3.2 Customer Engagement

Case Study

OE21 Guideline: 

3.2 Customer Engagement

Note: This Case Study refers to specific OE21 surveys and tools (spreadsheets or docs). Please try the blue link(s) below to learn more about these surveys and tools:

 

 

3.2 Customer Engagement

 

Assumption: The (Elafino Sports Center) organization has implemented the OE21 Guideline 3.2 Customer Engagement process. The following dialogue presents how the results and outcomes were achieved.

Note: The following dialogue is simulated to help managers understand how to introduce an organization to customer engagement.

 

The Organization Excellence Facilitator (FAC) has a question for Ann Happy (VP Sales and Marketing).

 

"Ann, could you give me a quick idea of your current sales process - you know - how you capture new members?"

 

Ann thinks for a minute and then begins." Well, we normally send out direct mail flyers to about 10,000 people each month," she says. "And when we have visitors, we give them a flyer too," Ann adds.

 

The FAC asks if anyone knows how many people that could be members live in the region served by the Elafino Sports Center.

 

Ann replies. "Right now, we have about 1875 members, and we estimate that about 3.8 million people live in our service region." "And since our full capacity is about 10,000 customers, we have more than enough prospective customers in our region -IF we can just capture them."

 

The FAC states that if we have 1875 members, and 10,000 would put us at full capacity, then we need to reach out to enough of the regional 3.8 million people to reach full or near-full capacity.

 

The CEO (J.T.) seems concerned. "You know the customer acquisition costs are sky-high." We cannot afford to send out flyers or other direct mail pieces to 3.8 million people, right?"

 

Ann Happy replies. "Let's see how many flyers we need to send out to capture customers."

 

"Since we just learned how to use the Sample Size Calculator, we can input a population of 3.8 million and see how many we need to send out to determine if the flyer works."

 

MANAGERS EXERCISE:

 

Go to the Sample Size Calculator and input 3% Confidence Interval, and a Population of 3,800,000, then see the calculator sample size.

 

(Case Study Continued)

 

J.T. (CEO) seems happy. "So, we can test our marketing pieces on less than 1500 people and see how many become customers, right?" Ann Happy replies. "Less than 1500."       

 

The FAC says: "Don't forget your website search engine optimization (SEO) and social media."  

"These marketing tools are proving to be a great addition to direct mail pieces."

 

J.T. (CEO) frowns again. "So, how can we estimate the costs of all these marketing tools and processes?"

 

The FAC refers to a formula provided in Oe21 3.2a Opportunity Marketing Guide and goes to the meeting room whiteboard.

 

"OK, let's see if we can estimate the cost of customer acquisition."

 

  • M = marketing costs of one campaign (such as a direct mail out of 1000 sales flyers)

 

  • T = marketing costs of using sales software tools

 

  • C = marketing costs of sales or marketing consultants (if needed)

 

  • L = labor costs for internal sales persons

 

  • CA = number of customers acquired

 

Formula: CAC = (M + T + C + L) / CA

 

  • M = marketing costs of 1000 mailed-out flyers: $3000

  • T = sales software tools license: $50

  • C = costs of sales consultant: $1200

  • L = labor costs for sales persons $1500

  • CA = number of customer acquired: 10

 

Formula: CAC = (M + T + C + L) / CA

 

CAC = ($3000 + $50 + $1200 + $1500) = $5750 / 10

 

Customer Acquisition Cost (CAC) = $575 per customer

 

The FAC concludes. "So, in this case, the customer acquisition cost is $575." "And to get ten new customers, we would estimate the cost would be $5750.

 

J.T. (CEO) looks at Ben Magic (the CFO). "So now you can go calculate the return on marketing investments for these initiatives, right?" The CFO nods yes, and replies.

 

"I believe that each full-time member brings in about $750 each year, so ten new customers would yield about $7,500."

 

 J.T. (CEO) has a big smile." It looks like the return on investment is very reasonable. We can add more members, and then we can place Rink 3 in operation. Next, we can lease our restaurant." 

 

Ann Happy continues this discussion.

 

"First, we need to study and apply the OE Opportunity Marketing process, and use the tools to achieve our objective and boost our market share."

 

Some of the Elafino managers seem to be confused about exactly who are the key stakeholders. Ann Happy goes to the whiteboard and spells it out for them.

 

The critical list for the Elafino Sports Center includes the following:

 

  • Elafino Sports Center Investors (5 people)

  • City Manager

  • Police Chief

  • Chamber of Commerce President

  • Head of a Community College that teaches skating and hockey sports

  • Power Company key executives

 

Ben Magic (Elafino CFO) was asked by the CEO to build a Product/Service Value Contribution table from the Elafino Financial Profit and Loss reports.

 

Ben pulled the numbers together used the OE21 Product/Service Value Contribution spreadsheet as a guide for the table. Ben sorted the Gross Profit from high to low which produced Figure 3.2-1.

 

Figure 3.2-1 OE21 Product/Service Value Contribution

Ben Magic then shared the table with the other Focus teams so that everybody understands that Ice Skating was the top profit contributor with a gross profit of $845,440 annually, and Fitness Center was the bottom contributor, showing a loss of $21,863. "Opening the Books" was a good idea.

At that point, the CFT used the OE21 CFT 3.1 Prioritization of Customers and Stakeholders to create a top-down list of highest to lowest priority customers and prospective customers. Ice Skating and Adult Hockey services remained at the top of the list. 

 

Next, the Elafino Customer Focus Team (CFT) updated the Customer Excellence Action Plan, with tasks, responsibilities and other information necessary to implement product, service or program performance improvements.

 

The last CFT action was to input or update the measures for Guideline 3.2 into the Performance Measurement System (PMS) Figure 3.2-3 (below) is an example with the target, future projection and two benchmarks for a or comparative organizations

 

Figure 3.2-3 shows the measure of adult hockey performance output (65%) versus the target of 90%. The "Alpha" benchmark measure is considered the nation-wide best practice measure of 95%. The "Bravo" benchmark for Elafino's main competitor has a score of 70%, and Elafino is rapidly moving toward that value and is projected to be even better in the next couple of months.

Figure 3.2-3 Example Trend Chart for Standard 3.2 Results

The Elafino LFT (IT Manager) published Guideline 3.2 Customer Engagement output results on the Elafino INTRANET, and notified all focus teams and managers of these updates.