Strategic Planning Telco


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Strategic Planning Telco

  1. 1. ‘Strategic Planning’<br />The Long Tail for Business Development in Telecom<br />We have roughly 1300 APEC customers. That’s quite a number you may agree with me… Now, as interesting as it may be, Vilfredo Pareto (the Italian economist) would tell us that for any chosen time window, all those existing accounts generate only 80% of our revenues, while the remaining 20% comes from the 1-2 new accounts added every year (the 80/20 principle). Profitable new business, huh? Yeah, this makes truly sense to me. Why so? Well, if “a well prepared” account team goes after a specific new player (let’s say a Telecom Greenfielder) in the marketplace, they will possibly sell, and sell well since…<br />The customer is in need of all our treats (they have all possible problems just waiting to be solved)<br />The customer is in need of a business partner in order to mitigate their business risk<br />We face nearly no competition since our competitors possibly won’t have an organized channel to sell to this customer<br />And why did I say “a well prepared” account team? That’s because this team should be extremely well armed with customer understanding, as well as experienced enough to be able to pull the right pieces (out of our portfolio) together in order to send the customer a proposal. As you might guess…This sales strategy costs and it isn’t small money. Selling to new customers is said to cost five-ten times more than selling to existing customers.<br />Ok, so that was one approach to business development: Search for sales outside the scope of today’s businesses, while still pushing out the same pieces of products we have been selling to all other customers (the Market Development quadrant of an Ansoff matrix )<br />The second approach to business development (I am painting the world with a very wide and rough brush here) has to do with those 899 customers. Pareto’s teachings tell us that, as a matter of fact, 80% of our current accounts’ revenues is generated by only 20% of our customers (Only 180 customers out of our 899 customers are actual “spenders”). The rest of the customer base is either not buying at all; buying very little (accounting in total for 20% of our current accounts’ revenues) or buying solely from our competitors. Now, where does business development fit in? Well, since those 180 customers have chosen to spend with us, why not try as hard as we can to sell them things they didn’t even thought they needed.<br />I am sure you see where I am heading…right, customer segmentation! A common argument with regard to customer segmentation is that customers that aren’t “good” today (not part of the 180-customers “spender group”) may turn out to be “good” customers tomorrow. Agreed, but that’s why we create strategies (product, marketing and sales ones) for, isn’t it? And strategies aren’t written in stone, they expire and should of course be re-evaluated (after a pre-defined timeframe of e.g. 3 years).<br />Some sanity check notes:<br />Important: Those 180 customers are possibly good ones but that shouldn’t stop us from asking ourselves some further questions, e.g., what are these clients’ potential for growth; their debtor days; their own commercial risk, etc.<br />In addition, there are many ways to interpret the Pareto principle. We could say for instance that possibly 80% of our profitability is generated by just 20% of our products. Should we then think about rationalizing the portfolio as well? Raised hands by now would say: “No, that’s how we differentiate ourselves. We solve all possible customer issues”. Point taken, but I believe it is never wrong to ask ourselves these tough questions.<br />Now, does it matter if we hold to the 80/20 relation (Pareto Principle), a 70/20 or even a 50/20? I don’t think so, the long tail behavior still holds true. Meaning that in order to boost profitability we need to continue to focus our resources and guide them with thought-through strategies.<br />I am sure you will have an opinion to share here. So please, be my guest.<br />