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Telecommunication marketing management

Telecommunication marketing management

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  • 1. Marketing Understand Act Marketing Management for Telecom Nibras Hussein Mohammed ‒ Marketing PhD
  • 2. 2 Marketing - Sales Markets Differentiation according to 3 sales markets and the participating partners Marketing B - to - B Business-to-Business- Marketing (company customer) Marketing of one company to another company (i.e. production machines) C - to - C Customer-to- Customer-Marketing Marketing of a private household to another private household (i.e. private sales on ebay) B - to - C Business-to-Customer- Marketing (private customer business) Marketing of a company to a private house old (consumption goods)
  • 3. 3 Decision-making units in B2B markets •  User –  These are the people who will use the end product. –  For instance, the office staff who will use the photocopier. •  Influencer –  These are the people whose opinion is sought in the purchase of the new product. –  For instance, the office supervisor may have an opinion on what the photocopier should be able to do. •  Decider –  This is the person who makes the decision which photocopier to buy. –  This person is likely to be a senior manager. •  Buyer –  This is the person who looks for the most suitable products and handles meetings with suppliers. •  Gatekeeper –  This may be the receptionist of the secretary to the decider or influencer. –  Gatekeepers are powerful because they are often the people who answer the phone or who open the mail on behalf of senior managers, and they can decide which suppliers reach the decision maker.
  • 4. 4 What influences B2B customers •  B2B customers need to make the best decision on behalf of the organisation. •  Unlike B2C customers, who may decide to buy a bar of chocolate on impulse as they go round the supermarket because it’s the end of the working day, because they are feeling particularly hungry, and because they are tired-out from work, B2B customers are likely to take a long time over the decision and do their best to weigh up all the criteria. •  So they are likely to consider: –  Price –  The performance and quality of the product or service –  The reliability of the supplier –  The level of post-purchase customer service
  • 5. 5 What Is Marketing? Stresses Customer Satisfaction A Philosophy An Attitude A Perspective A Management Orientation A Set of Activities… Products Distribution Promotion Pricing Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Employee satisfaction Greater efforts Higher quality Customer satisfaction Growth and profits Shareholders satisfaction More investment
  • 6. 6 Marketing concepts 1.  Focusing on customer wants and needs to distinguish products from competitors’ offerings 2.  Integrating all the organization’s activities to satisfy these wants 3.  Achieving the organization’s long-term goals by satisfying customer wants and needs legally and responsibly Achieving a Marketing Orientation Obtain information about customers , competitors and markets Examine the information from a total business prospective Determine how to deliver superior customer value Implement actions to provide value to customers Customer Value The relationship between benefits and the sacrifice necessary to obtain those benefits.
  • 7. 7 Marketing Role in The Company (a) Marketing as an equal function HR and Operatio nal FinanceNetwork Marketing (b) Marketing as a more important function Marketing Network Finance HR (d) The customer as the controlling function Custome r (e) The customer as the controlling function and marketing as the integrative function Customer (c) Marketing as the major function Marketing
  • 8. 8 Inactive or ex-customers PartnersAdvocatesClients Repeat customers First-time customers Suspects Prospects Disqualified prospects Customer lifetime development and stage
  • 9. 9 Determinante of Customer Added Value Product value Services value Personne l value Image value Time cost Psychic cost Energy cost Monetary price Total customer value Total customer cost Customer delivered value
  • 10. 10 Profitable Customer Relationships Product Place Price Promotion Competitors Marketing Intermediaries PublicsSuppliers Demographic- Economic Environment Technological- Natural Environment Political- Legal Environment Social- Cultural Environment Segmentation Target Marketing Positioning Leader, challengers, followers, nichers The marketing process
  • 11. Analysys Mason’s structured approach to developing an entry strategy begins with a comprehensive analysis of the market, based on market data or tailored research   Our approach to developing a market-entry strategy follows a proven and structured process, based on extensive industry experience and in-depth understanding of all aspects that feed into a commercial launch   A comprehensive analysis, using market data and tailored market research, allows us to assess all areas affecting the operator’s strategic direction: –  market dynamics: detailed consumer and business market segmentation and analysis of market drivers will be undertaken to identify the most valuable target segments and underlying reasons for market growth. Specific target areas are evaluated to provide key inputs: retail structures, financial transactions systems and Internet usage provide input to sales and distribution planning –  competitive landscape: extensive competitive profiling in areas such as positioning, brand, target segments, value proposition, market offer, pricing, customer care, sales & distribution, coverage, network & support systems enable assessment of competitors’ strengths and weaknesses –  macro-economic outlook: analysis of relevant macroeconomic data determine market and segment growth –  legislation and regulatory framework: description of limitations or possibilities within the current regulatory environment that affect market and segment growth –  internal assets/technology: analysis of all internal assets including technology, brand, partnerships will be done to clarify which sustainable competitive advantages the company holds   An internal SWOT highlight areas of valid advantages and disadvantages, providing input to market entry positioning and value proposition   Identification of strategic risk areas at an early stage enables preparation of mitigating actions prior to market entry   Conclusions from the market analysis together with internal SWOT and identified strategic risk areas form the basis for describing the market opportunity Market dynamics Competitive landscape Macro- economic outlook Regulatory environmen t Internal assets / Technology Internal SWOT Identified strategic risk areas Summary and conclusions Market opportunity description Market entry strategy Strategic directions Pricing Brand and communication Sales and distribution Products and services Customer service Launch phasing Market analysis Tactical launch plan Contingency plan Vision and Mission Objectives Overall Strategy Positioning Value proposition Brand Target segments Internal and external factors Products & services Pricing Brand and communication Sales & distribution channels Customer service
  • 12. Analysys Mason’s overall market entry strategy statement and market position clearly demonstrates which main directions are necessary to reach market objectives   A description of the company’s vision and mission statements as well as financial objectives form the starting point for the market entry strategy as they set the framework in which a new entrant will function   Short-term objectives, sales targets, market share and brand awareness, will be set against the market opportunity and supplied as input to the business planning team   Analysys Mason will develop an overall market entry strategy statement, clearly demonstrating which main directions are necessary to reach stated objectives   The positioning statement visibly describes the company’s strategy in relation to competition and the value proposition captures the company’s differentiating advantages and their benefits to potential customers   The brand strategy explains which values are important to communicate in order to enhance the company’s relationship with its customers   Targeted customer segments that need be addressed in order to deliver desired objectives will be specified and prioritised   Strategic directions in all functional areas; products & services, pricing, brand & communication, sales & distribution and customer service further detail the overall entry strategy. Finally, the launch phasing section explores the various viable market entry options, their pro’s, con’s and pre-conditions Market dynamics Competitive landscape Macro- economic outlook Regulatory environmen t Internal assets / Technology Internal SWOT Identified strategic risk areas Summary and conclusions Market opportunity description Market analysis Market position Business Company A Company B Company C Price Consumer Market position Business Company A Company B Company C Price Consumer QualityQuality The imagePrice NW/QoS The image Service portfolio Customer service Positioning values The imageBroad Leader The imagePremium Leader The imageNarrow Basic The imageLeader Adequate The imageMedium Basic The imageModerate Adequate Company B Company C Company A Price NW/QoS Service portfolio Customer service Positioning values Broad LeaderPremium Leader Narrow BasicLeader Adequate Medium BasicModerate Adequate Company B Company C Company A Market entry strategy Strategic directions Pricing Brand and communication Sales and distribution Products and services Customer service Launch phasing Tactical launch plan Contingency plan Vision and Mission Objectives Overall Strategy Positioning Value proposition Brand Target segments Internal and external factors Products & services Pricing Brand and communication Sales & distribution channels Customer service
  • 13. Detailed tactical launch plans enable efficient and controlled implementation, leading to rapid market introduction   Strategic directions are further detailed into a tactical launch plan, covering all functional areas. This provides the launch team and vendors with necessary specifications for implementation and ensures that all launch activities support the overall market entry strategy   A product & service roadmap will be developed by matching technical capabilities and benefits with customer needs. The roadmap includes detailed set of individual services or product packages at and post-launch   Pricing launch packages and separate services includes development of complex price modelling and deployment of conjoint research to assist in the choice of, from customer perspective, the most valuable pricing option   Brand and communication plan for market entry includes development of brand wheel (attributes, benefits, values) and full launch campaign planning   The development of a sales and distribution channel plan involves creation of a tailor made sales and commission model, detailing of the company’s sales and distribution channel structure and analysis and recommendation on commission structure and levels   The customer service plan includes high level customer service processes and customer centre dimensioning   Clear contingency planning enables the company to pre-empt the occurrence of situations that affect the planned activities and prepare plans to remedy those, resulting in shortened reaction time. Both internal and external factors will be analysed –  Internal – e.g. technical and organisational issues –  External – e.g. competitive market activities and regulatory actions Market dynamics Competitive landscape Macro- economic outlook Regulatory environmen t Internal assets / Technology Internal SWOT Identified strategic risk areas Summary and conclusions Market opportunity description Market analysis Market entry strategy Strategic directions Pricing Brand and communication Sales and distribution Products and services Customer service Launch phasing Tactical launch plan Contingency plan Vision and Mission Objectives Overall Strategy Positioning Value proposition Brand Target segments Internal and external factors Products & services Pricing Brand and communication Sales & distribution channels Customer service
  • 14. 14 14 Modern definition Delivering Value Communicating Value Creating Value Customer value and beneficial relationships
  • 15. 15 Marketing is the process of ①  Defining markets ②  Quantifying the needs of the customer groups within these markers ③  Developing Value proposition to meet these needs ④  Playing an appropriate role in delivering these value propositions ( communication) ⑤  Monitoring Value delivered ⑥  For this process to be effective organization need to be consumer or customer driven
  • 16. 16 Define markets and segments Understand Value required By the customers Understand competitor value positioning Evaluate market segments attractiveness 1.  Corporate Mission and Objectives 2.  External Data 3.  Internal Data Define Value proposition Choose Market Segments Define objectives Value received Defined price- Value proposition 1.  Low costs 2.  Convinces 3.  Communication 4.  Customer wants & needs  Products and service benefits Define Market strategy How value to be delivered and communicated Price Place – Distribution Promotion – Marketing communication Products and service: Features and customer service Estimated result / Budget – value received Analysis of corporate objectives Create the Value proposition
  • 17. 17 Deliver Value
  • 18. 18 Define marketing strategy for promotion Value required by customers Latest VS expected Value delivered VS proposition Value received VS objectives How value delivered . Communicated VS marketing strategy Products and services Vs Plan and roadmap [promotion VS Plan MIC Distribution VS Plan Pricing Vs Plan Monitor Value
  • 19. 19 Customer: one who purchases or receives a product or service from a business or merchant, or plans to Value for Customers Customerperceivedvalue Functional benefits Brand benefits Other benefits Customer perceived value Purchase price Other costs Benefits Costs Negative Dissatisfied Defect Neutral Satisfied switchable Level of satisfaction Emotional experience Delighted Loyal Positive Perceived value What will this product deliver for me? Perceived Benefits For the money I’m paying, what am I getting Perceived Costs It’s worth paying certain amount for what I am getting
  • 20. 20 Revenue streaming Marketing Commercial Subscribers Usage Market share Brand Health Economic Revenue Revenue by Products Financial Costs of Sales Gross Margin OPEX EBITA Revenue streaming Subscribers Usage Revenue Costs EBITDA
  • 21. 21 RGS as Core Focus drivers – Subscribers Indicators Duration ( one year) Openin g RGS Gross Ad Churn Net Add Closing RGS Open period Close period From BI we need to identify: 1.  Total No of sub 2.  Total No of RGS 3.  Total No of Gross ads 4.  Total No of Churn ( 90 Days) 5.  Total No of Net adds + Calculate Closing RGS Gross connection Market penetration Net Adds Growth RGS Company Size and market share Voluntary and involuntary churn: Switch to competitor bill not paid halt of the usage of the secondary sim card •Loss of sim card •Tourists.
  • 22. 22 Market share Indicators Market share Subscribers Value share Revenue Share of Talk Usage Relative market share Against Main competitor Marginal Market share Net Additions Share in shops No of outlets Share of Wallet Customer budget Share of Voice Media presence Brand health score Ratio Brand share / market share Customer satisfaction score Overall rating of company value proposition from customer SOUL Share of user loyalty Global brand index Degree of which brand plays a role in sales Brand equity Value (goodwill) of the brand in the market Top of mind People quoting the brand in top position Total spontaneous People quoting spontaneously the brand Aided awareness People knowing the brand (with or without recall) Branded image strength People making association brand- statement Brand image character People making the association positively Brand preference People who like or recommend Brand affinity People with strong relationship Assess the brand position of the company.Give the quantitative position of the company in the market place.
  • 23. 23 New and traditional Marketing and commercial indicators Traditional Matrix Minutes of use per subscribers MOU Total duration of calls/user Number of calls Frequency of use Call length/duration Average duration of call per user Data usage No of SMS , volume of data per user Modern Matrix Sphere of influence SOI Distinguish calls Sphere of reception SOR People calling Return call index RCI Ratio SOI/SOR Call distance Time distance between two calls (average, min and max) Days of call Total number of days of calls MOU/User = SOI x Number of calls/p. x Call length Ex: MOU = 80 x 1.5 x 40=4,800 sec Call box? Ex 2: MOU = 12 x 5 x 80 =4,800 sec Businessman? Ex3: MOU = 4 x 20 x 60 = 4,800 sec .F & F
  • 24. 24 Economic Indicators The goal is to track the capacity of the company to generate money from its subscribers. Gross revenue Distribution channel Loadings Recharge by Customers Service revenue (usage Earned revenue for the company SDP balance Airtime within customer’s phones 1.  Monitoring should concern various items: prepaid/postpaid, interconnect, roaming, airtime, voice/data, split by region, by destination (onnet/offnet, international), by tariff plan, by segment of customers, etc. 2.  At the end of the day, service revenue is the key indicator. But the other items (gross revenue, loadings, SDP) make it possible to analyze and to foresee service revenue. Revenue per unit ARPU Average Revenue per user AMPU Average margin per user Marginal ARPU/ASPU New subscribers or incremental revenue CLV (Customer Lifetime Value) Total net revenue over time Marginal ASPU tracking and analysis enables: 1.  To determine if new subscribers generate revenue that permits maintenance of a given level of profit; 2.  To be more accurate concerning revenue modeling.
  • 25. 25 Financial Indicators Operational costs Cost of sales CoS Focus on: 1.  Recharge vouchers 2.  Commissions and distribution 3.  Interconnect 4.  Roaming cost 5.  Cost of handsets 6.  Sim card and Sim packs OPEX Focus on marketing (advertising, promotions and public relations) Financial indicators measuring marketing and commercial effectiveness Revenue ratios (%) Qualitative ratios (currency/unit) Marketing OPEX / revenue Commissions and distribution/revenue (out-bound) revenue Marketing OPEX/RGS revenue Marketing OPEX/gross connections revenue Marketing OPEX/net additions revenue Acquisitions cost/gross connections revenue Marketing Quality of products/services Suitability of products/services with target Timing of new product launch Quality of ATL/advertising (message, media Quality of BTL/trade marketing support Share of voice and targeting of marketing support Pricing features (level, flexibility) Commercial Stock availability with distribution channels Outlets management (share of outlets and coverage quality) Support for sales team (number and quality of the visit to dealers and direct customers) Customer demand New consumption scheme from customers (consumption vs. savings, new consumption priorities) Consumers confidence index
  • 26. 26 Commercial Stock availability with distribution channels Outlets management (share of outlets and coverage quality) Support for sales team (number and quality of the visit to dealers and direct customers) Other Support Network coverage Network quality (loadings, communication, etc) Customer service support (service centre, call centre, inquiries, etc: Supply chain support (stock availability) Finance support (payment of commissions) Customer demand New consumption scheme from customers (consumption vs. savings, new consumption priorities) Consumers confidence index
  • 27. 27 Business consideration 1 A boom of RGS leads to a strong increase of revenue 1.  New subscribers are generally low end users. 2.  Important to observe the proportion of multisim users. 3.  Important to measure churn (balance) 4.  New subscribers are generally low end users. 5.  Important to observe the proportion of multisim users. 6.  Important to measure churn (balance) Because new subscribers are supposed to bring in revenue… A boom of RGS leads to a drop of Because new subscribers are in the bottom of the pyramid (low end users • Probability of high churn from competitor. • Impact of VAS development and its impact on usage. • Useful to consider impact of a positive economic conjuncture. A boom of gross connections will increase market share 2 3 Because new subscribers will strongly increase our RGS 1.  Important to verify that we grow faster than the whole market. 2.  Important to analyze the nature of new subscribers (volatility issue). 3.  Important to analyze structure of this boom (reactivations, RGS definition). 4 Postpaid customers are highly profitable Because they generally have highest ARPU than prepaid customers 1.  Important to analyze the margin (effective tariff and costing) 2.  Important to analyze churn impact (debts). 3.  Important to analyze the margin (effective tariff and costing) 4.  Important to analyze churn impact (debts).
  • 28. 28 •  Telecommunication Platform & revenue streaming Prepaid Postpaid CorporateIndividuals 1.  No of corporate 2.  Corporate segmentation 3.  Potentiality of the corporate 4.  No of Lines 5.  Usage ( Outgoing . Incoming , On-net and off-net , International and demotic 6.  Data usage (Volume GB 7.  Interconnection costs 8.  Mobility & coverage 9.  Roaming 10. RGS 11. Payment and methods 12. Geographical Zone 13. Potential of Smart Phone 14. Packaging & business solutions 1.  Classification and segmentation - ARPU 2.  Telecommunication needs 3.  Packaging 4.  Usage Data and Voice 5.  Potential of ARPU – immigration 6.  RGS and Off-net – Interconnection and revenue 7.  Outgoing / Incoming 8.  International calls 9.  Primary and secondary SIM 10. Type of Handsets 11. VAS revenue and usage 12. Packaging and customized usage
  • 29. 29 Telecom Platform Partners Own Sales Points POS Retailers E- distribution Role of distribution system within Telecom
  • 30. 30 Developing a Distribution Strategy & channel Management : Distribution Strategy Development Key Decisions: •  Channel Length •  Channel Breadth –  Exclusive, selective or intensive –  Multiple / single channel –  Intermediary Selection –  Choice of promotional strategy Market characteristi cs Cost Legal restrictions Existing intermediaries Company resources and reputation Product features Key Factors to Consider: The major output from this training is enable the distribution and sales establish Sales and distribution strategy elements and assessment so as to develop a sustainable competitive advantage , control when elements of the five force model ( bragging power of distributors ) – actualization marketing strategy and objectives of growth , contributed in the overall corporate strategy and operational plan to achieve business objectives ‘Strategic’ Decisions ‘Tactical’ Decisions Channel economics Customer preferences Incentives
  • 31. 31 Customer experience Buying Activat ing Usage Paying Contact ing Gettin g to know Contac ting Customer expectatio ns Functional area 1.  Brand awarenes s 2.  Offer availabilit y (what & where) 1.  Marketing 2.  Sales 3.  Customer service 1.  Offer availability 2.  capillarity 3.  Value for money 1.  Marketing 2.  Logistics 3.  Sales 4.  Customer Service 1.  Speed 2.  Connivance 3.  Getting start 1.  Marketing 2.  Sales 3.  Network 4.  IT 5.  Customer Service 6.  Portal Customer experience elements 1.  Usability 2.  Coverage 3.  Reliability 4.  Quality 5.  Roaming 6.  Service VAS 1.  Network 2.  IT 3.  Customer Service 1.  Accuracy 2.  Control 3.  Choice 4.  Convenien ce 1.  Sales 2.  IT 3.  Customer service 1.  Responsiv eness Friendline ss 2.  Consistenc y 3.  Helpfulnes s 4.  Resourcef ul 1.  Customer service 2.  IT 3.  Portal 1.  Flexibility 2.  Loyalty 1.  Marketi ng ( Save team) 1.  Sales 2.  Custom er service 3.  IT
  • 32. 32 RevenueFINANCIAL Users ARPU SALES Gross Adds PoS Churn OPERATIONA L Per region G.A. per PoS Per region Per activation PoS Per value tier VALUE MANAGEMENT # Recharge $ Recharge Per price plan Per price plan Per promotion Per promotion Per PoS Per PoS % Penetration % Pop. covered Duration % Consume d Sales and distribution KPIs Evaluated Sales and distribution system and models Focus on Simulation case and developed Sales and distribution strategy all through the training – developing &I implementing Actual Business case 1.  Total Sales revenue 2.  Revenue splits & contribution % 3.  Revenue share % 4.  Sales revenue by channels 5.  Channel activation 6.  Scratch card availability , Total and By channels 7.  Network utilizations by BTs , Cities & region 8.  CoS by channel and channel member 9.  Sales of scratch card by face value and contribution on total Sales 10.  Other KPIs
  • 33. 33 METHODOLOGY > REVENUE ORIENTED KPIS the commercial success of Zain , i.e., how much of the total communication budget are we capturing. Revenue RationaleKPIs •  The most basic KPI is the number of subscribers/market share, unfortunately it is also the easiest to be distorted. Users ARPU MoU ARPM Average Recharge Number of Recharges •  For the higher-value segments ARPU can be the only valuable metric as they are likely to migrate towards “all you can eat” plans •  Increasing the usage is relevant for all groups, even when it does not translate into additional revenues as it increases perceived value •  The average revenue per minute will be more important for low- usage subscribers that are at their maximum level of usage •  Increasing the amount recharged through promotions and offers can help medium-value subscribers into higher spending •  While more frequent recharges is likely the way to go for low-value users that find affordability barriers
  • 34. 34 Marketing KPIs – the bottom line RevenueFINANCIAL Users ARPU MARKETING Active Base Gross Adds Churn OPERATIONAL Per price plan Per value Per price plan Per value Per price plan Per value Per promotion VALUE MANAGEMEN T ARPU MoU Per price plan Per price plan Per value Per value In / Out In / Out Market share Per destinatio n Per promotion Calls Per price plan Per value Call length
  • 35. 35 Segmentation, Targeting, Positioning 1. Identify segmentation variables and segment the market 2. Develop profiles of resulting segments Market Segmentation Market Targeting 3. Evaluate the attractiveness of each segment 4. Select the target segment(s) Market Positioning 5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen positioning concept
  • 36. 36 Five Patterns of Target Market Selection M=Market) (P=Product / Full coverage M1 M1M1 P1 P2 P3 Product specialization M1 M1M1 P1 P2 P3 Single-segment concentration M1 M1M1 P1 P2 P3 Market specialization M1 M1M1 P1 P2 P3 Selective specialization M1 M1M1 P1 P2 P3
  • 37. 37 Market Segmentation 1.  Young urban consumers are the highest users of mobile services 2.  Prepaid and Postpaid 3G Smartphone customers are a high-value segment 3.  36 to 45-year-olds have high potential 4.  Behavioral and attitudinal factors significantly impact service usage
  • 38. 38 There are multiple approaches to customer segmentation… Demographic Behavioral Usage profile (i.e. domain specific) •  Based on customer personal, demographic, and socio- economic circumstances: age, income level, socio-economic group,… –  Pro’s: simplicity –  Con’s: not directly linked to usage of service, hard to get for prepaid customers •  Built upon customers’ lifestyle –  Pro’s: Identify customers’ key interests –  Con’s: Impossible to apply for a prepaid customer base. Depends on what people “claim” to be and to do •  Supported by current usage patterns, it identifies implicit needs behind usage drive –  Pro’s: Effective. It is based on actual usage and not on stated intentions –  Con’s: complex data processing, not practical for many operators
  • 39. 39 A usage based segmentation allows us to build on the implicit to design an offer that best matches the customers’ needs •  Ability to talk long time with friends •  Low total spending •  Willing to sacrifice convenience for cheaper tariffs •  On-net bundles for voice/SMS •  Incoming traffic bonus •  Regressive tariffs (per call, per month,…) Group A Needs Offer Group C •  Needs to make calls at any time and more likely to any destination •  Low cost per call •  Makes very short calls •  Per second billing •  Simple tariffs Group B •  Multiple sim-user, keen on arbitration •  Cheap off-net calls
  • 40. 40 •  The segmentation identifies groups, or clusters, of customers with a similar usage profile and uses the values for an “average” customer, i.e. one in the centre of the cluster as representative for the whole group. •  Each of these groups will be characterized by different levels of usage in the different dimensions used in this exercise. •  Finally, in order to prepare an Action Plan we have also classified the seven groups in high-, medium-, and low-ARPU. The initial results from the segmentation exercise show that, using the variables described in the previous section, we can identify several profiles. High ARPU Medium ARPU Low ARPU •  Heavy Users •  International users •  Receivers •  Heavy on-net users •  On-net •  Sudani-callers •  Zain-callers
  • 41. 41 Heavy users segment shows higher ARPU as long as larger revenue contribution Heavy users segment is the main contributor to outgoing revenues... ...driven by high ARPUs •  Heavy users segment shows the highest ARPU Out levels. Therefore these are high value customers to Zain and first priority should be ensuring their loyalty •  Great appetite for communications characterize these customers, which will likely show sensitivity not only to price but also to other market levers such as customer service, simplicity….E.g. on Marketing actions to test on this segment: –  Community action aimed at locking the customer within the Zain network –  Further developing usage by elasticity creation, e.g., simplicity oriented tariffs –  V.A.S. upselling Heavy users Total group size 28,877 469,598 # outgoing calls 143 35 # outgoing mins 472 102 call out length 104 82 arpu out (USD) 46.0 9.5 revenue per call (USD) 0.174 0.139 % outgoing onnet 44% 43% % out Sudani 18% 20% % out Zain 36% 34% % out International 0.4% 0.4% % out on peak 77% 79% # SMS out 19 10 % onnet SMS 34% 32% % international SMS 8% 5% # incoming calls 107 38 # incoming minutes 274 130 % incoming onnet 39% 42% international users segment show high ARPU.. Heavy onnet users segment is characterize by high ARPU... On-net users.... Zain callers segment strongly contributes to total revenues...
  • 42. 42 The different segments can be grouped in terms of (potential) size and customer value to Zain in order to time the actions. Preliminary results Potential value for Zain PotentialSize Value Growth Defensive Area Base Growth Value Growth Preliminary proposed approach •  The customers in those segments have the highest level of spending and they are, based on focus- group results, probably under- represented in our base Defensive Area •  These customers have been identified in our base as having medium outgoing traffic levels either split with another operator or purely on-net Base Growth •  These are low-value customers, the most numerous, and therefore critical to reach our customers targets Heavy users Heavy on-net users Internatio nal users Receiver users Zain callers Sudani callers On-net users
  • 43. 43 Action Plan direction Possible actions to be explored in following project stages Target now… •  Value Growth and Defensive area: Defensive actions to prevent revenue erosion, especially for the more numerous heavy-users segment •  Base Growth: Focus on acquisition campaigns Target soon… •  Value Growth: Focus on long- term retention strategies (hybrid/post-paid plans) •  Defensive area: Below the net campaigns to stimulate consumption •  Base Growth: Churn management actions. Offers and products to consolidate traffic, and as a side effect deter churn Target later… •  Value Growth: ARPU stimulation campaigns, new products and services (data content related, international best-rates…) •  Defensive area: Develop a Prepaid-premium proposition (Structural incentives for on-net and incoming traffic, better customer care) •  Base Growth: Campaigns to migrate them towards heavy on - net Next 3 months 3 – 6 months 6 - 12 months time
  • 44. 44 Analysis of internal Company Resources- Of customers & your own Value Chain Analysis Company Infrastructure (Leadership, Financial Management, etc.) Human Resources (Staff planning, -acquiring, -development, etc.) Technology development (Research & Development, IT-Systems, etc.) Procurement (Raw Materials, Equipment, Facilities, etc.) Inbound  Logis,cs     Incoming  goods     Storage     etc.   Produc,on     Produc,on     Packaging     etc.   Marke,ng  &  Sales     Prices     Distribu,on     Adver,sing     Process     etc.   Outbound   Logis,cs     Warehouse   management   Delivery     etc.   Service     Installa,on/   Configura,on     Maintenance     Supplies     AEer  sales     etc.   SecondaryActivitiesPrimarilyActivities
  • 45. 45 Life Cycle Analysis− Phases Characterization of four ideal-typical Phases Profit   Revenue   Increase  familiarity     expand  market  share   Focus  on  marke,ng  product  improvement     and  product  diversifica,on      Defense  of  market  share       and  product  modifica,ons   necessary   Cost  control   Ensure  produc,vity   Growth  Phase  Introduc,on  Phase   Decline  Phase  Maturity  Phase     Products  largely  unfamiliar     Low  revenue  and  high  ini,al  costs/   development  costs     Nega,ve  profits  in  sales  and   marke,ng     Growing  awareness  of  the  product     Dispropor,onal  increase  in  sales     Posi,ve  Profits     Increased  compe,,on  and  compe,,ve  pressure     Maximum  sales     Declining  Profits     satura,on  of  the  market     Maximum  number  of   compe,tors     Degenera,on  phase  with  steadily   falling  profits     Low  profits     Changed  customer  needs     Low  demands     Exit  market  
  • 46. 46 Customer Satisfaction Analysis Determine     performance  criteria  from   perspec,ve  of  respondents   and     business  ra,os     1 Evaluate  performance   criteria  and  gather   business  ra,os     2 Eliminate   dissa,sfac,on   3 Increase  sa,sfac,on   4
  • 47. 47 Ansoff Matrix: What is it? Market Penetration Product Development Market Development Diversification PRESENT PRODUCTS NEW PRODUCTS PRESENT MARKETS NEW MARKETS 1 2 3 4 •  A tool that helps to evaluate the possible strategic growth directions for a business •  In summary, there are four basic choices to drive growth: 1.  Grow existing products in existing markets 2.  Introduce new products into existing markets 3.  Enter new markets with existing products 4.  Develop new products and introduce these into new markets 7 Descrip,on  1   ? High Annual real rate of Market Growth (%) Low Relative market share (%) LowHigh •  A framework that: –  Enables one to judge the overall ‘health’ of a portfolio of businesses; or –  Facilitates the decision making process for the allocation of resources among business units (or products)
  • 48. 48 high Relative Market Share Question Marks Poor Dogs Stars Cash Cows low high low MarketGrowthRate BCG Matrix Product Life Cycle DIVEST INVEST SLIM SKIM Size of bubble represents revenue Link product lifecycle with BCG
  • 49. 49 Existing customer data base Cross- selling and up- selling Opportunities 90% Change Management Iceberg New acquire customers 10%
  • 50. 50 The US Market Opportunity" 2700 businesses, <2500 employees" $4.8T in revenue, 31M employees" 25K businesses, >2500 & < 250 employees" $2.0T in revenue, 15M employees" 4.2M businesses, < 250 employees" $4.7T in revenue, 41M employees" Mid Market" SMB" Enterprises"
  • 51. 51 $1 billion English travel guides sold annually " $210 million 20-35 year old travelers" $123 billion tourism industry inside the US" (Initial test market)" Total available market" Served market" Target market" Addressable, Served & Target Market" A city"
  • 52. 52 The Technology Adoption Curve" 0" 1-2" 3-5" 6-10" 10-15" 15-20" Innovators" Early
 majority" Late
 majority" Laggards" Note: On average, a company will need at least 6-10 years in a market to establish market category dominance" Years" Early
 adopters" 2.3%" 16%"34%" 34%"13.6%"
  • 53. 53 The total value proposition is the sum of the offerings and experiences delivered to your customers, during all their interactions with your organisation All  products,  services  and   solu,ons  and  their  func,onality   How  your  customers  experience     your  products,  services  and  your     company   Your  customer’s  experience  through  all  touch     points  with  your  company  such  as  marke,ng,     sales,  delivery,  customer  service,  aEer  sales     service,  invoicing,  legal/contrac,ng   Definition of a total value proposition The issue for many companies is they don't have a total value proposition
  • 54. 54 Are your sales people creating sales propositions in a vacuum? Without sales proposition being joined up to and driven from the company- wide, total value proposition, it will be off-target and lose its power and impact This will cost you money in many ways: 1.  Ineffective marketing campaigns 2.  Chasing the wrong sales opportunities 3.  Attracting bad opportunities 4.  Wasting time through reinventing everything each time lack of focus = Waste of money
  • 55. 55 Create  your   company  value   proposi,on  first   and  refine  to   create  tailored   sales  proposi,ons   from  it   Value  proposi,on  to  sales  proposi,ons  
  • 56. 56 It’s not a one-way street. Feedback from sales teams on customers and markets is vital to keep the total value proposition relevant and well positioned. Feedback is vital Value Propositi on Sales Propositi on Value = Benefits: all the good points that customers perceive – the positive functionality of the product, its attributes, the behaviours of your people interacting with customers and the values and greater purpose that your organisation stands for and the contribution it makes Minus Costs: all the bad points that customers perceive – the negatives of the product functionality, attributes, behaviours and weak or non-existent values and greater purpose, as well as the cost and risk to your customer Let’s look at how people understand value Value = Benefits – Costs2
  • 57. 57 Many companies create their value proposition in their own image but your value proposition isn’t all about you. You must bring your customer into the creation of your value proposition. Value is not all about you If you don’t bring your customers into value proposition creation, you’re just making a guess about what your customers truly value. This is about much more than just asking them what they want.
  • 58. 58 General Guidelines for completing this Account Guidance section OBJECTIVES  Provide an overview of the account  Identify financial targets by discipline  Articulate the current state  Identify the makeup of the account team  Identify all the client key players– those who will help and those who may harm the relationship  Understand the current pipeline status  Identify the BD investment plan  Identify how the NA Country Board can enable you to drive the cross discipline growth ambitions of your account SUGGESTED DATA SOURCES  Account Executive  Client public materials – annual report, SEC filings (10- K, 10-Q), strategy documentation, press releases  Analyst reports  Account team (relationship map)  Current pipeline  Situation appraisal document  Business development investment plan  Finance KEY QUESTIONS  What are the account ambitions for 20XX?  What does the account team structure look like?  Who are the key decision makers in the client and what is our relationship(s) with them?  What business development investment will be required to achieve the specified ambitions and expand our footprint within this account?
  • 59. 59 Account Overview TOP 3 CURRENT OPPORTUNITIES Opportunity name TCV ($M) Opportunity description Discipline Sign state Sales stage Probability BASIC ACCOUNT MANAGEMENT INFORMATION BASIC CLIENT INFORMATION Account name Revenue and profit 20XX Account Executive # of Employees Sales Executive Industry trends, key issues and opportunities  <…>  <…>  <…> Our Strategic Strengths   <…>   <…> Our One Critical Vulnerability   <…> Our Performance ($M) Last Year Budget (This Year) YTD Forecast This Year Bookings Revenue CM ($M) CM%
  • 60. 60 Situation Appraisal Give a brief overview of the current account situation Statement of intent  Our overall account goal is to sell “X $$” until “200X”; our strategy to achieve this goal is …  By concentrating on “BU XYZ”  By offering “solution”  Positioning our company as “how” .  Establishing relationships to “XYZ” Our current positioning and market share at client  The client perceives us as a “XYZ” company; this derives from our “project history”, “sales history”, “relationships / network”, etc.  We have X% of the <A> budget, <B> budget, <C> budget  Our current delivery track record is… Relationship status  We have good/reasonable/weak contacts to the executive/management/operational level  We are addressing currently “Buying Center X” by doing …  We need to build up / deepen contacts in “Buying Center Y and Z” because … this will be done by … Our top 3 competitors in the account and their positioning  Comp 1 is perceived as “XYZ”, resulting from  Comp 2 is perceived as “XYZ”, resulting from  Comp 3 is perceived as “XYZ”, resulting from
  • 61. 61 Account Team Account Name Account Executive Account Executive Sponsor Core team (country account managers, discipline representatives etc.) Name Role Discipline Extended team (delivery leads, subject matter experts, alliance etc.) Name Role Discipline Comments on current account team capabilities and needs •  <…> •  <…>
  • 62. 62 Client Name Job Title *Role Our Relationship Owner [Identify all the key players in the account – those who will help you and the other members of your team and those who may harm the relationship. Then identify which member of the account team owns that particular relationship] Relationship Map *Role: Sponsors – Promoting you in the account Strategic Coaches – Providing guidance and direction Anti-Sponsors – Working against your position Other key players – Playing a part in the relationship
  • 63. 63 Identified Contacted Qualified Developed Closed Completed Opportunity/Initiative Date Won / Lost / N/A 1. Implementation of XXXX for the office of the CMO (example) 2. 3. August 17, 20XX N/A 1. 2. 3. 1. 2. 3. 1. 2. 3. 1. 2. 3. 1. 2. 3. Stage7Stage6Stage5Stage4Stage3Stage2 Current Pipeline
  • 64. 64 Business Development Investment Plan (Optional) Program Audience Owner Timeframe Cost Expected ROI Annual Budget ($M): $ Forecasted Spend ($M): $
  • 65. 65 General Guidelines for completing this Competitive Positioning section OBJECTIVES  Link key client issues to your company’s capabilities  Identify key opportunities  Identify how to use our Alliance Partnerships to maximize our position  Understand how our competitors are supporting the client SUGGESTED DATA SOURCES  Capability unit Subject Matter Experts  Account team  Delivery team  Client public materials – annual report, SEC filings (10-K, 10-Q), strategy documentation, press releases  Analyst reports  Account SWOT  Account Action Plan  Marketing Plan  Competitive footprint KEY QUESTIONS  What does the account need to do to deliver their strategy/ address their burning issues?  What capabilities does your company have to support the account with these projects?  Do we have any credentials in working in this space?  How can we best utilize our strategic alliance partnerships?  What strategy do we use to put us in the best position in relation to our competitors?
  • 66. 66 Action Name Action Description Owner Timeframe Account Key Action Plan and Penetration Strategy
  • 67. 67 Provide an overview of the existing of future account-based marketing priorities and strategy Marketing Plan Timeframe Themes / Messages Audience Content/Collateral Owner Medium (print, video, event, etc.) Future   AAA   BBB   CCC   Content Developer:   Collateral Producer:
  • 68. 68 Competitor name Market position and trend* Top 3 client relationships Positioning & pillars within client Strategy (sales approach, campaigns, relationship, push offerings, pricing) Issues [CompanyY ] [Strong but decreasing] [CIO, Name CEO, Name] [Strong CxO relationship. Trusted advisor status] [Uses historical relationships and incumbent position to sell] Competitive Footprint
  • 69. 69 www.businessmodelgeneration.com! The Business Model Canvas For what value are our customers really willing to pay? For what do they currently pay? How are they currently paying? How much does each Revenue Stream contribute to overall revenues? Through which Channels do our Customer Segments want to be reached? How are our Channels integrated? Which ones work best? Which ones are most cost- efficient? How are we integrating them with customer routines? What type of relationship does each Customer Segments expect us to establish and maintain? Which ones have we established? How are they integrated with the rest of our business model? How costly are they? For whom are we creating value? Who are our most important customers? How do we differentiate our Customer Segments What value do we deliver to the customer? Which one of our customer’s problems are we helping to solve? Which customer needs are we satisfying? What Key Activities do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue streams? Who are our Key Partners? Who are our key suppliers? Which Key Resources are we acquiring from partners? Which Key Activities do partners perform? What Key Resources do our Value Propositions require? Our Distribution Channels? Customer Relationships? Revenue Streams? What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive? Alexander Osterwalder!
  • 70. 70 1.  Customer Segments (CS) – Who you serve? •  Mass market •  Niche market •  Segmented •  Diversified •  Multi-sided platforms 2. Value Propositions (VS) – The value you provide: •  Newness •  Performance •  Customization •  Getting the job done •  Design •  Brand/ status •  Price •  Cost reduction 3. Channels (CH) – How the value is delivered to your customers? •  Own •  Partner •  Direct •  Indirect Channel Types: •  Sales force •  Web sales •  Own stores •  Partner •  Stores •  Wholesaler
  • 71. 71 4. Revenue Streams (R$) – Your revenue sources •  Asset sale •  Usage fee •  Subscription fees •  Lending / Renting / Leasing •  Licensing •  Brokerage fees •  Advertising 4.  Customer Relationships – The communication environment with your customers: •  Personal assistance •  Dedicated personal assistance •  Self-service •  Automated services •  Communities •  Co-creation 6.  Key Resources (KR) – the items you need to create your value proposition •  Physical •  Intellectual •  Human •  Financial
  • 72. 72 7.  Key Activities (KA) – the things you do with those resources •  Production •  Problem solving •  Platform/ network Canvas 9 Building Blocks 8.  Key Partnerships (KP) – third parties who also perform key activities in order to provide the value proposition •  Optimization/ economy of scale •  Reduction of risk & uncertainty •  Acquisition of resources and activities 9.  Cost Structure (C$) – your costs •  Cost-driven •  Value-driven •  Fixed costs •  Variable costs •  Economies of scale •  Economies of scope
  • 73. 73 Business model innovation requires a strong customer value proposition, viable profit formula, and access to key resources and processes… A successful business model has 3 key components: •  Customer Value Proposition. The model helps customers perform a specific job, which alternative offerings don effectively address. •  Profit Formula. The model generates value for your organization through such factors as revenue model, cost structure, margins, and inventory turnover. •  Key Resources and Processes. Your organization has the people, technology, products, equipment, facilities, and brand required to deliver the defined value proposition to the target customers. It also must have the processes to leverage these resources. 1 2 3 Customer Value Proposition Profit Formula Key Resources and Processes Successful Business Model+ + = 1 2 3
  • 74. 74 The blueprint of a business model consists of 4 elements—Customer Value Proposition, Profit Formula, Key Resources, and Key Processes … Business Model Elements (1 of 2) FOCUS ON THE OPPORTUNITY CONSTRUCT A BLUEPRINT COMPARE NEW MODEL WITH EXISTING 1 2 3 Customer Value Proposition 1 Profit Formula 2 Key Resources 3 Key Processes 4 The Customer Value proposition and Profit Formula define value for the customer and the company The Key Resources and Key Processes describe how that value will be delivered to both the customer and the company
  • 75. 75 … the Profit Formula along with Key Resources and Processes define how the Customer Value Proposition can be profitably fulfilled Business Model Elements (2 of 2) FOCUS ON THE OPPORTUNITY CONSTRUCT A BLUEPRINT COMPARE NEW MODEL WITH EXISTING 1 2 3 Customer Value Proposition 1 Profit Formula 2 Key Resources 3 Key Processes 4 •  Target customer •  Job to be done to solve an important problem or fulfill an important need •  Offering that satisfies the problem or fulfills the need •  Revenue Model. How much money can be made •  Cost Structure. How costs are allocated •  Margin model. How much each sale should net to achieve desired profit levels •  Resource Velocity. How quickly resources need to be used to support target volumes •  Processes •  Rules and Metrics •  Norms. E.g. opportunity size needed for investment, approach to customers and channels •  People •  Technology •  Equipment •  Information •  Channels •  Partnerships, Alliances •  Brand
  • 76. 76 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com You will find that all business cases have the same core objectives Objectives – Core Objectives of Business Case  Quantify major improvement opportunities  Ensure project resources are allocated to the areas of highest leverage  Establish the range of benefits to be achieved through implementation activities  Provide the basis for assessing the return on investment and tracking benefits to the bottom line during the implementation phase  Develop the rational basis for making change necessary
  • 77. 77 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com And, although the business case is viewed as the rational element, its uses are both political and emotional in nature RATIONAL POLITICAL EMOTIONAL   Understand the financial drivers of the business   Establish the potential scope and scale of benefits   Ensure resources are allocated to areas of highest leverage   Quantitative estimation of the results of project implementation   Assess the ROI and impacts on the company s financial statements   Use as baseline for benefits tracking through implementation   Gain insight drivers of hot/key executive issues   Assess the financial health of the organization   Provide quantifiable and objective backing to projects or other investments   Create political risk for project sponsor if opportunities identified are not acted upon   Show that an integrated approach must be taken   Gain credibility and develop rapport with key decision makers and executives   Create career wins for yourself. project sponsor, or other key stakeholders if identified opportunities are acted upon   Create a vision of what he company could become Objectives – Rational, Political, and Emotional Elements
  • 78. 78 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com   Identify major areas of revenue and cost assets and their key drivers   Identify true value (i.e. revenue and costs): –  By function/activity –  By process –  By product/client type   Quantify the financial impact of improvement opportunities from streams   Validate business case and gain sign-off The business case stream identifies areas of opportunity and quantifies the improvement potential OBJECTIVES CRITICAL SUCCESS FACTORS   Understanding of the business case within the project   Access to key data and knowledge holders within client   Availability of key resources to validate findings   Timely input from streams SCOPE   Summary analysis of costs and revenues   Detailed analysis of operating costs DELIVERABLES   Detailed breakdown of current costs and revenues   Quantification of financial impact of early wins   Benefits case estimate for improvement potential in costs and revenues: –  Including payback periods   Input to design of benefits-tracking mechanism ACTIVITIES   Conduct focus interview   Analyze financials   Build business model   Build top-down business case   Analyze benefits from team   Build bottoms-up benefits case   Prepare business case for benefits-tracking Business Case Stream Charter
  • 79. 79 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Contents •  Overview -  Executive Summary -  Objectives -  Business Case Stream Charter •  Quantitative Analysis Elements •  Business Case Modeling •  Sample Business Case Model (Excel document) •  Final Words -  Dos and Don ts -  Common Pitfalls -  Rules of Thumb
  • 80. 80 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com The structure of a business case is built on a combination of four separate, yet interlinked, quantitative analysis elements The extent of each element varies from case to case—but, they are always there. Bottoms-up Benefits Case Business Modeling Top-down Business Case Financial Analysis BUSINESS CASE ELEMENTS Enabling Element Core Deliverables Quantitative Analysis Elements
  • 81. 81 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Each of the analytical elements has different objectives and requires different types analyses Financial Analysis Business Modeling Top-down Business Case Bottoms-up Benefits Case   What is going on in the company? – Understand the business – Create urgency – Quantify the competition gap   Financial reporting   Ratio analysis   Breakdown ROCE (DuPont analysis)   Stakeholder value calculations   Simple sensitivity analysis   What could potentially happen to the company? – Understand the future scenarios – Set the aspiration – Quantify the risks – Focus the strategic analysis   Linked sensitivity analysis   Valuation modeling   Scenario modeling   Optimization analysis   What are the challenges and associated costs? – Establish the link between the financial analysis and the bottoms-up business case – Fine tune the business drivers – Understand the economics of the business – Quantify the preliminary amount of accessible benefit   P&L and Balance Sheet impact estimation   Cash flow NPV modeling   ROI calculation   What level of benefits do we commit to achieve? – Develop fields of opportunities – Identify the origins of the low performance – Quantify and validate the identified opportunities   Opportunity charts   Opportunity selection, prioritization, and phasing modeling OBJECTIVE ANALYSIS Quantitative Analysis Elements – Objectives
  • 82. 82 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com The top-down business case and the bottoms-up benefits case are two very different beasts that are often confused Top-down Business Case Bottoms-up Benefit Case = = A collection of analysis stream findings translated into financial and non- financial improvements Explains why getting these benefits matters to the business •  Top-down approach •  Models the impact on financial statements •  Relates delivery to strategy •  Is an executive steering group process •  Bottoms-up approach •  Displays mixed benefit formats •  The logic is as important as (if not more important than) the numbers •  This is a work stream process The two components are highly inter-dependent, but it is important to understand the distinction and that work is structured around it. Quantitative Analysis Elements – Top-down & Bottoms-up Approaches
  • 83. 83 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com The combined top-down and bottoms-up approaches triangulate to form the final business case Final Top-down Business case Final Bottoms-up Benefits Case Aspiration Hypotheses Benchmarks Baseline Implementation Prioritization Leveraging the Opportunities Analysis Preliminary Top-down Benefit Evaluation Benefit Scope by Area Final Business Case Realized Benefits Focus on Major Benefit Levers $$$ Bottoms-up Approach Top-down Approach Proposed Issues Quantitative Analysis Elements – Top-down & Bottoms-up Approaches (3 of 3)
  • 84. 84 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Financial Decomposition Opportunity Identification Opportunity Quantification Benefit Validation Business Case Finalization 1 2 3 4 5   Decompose the organization s financial situation by understanding economic drivers of the business   Understand the financial projections and historical trends   Based on the financial analyses in the first phase, conduct studies around the key levers identified   Develop a financial baseline   Quantify the opportunities identified and develop benefit logic   Create opportunity charts for each opportunity   Define financial and operational assumptions   Validate the benefit logic with key process owners in the business   Obtain sign-off from key stakeholders in the organization   Design a cohesive project with clear linkages to the benefits identified   Define payback assumptions Business Case Development Approach The business case development process begins with a financial decomposition of the organization to search for opportunities
  • 85. 85 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Financial Decomposition Opportunity Identification Opportunity Quantification Benefit Validation Business Case Finalization Phase 1, 2 – Financial Decomposition & Opportunity Identification As you identify potential benefits, map these benefits against the attributes of quantifiable and financial The Benefits Matrix is an important tool to organize and structure identified benefits. Understand the company s financial levers Focus stream efforts at points of greatest leverage Understand the impact of identified benefits on company financials Financial Non-financial The benefit s financial impact is clearly identifiable and measurable The benefit is non- financial, but has a measurable impact There is a financial impact, but it cannot be estimated accurately This section includes non-financial benefits that are difficult to measureQuantifiableNon-quantifiable BENEFITS MATRIX
  • 86. 86 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Financial Decomposition Opportunity Identification Opportunity Quantification Benefit Validation Business Case Finalization Those benefits identified as both financial and quantifiable may eventually be captured in the business case financial model Financial Non-financial Examples   Increased sales   Increased delivery time   Reduced operating costs Examples   Customer satisfaction   Service quality   More stable field force team   Increased employee morale Examples   Customer retention   Retail alignment with strategy   Effective work processes Examples   Improved communication   Increased teamwork   Enhanced reputation with suppliers QuantifiableNon-quantifiable Financial Non-financial These benefits can be captured quantitatively in a financial model Capture qualitatively Capture qualitatively Capture qualitatively QuantifiableNon-quantifiable Only those benefits that are both Financial and Quantifiable can be modeled into the final financial model. Phase 1, 2 – Financial Decomposition & Opportunity Identification
  • 87. 87 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Financial Decomposition Opportunity Identification Opportunity Quantification Benefit Validation Business Case Finalization Any financial and quantifiable benefit must fall into one of five benefit categories Financial Non-financial Capture quantitatively Capture qualitatively Capture qualitatively Capture qualitatively QuantifiableNon-quantifiable Categorize the financial, quantifiable benefits into the 5 benefit categories for structure in the financial model. All Financial and Quantifiable benefits must fall into 1 of 5 benefit categories Revenue Enhancement This benefit will increase revenues (e.g. service upsell) Cost Reduction This benefit will reduce (but not eliminate) a cost Cost Avoidance This benefit will allow the company to avoid (i.e. eliminate) a cost completely Capital Reduction Similar to Cost Reduction, but reducing a capital expense (as defined by Corporate Finance/ Accounting) Capital Avoidance Similar to Cost Avoidance, but avoiding a capital expense (as defined by Corporate Finance/ Accounting) BENEFIT CATEGORY DEFINITION 1 2 3 4 5 Phase 1, 2 – Financial Decomposition & Opportunity Identification
  • 88. 88 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Financial Decomposition Opportunity Identification Opportunity Quantification Benefit Validation Business Case Finalization Phase 3 – Opportunity Quantification These benefits must then be quantified and translating into specific financial impacts Categorize the financial, quantifiable benefits into the 5 benefit categories for structure in the financial model. PROFIT & LOSS IMPACTS BALANCE SHEET IMPACTS CASHFLOW IMPLICATIONS Gross benefit Investments Net benefit Financial Non-financial Capture qualitatively Capture qualitatively Capture qualitatively QuantifiableNon-quantifiable Revenue Enhancement Cost Reduction Cost Avoidance Capital Reduction Capital Avoidance •  Ultimately, benefits must be quantified and translated into impact on the company s financials •  P&L impacts •  Balance Sheet impacts •  Cash Flow implications •  Analyses should be presented within the context of investment required and timeframe for benefits realization (e.g. payback period)
  • 89. 89 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Financial Decomposition Opportunity Identification Opportunity Quantification Benefit Validation Business Case Finalization Phase 4 – Benefit Validation It is critical to validate the legitimacy of identified benefits, as well as the legitimacy of its calculations An invalid benefit results in an invalid business case—executives will not believe your numbers if they don t believe in the benefits. Define Benefit X Define calculation for Benefit X Valid? Valid?  Define Benefit Y Define calculation for Benefit Y Valid? Valid?  Define Benefit Z Define calculation for Benefit Z Valid? Valid?  Validate the legitimacy of the identified benefit Validate the legitimacy how you are planning to calculate the benefit •  Validation of both the benefit itself, as well as how its calculated is a crucial step •  If executive members or key stakeholders do not agree with the benefit or its calculation, they will not believe in any of your resulting financial analysis •  Validate first before proceeding with financial modeling
  • 90. 90 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Financial Decomposition Opportunity Identification Opportunity Quantification Benefit Validation Business Case Finalization Phase 5 – Business Case Finalization The financial modeling process involves calculating key financial metrics, such as ROI and Payback Period Define key assumptions and financial metrics to drive financial modeling COMMONLY USED FINANCIAL BUSINESS CASE METRICS Timeframe Most business case for capital budgeting models have a 5-year timeframe. Discount / Hurdle Rate By definition, this is the minimum acceptable rate of report for any internal project that the company takes on. This is defined by Corporate Finance and for most companies, it is 10% (annually). This value is crucial, as it drives all the key financial calculations (e.g. NPV, ROI). Net Present Value (NPV) NPV is a concept used to measure present value of future cash flow. This is done by discounting the cash flow by the discount rate. E.g. with a discount rate of 10%, the NPV of $5MM in year 2 is $5MM/(1 + 10%)2 Return on Investment (ROI) ROI is a performance measurement of how profitable the project or investment was. It is a percentage symbolizing the profit as a percentage of total investment. Usually, we calculate the ROI for the snapshot at the end of the 5-year timeframe. Payback Period This is the time it takes for a project to recover its initial costs and start generating a positive return for the company. Since most models are set at a 5-year horizon, the payback period should occur within 5 years. Source: Investopedia (for more information) If these concepts are new to you and unclear, examine the calculations used in the embedded Excel model (on slide 25).
  • 91. 91 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Financial Decomposition Opportunity Identification Opportunity Quantification Benefit Validation Business Case Finalization Phase 5 – Business Case Finalization The financial model provides a summary of the benefit case, cost of investment, and calculated financial metrics to help drive to a decision Financial Benefits Breakdown of the quantifiable, financial benefits broken down by Revenue Impact, Cost Impact, and Capital Impact Cost of Investment Breakdown of the costs involved Cash Flow Analysis Core Financial Metrics Source: This screenshot is taken from the Excel spreadsheet included with this presentation (slide 25)
  • 92. 92 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Sample Business Case Model As you identify potential benefits, map these benefits against the attributes of quantifiable and financial Double click to open the Excel financial model NOTE: If you are having trouble opening the embedded Excel file, you can download it online at this web address: http://learnppt.com/downloads/bcasemodel/
  • 93. 93 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Developing a successful business case is straightforward if you follow a few simple tips… DO s DON’T s   Ask for help/advice when struggling   Come with a range of possible situations/activities that need prioritising rather than a list of problems   Leverage the network with the organization   Listen, think, and speak in that order   Making unsubstantiated statements (present hypotheses as hypotheses)   Using data before you are sure you understand what it represents (definitions) and that it is uncorrupted and consistent   Extrapolating from an insufficient data sample (without being very clear that you are doing so and noting the implications)   Making assertions or promises to stakeholders without being sure they are true/you can keep them   Carrying out analyses/writing panels without being sure they are adding value to the project   Presenting unsourced data or conclusions that rely on undocumented assumptions   Guessing/bluffing—“I don’t know (yet)” is always better Dos and Don ts
  • 94. 94 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com … and avoid the common pitfalls!  “Oh data, you wanted me to get data!” –  Lots of war stories but no data   “There is no data” –  Sadly, too often this means the speaker is too lazy to plug through reams of paper to get at the data  Staying in data gathering and analysis mode  Stating the obvious –  “Increasing margins will improve profits.” –  We are looking for the “So-Whats”—keep on digging until you find them.  Finding a gold mine and quantifying the value of the shack built on it –  Too often we get bogged down in the detail and forget the bigger picture  “Validate, validate, validate—oh, does that mean I should have validated my analysis?” –  People are validation—averse because they do not understand the process or are afraid it will be abused  Letting the team dictate where the benefits will end up  Not plugging in to the authorisation network and selling strategy discussions  Staying holed up and not understanding each study’s findings and opportunities COMMON PITFALLS Common Pitfalls
  • 95. 95 Questions & feedback? Email me – dave@learnppt.com The diagrams in this pack are to be used by the original buyer only. learnppt.com Utilize these rules of a thumb as a sanity check and to help focus your business case development activities  Start the quantification process early on  Obtain early stakeholder or executive buy-in –  Baselines, findings, assumptions, etc.  The information you need will probably not be what the organization currently tracks in the financial systems  Do not underestimate the importance of the business case  Focus on both financial and intangible benefits  Follow the Pareto Principle / “80/20” rule  Understand the business not just the numbers  The benefit logic (how) is as important as the numbers RULES OF THUMB Rules of Thumb