Performance Implications of Adopting a Customer-Focused Sales Campaign
Published 9/1/2008
Author: V. Kumar, Rajkumar Venkatesan and Werner Reinartz
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Executive Summary
Although organizations have recognized the value of a customer focus for several decades, fewer than 20% of marketing organizations among Global 1000 enterprises report that they have evolved enough to leverage customer-centric, value-added processes and capabilities successfully. The first step in the migration from a product-centric to a customer-centric organization is the informal coordination of customer-connecting activities, such as sales calls across product silos (i.e., implementing a customer-focused sales campaign). Although customer-focused sales campaigns are theoretically expected to increase profits and improve return on investment (ROI), firms’ adoption of customer-focused sales campaigns has been low.
The goal of this study is to provide an assessment of the consequences of implementing a customer-focused sales campaign through two field experiments conducted in the high-technology and telecommunications industries. The authors assess the performance of customer-focused sales campaigns using both relational and financial metrics. Through the field experiments, they also generate insights into the process of ROI improvement. In both the experiments, salespeople adopting the customer-focused sales campaign coordinated their sales calls with the objective of selling all the products that a customer was predicted to purchase only at the time the customer was expected to purchase. The authors compared this strategy with the current practice in the organization in which salespeople for each product category independently contact the customers who are expected to purchase in that category without any guidance on the expected timing of customer purchase.
In the high-technology industry, the average investment per customer was $5,000. For this investment, the customers exposed to a customer-focused sales campaign (the test group) provided $13,253 in profits, whereas customers exposed to a product-focused sales campaign (the control group) provided only $9,584 in profits. The test-group customers provided more than $1 million in total incremental profits compared with the control group customers. When projected to the entire customer base of approximately 10,000 customers, adoption of the customer-focused sales campaign is expected to provide incremental profits (compared with a product-focused sales campaign) of more than $36 million and more than $132 million in total profits. High-revenue customers were the source of improvements in the efficiency of marketing contacts, whereas low-revenue customers were the source of improvements in the effectiveness of the marketing contacts. A customer-focused sales campaign also improved the relationship quality between the customer and the firm.
This study shows that the promise of a customer focus, at least in customer-facing activities, such as sales calls, can be realized by (1) understanding each customer’s needs, (2) by customizing the firm’s offerings to customer needs, and (3) by coordinating sales calls across product silos to deliver a consistent and single message to the customer. Objective evidence regarding the benefits obtained from adopting a customer-focused sales campaign can serve as an aid for top management to gain support for initiatives that would develop a customer-centric organization. The field experiments can provide organizations with a template for implementing the first step in migrating to a customer-centric organization.
Biography
V. Kumar is ING Chair Professor of Marketing and executive director of the ING Center for Financial Services in the School of Business at the University of Connecticut. He has been recognized with more than 15 teaching and research excellence awards including the Paul H Root Award (two times) for the article published in Journal of Marketing that best contributes to the practice of marketing, and the Donald R. Lehmann Award (two times) for the best article published in the Journal of Marketing or Journal of Marketing Research over a two-year period. Recently, one of his articles in forecasting won the Outstanding Paper Award from the International Institute of Forecasters. He has published more than 75 articles in many scholarly journals in marketing, including the Harvard Business Review, Journal of Marketing, Journal of Marketing Research, Marketing Science, and Operations Research. He has coauthored multiple textbooks on marketing research. He has authored a book titled International Marketing Research, which is based on his marketing research experience across the globe, and his book Customer Relationship Management: A Databased Approach was recently released. His current research focuses on multichannel shopping behavior, international diffusion models, customer relationship management, customer lifetime value analysis, sales and market share forecasting, international marketing research and strategy, coupon promotions, and market orientation. He has taught in several universities and organizations worldwide. He was recently listed as one of the top-five ranked scholars in marketing worldwide. He has consulted for many global Fortune 500 firms.
Rajkumar Venkatesan is an Associate Professor of Business Administration in the Darden Graduate School of Business Administration at the University of Virginia. Raj has been on the faculty at the University of Connecticut and received his PhD from the University of Houston. Raj’s research focus is on designing marketing strategies that maximize customer profitability, understanding the pricing strategies of online retailers and developing models for forecasting sales of new products. His research has appeared in several journals including Journal of Marketing, Journal of Marketing Research, Marketing Science, and Harvard Business Review. Raj’s research has been recognized with awards, such as the Don Lehmann Award for the Best Dissertation-Based Research Paper published in Journal of Marketing Research or Journal of Marketing, the Marketing Science Institute Alden G. Clayton Award for the best marketing dissertation proposal, and the ISBM outstanding dissertation proposal award.
Werner Reinartz is Professor of Marketing and Director of the IFH Center for Retail Research at the University of Cologne, Germany, and Associate Professor of Marketing at INSEAD in France. His research interests focuses on the dynamics of the consumer-firm interaction. He has published in Journal of Marketing, Journal of Marketing Research, Journal of Consumer Research, Journal of Service Research, Multivariate Behavioral Research, Journal of Retailing, Marketing Letters, Harvard Business Review, and California Management Review. He is also a member of the editorial board of Journal of Marketing, Marketing Science, and International Journal of Research in Marketing. His research on measuring and managing customer lifetime value has received academic awards, such as the 1999 AMA Doctoral Dissertation Competition, the 2001 Don Lehmann Award for the Best Dissertation-Based Research Paper published in Journal of Marketing Research or Journal of Marketing, and Journal of Marketing’s 2003 and 2005 MSI/Paul Root Award. Together with V. Kumar, he coauthored the textbook Customer Relationship Management: A Databased Approach (2005). Professor Reinartz holds a PhD in Marketing from the University of Houston (1999).
Journal of Marketing, Volume 72, Number 5, September 2008
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