scale image campaign.

ITSMA: As someone who has a lot of experience in the European market, tell us what you see as the major trends that will affect European businesses in 2007.

Bailey: There are a number of factors that will shape the European markets during 2007. First, I think that the ongoing enlargement of the European Union, with the addition of two new members in January, opens up incredible opportunities for growth, as companies not only have access to new markets but also to new sources of skilled labour on the supply side of the equation. Marketing can help companies take advantage by gaining a deeper understanding of the different markets and targeting various segments with relevant offers.

Second, linked in part with the EU enlargement is the ever-increasing fragmentation of markets and channels facilitated by technology and evolving consumer behaviour. This will necessitate that marketing focuses on ensuring that cost effectiveness and value creation are maximised.

Thirdly, and this isn't a new development for 2007, is that many of the companies in Europe are divisions of U.S. or global corporations that need to adapt their service offerings to the changing EU market. Obviously, marketing has a huge role here in building understanding of the local markets, customising portfolios where appropriate, and communicating regional variations to corporate headquarters.

Finally, account-based marketing (ABM) is a hot marketing topic that continues to gain speed in the European market. Companies are really seeing the benefits of investing a great deal of time and energy in better understanding key clients and making sales and marketing work together to ensure maximum value delivery.

ITSMA: Robert, what are your goals for ITSMA Europe in 2007?

Bailey: I intend to strengthen our core membership experience to be certain that we continue to help our members gain new skills through our research, advisory capabilities, and peer networking events. I also want to develop the thought leadership engine in Europe by creating more EU-centric content. There are a number of regional differences in Europe that make it more complex than the U.S. marketplace, and I think our members need more insight that's developed specifically for them. Obviously I want to grow the business, and I think we can do that by building more of a presence in continental Europe as well as enhancing the range of services we offer to all our existing members.

I think that ITSMA's mission of raising the bar for services and solutions marketing is an important one, and I'm looking forward to strengthening the ITSMA community in Europe!

Research Desk

Three Steps to Proving the Value of Your Solutions

By Julie Schwartz, jschwartz@itsma.com

There is no question that the decision process for technology-based solutions is a complicated one. ITSMA research has shown that there are more people involved in the solutions purchase, that business executives are more likely to drive the solutions purchase, and that the sales cycle for solutions is longer than it is for discrete products and services. Research has also shown how important it is to customers that the value from their solutions be measurable. In fact, almost all customers are required to make a business case for and validate the value of a solution before they receive approval for buying it.

But despite the obvious importance of proving measurable value, it’s also clear that customers are highly skeptical of providers’ claims, and they don’t necessarily want to collaborate with solutions providers to measure or document value delivered.

But don't despair! There are steps that solutions providers can take to better show the value of their solutions to skeptical customer and win more business:

1. Segment customers based on why and how they measure value. Customers are at different levels of maturity when it comes to measuring value. By segmenting customers based on why and how they measure value, providers will be better prepared to demonstrate the value of their solutions in a way that is relevant to the customer.
2. Sell the value of working with the company, not just the value of the solution. Customers are skeptical of provider claims. They would rather build their own business case for a solution than take the ROI number a provider gives them, especially since vendors don't usually take perceived risk into account when coming up with their ROI estimates. What customers do want to know is why they should select one provider over a competitor. To make the case, give them access to tools, models, benchmarks, best practices, and case-study examples that can help them build the ROI model for the solution, implemented in their environment.
3. Shift the discussion from validating the business case to ongoing business improvement. Customers have little incentive to gather data that will only help a provider make its next sale. But providers that build true partnerships in which they take into consideration customers’ business goals for their solutions will have much more success obtaining post-implementation results from them. To get the proof points they need, providers must emphasize the importance of measurement as a way to spur ongoing business improvement—and then make it easy for their customers to pull the metrics/KPIs that are important to them out of their solutions.

Packed with insight and direct quotes from customers, ITSMA's latest Update elaborates on the steps outlined in this article: http://www.itsma.com/research/abstracts/U0053.htm

Ask ITSMA: How Important Is Global Consistency?

By Julie Schwartz, jschwartz@itsma.com

Each month, ITSMA receives a number of queries through Ask ITSMA, a resource designed to give members a quick and easy way to get insight on important services and solutions marketing questions they face. In this column, we will publish some of our favorite questions along with excerpts from our replies.

Question: How important is global consistency for an IT services provider?

Answer: There are two ways to look at this question: from the IT services provider's point of view and from the client's point of view.

On the provider side, global consistency is imperative in dealing with global projects and programs. The benefits come from repeatability and economies of scale with investments in services technology, training methodologies, tools, and so forth. Simply having consistent offerings and descriptions globally reduces the complexity of managing the business, communicating with the sales force, and selling to prospects. The creation of service methodologies is also an important part of ensuring global consistency for services, because such methodologies provide a uniform approach to service design and service delivery.

On the client side, our research has shown that questions about global capabilities and consistency often fall on the low end of importance relative to other issues because only a small percentage of buyers purchase true "global" solutions. However, the clients that are seeking global solutions need assurance that what gets delivered in Boston is the same as what gets delivered in Australia or Germany. It is also important, though, to ensure that local needs—driven, for example, by government regulations or unique market dynamics—are addressed, so there should be enough flexibility in the portfolio management process to allow for these differences. Thus, there is tension between the quest for consistency and the need to tailor offerings to meet individual market needs. The tricky part is finding where to place the fulcrum to get the balance that will work best with your company's strategy. ITSMA recommends that services providers invest in consistency and treat local needs as "exceptions."

Please note that anyone from an ITSMA member company may use Ask ITSMA and will receive an answer in three business days or less.

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

News & Notes

Moving Up

Congratulations to Alcatel-Lucent's Stef van Aarle, a longtime member of both ITSMA and ITSMA's Advisory Board, for his recent promotion to senior vice president of services, Europe and North Region, Alcatel-Lucent. Stef is now responsible for the $1B+ services business of Alcatel-Lucent in the Europe and North region, including delivery, business development, and managing the P&L across the company's five main lines of business.

Congratulations as well to ITSMA's own Katie Gustin, who recently joined ITSMA's research team as a research associate. Prior to joining the research team, Katie served as ITSMA's marketing coordinator. She will be working on custom research projects and managing the Services Marketing Competency Assessment process.

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