Integrating the Demand Side:A Holistic Approach to the Customer

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Exceptional customer service and building strong relationships are keys to long-term growth. An orchestrated approach across the demand-side functions can help close the gap between the value chains.

To achieve profitable growth, companies need more sophisticated capabilities to create and sell offerings that maximize value to both customers and the companies alike. In this quest, businesses spend many hours and millions of dollars answering questions such as:

“What should the pricing strategy be?”

“What marketing analytics should be used?”

“How can the company better serve customers through differentiation and segmentation?”

“What can be done to better enable the sales force to meet stated goals?”

Unfortunately, these questions often exist in isolation, as companies evolve their product development, marketing, pricing, and sales and customer support functions in silos. Such a segmented approach typically results in disparate tactics that may serve overall corporate and brand strategies, but do so in a highly inefficient manner that produces suboptimal returns.

To make matters worse, these various functions often send contradictory messages to customers that cause costly dissatisfaction. Lower-level, granular choices usually receive significant support from leadership, but macro decisions that span demand-side functions are left to instinct. If companies wish to develop true competitive advantage from existing investments in leading capabilities, they must make integrated, holistic decisions that take the customer into account across all demand-side functions.

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The progress of recent years Customer centricity has become increasingly important to companies in the past decade. Technology such as social media and mobile devices has greatly changed the nature of interactions between customers and brands, too. As stated in Forbes, “Consumers have found their voice: it’s powerful and they’re not afraid to use it.”1 As a result, companies now need to know exactly what each customer set wants and consistently provide it to succeed. Nissan demonstrates an excellent example of how brands are embracing this mindset, creating a customer experience task force and appointing its first chief customer officer.2

Not surprisingly, demand-side functions—such as the pricing, marketing, selling and serving of a company’s offerings—have grown far more sophisticated to better meet customer needs (see Figure 1). Even the way businesses develop and bundle products has become more advanced, relying on analytics and predictive algorithms to determine the optimal configuration of product features by customer. This approach is being used by manufacturers, high-tech companies, retailers and more. It’s also being used by a few leaders in the Insurance industry who are “playing to win” to meet customers’ expectations by : 1) being truly customer-centric, 2) offering more relevant and meaningful products and services, and 3)

exploiting digital technologies leveraging advances in big data and analytics.3

Many companies have also pursued new strategies, tactics, analytics, processes and tools for specific demand-side functions—perhaps by adopting a holistic pricing strategy, implementing next-generation marketing analytics, or upgrading tools to improve sales and customer service. Although the returns from enhancing a single function are significant, it only solves part of the problem. It will not allow leadership to fully understand the integrated view and the tradeoffs of each decision, which helps companies to better meet customer needs at lower costs.

Figure 1: The full customer relationship management capability

Marketing Management

Opportunity Management

Account Management

Configuration Pricing Management and Execution

Quote to Order

Infrastructure enablement (customer/product/partner data, content management)

Quote and Proposal Management

Order Management

Contract Management

Billing/ Invoicing

Marketing campaign

Generate opportunity

Customer creation

Self-service configuration to order (low touch)

Pricing/o�er administration

Quote output Order orchestration

Contract creation

Invoice creation

Lead generation Sales forecast Territory assignment

Build to order (high touch)

Pricing execution/o�er presentment

Order capture/quote to order integration

Order fulfillment and provisioning

Terms and conditions/master services agreement

Revenue recognition

Demand generation

Customer credit management

Expert configure to order (high touch)

Pricing analytics

Multi-channel quote management

Supply chain integration

Professional services

Customer locations

Engineers to order

Pricing optimization

Proposal generation

Managed service

Hierarchy Setting up pricing strategy and rules

Upstream processes

Core configure price quote process

Core pricing processes

Downstream processes

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Better decisions at the bottom, but what about the top?

Integration across the five key dimensions

Imagine a scenario in which a senior executive is in charge of pricing for a large company. The firm has made significant investments in leading-edge capabilities to better understand customer needs. Product managers work with the executive’s team to leverage pricing to drive sales, margins or customer traffic. To make the best decision, the team uses a guiding strategy, a series of situation-specific tactics, advanced analytics, a clearly defined organization and a state-of-the-art toolset to provide pricing recommendations.

While it sounds like the company’s pricing decisions are solid and product management is sophisticated, the decisions are still being

To maximize returns on the investment in advanced capabilities in product development, marketing, pricing, and sales and customer support—and develop true competitive advantage—companies need to better integrate their demand-side functions. It is critical to understand what customers value across all functions, as well as tradeoffs they are willing to make, just as much as knowing what it costs to provide them. Doing so allows a company to affordably tailor its value proposition to specific customer needs and wants better than competitors.

made in a silo. What made the product managers believe that pricing was the best way to meet their goals? Why did they choose it over a feature reconfiguration, a promotion, rebranding, more lenient payment terms, or a host of other levers the company could have pulled?

Odds are this higher-level and far more important decision, spanning demand-side functions, employs significantly less rigor than those made at a more granular level. As a result, the choices made, even if they align with overall corporate and brand strategy, will often prove suboptimal. In fact, without an integrated view across all aspects of the value chain, a company

This has to occur across the five key dimensions of strategy, tactics, analytics, process and organizational structure, and tools and technology. (See Figure 2 for a checklist.) Think of the metaphor of a car trip: a driver decides the destination (strategy), determines the means of transportation (tactics), chooses the best routes (analytics), splits up the travel and preparation responsibilities (process and organizational structure), and leverages a GPS (tools and technology) to find the destination and avoid traffic.

could just as often be using the most costly approach to meet its goals, rather than the most efficient.

Consider a car manufacturer that wants to invest in a new marketing campaign to try to reinvigorate an older brand. If the manufacturer’s car designs have not changed to address consumer needs, i.e., the company is trying to solve a problem with a marketing campaign versus though the product development process, it is potentially making a costly error that could further erode its brand.

Without an integrated view across all demand-side aspects of the value chain, a company could be using the most costly approach to meet its goals, rather than the most efficient.

1. STRATEGY Is the destination a specific address or a general direction?

Odds are each functional area, from product development through customer support, has a stated strategy. However, it is rare to see all these strategies—developed by different resources at different times to serve different goals—working in perfect harmony. For instance, do levels of after-sales support align completely with pricing, marketing and product development decisions? Has it been done in the best possible way? Until a company is absolutely certain, the chance of misalignment will always exist.

The first step towards harmonization is to understand how the individual strategies of each function align to overall brand image and corporate goals. While this may seem basic, most strategies fall short because they are not sophisticated enough to maintain consistent messaging under many of the changes that can occur in the marketplace. A good check to determine if individual strategies are developed enough is whether or not they provide an overarching vision across category roles and growth intents, customer segments and needs, competitive sets, channels to the market, and cost structures.

If individual strategies meet these requirements, they will prove much easier to integrate into a cohesive whole. Taking this more sophisticated, complete view within each function will not only provide more consistent alignment with brand and companywide goals, but it will also force all parts of the organization into thinking about how different aspects of the demand-side functions relate to one another. Moreover, it allows easier adaptation to market changes over time, such as when emerging products become mainstream or competitor power shifts. Rather than requiring a major shift in the overall strategy, merely one part needs to change.

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An aftermarket auto parts retailer saw the advantage of more enhanced strategies, when it found its existing, simple pricing strategy was becoming too costly. To meet its goal of being a low-price leader, the retailer had been underpricing competitors on every product, in every market. Such a strategy was unsustainable. With a new pricing strategy, the retailer learned it could maintain its brand image by underpricing relevant competitors on certain key items within each market, and just remain reasonably aligned with competitors on the vast majority of its assortment. Understanding how pricing worked with product portfolios, customer segments, competitors and markets saved millions in profits each year.

2. TACTICS When off-roading, is it best to take the sports utility vehicle or the luxury sedan?

A strategy does little without the appropriate playbook of tactics to execute it. Unfortunately, companies often develop tactics in functional silos to support the individualized strategies described earlier. For example, when faced with a competitive move in advertising, a company will react with advertising of its own. The idea of looking outside of the function for a better method of responding is rarely part of this mindset. In other words, the company efforts and resources that go towards avoiding knee-jerk reactions may end up designing a structured approach that supports them. This result is hardly desirable.

When a strategy is single-faceted, only the employees working within a single function develop the tactics to support it. Since they are limited to the area they directly control, the outcome can only be fragmentary and imperfect. Companies can sidestep this problem by making sure the tactics support the broader, more enhanced strategy, and recognizing that the tactics will impact additional functional areas, as well as require collaboration with a larger variety of resources.

Although this new set of tactics will be a vast improvement, developing the playbook will necessarily be a more involved process. Since the strategy looks across and integrates multiple functions, the team developing the tactics needs to do so, as well. The mindset needs to change from marketing developing marketing tactics to deal with competitive marketing movements, to a cross-functional team developing cross-functional tactics to respond to competitive marketing movements. This needs to happen across all demand-side movements by competitors. If responding to a competitor’s advertised price cut, a company should not be limited to a pricing response. The brand image and overall message will provide additional options to react, and taking advantage of these typically missed opportunities can have significant benefits.

To illustrate this point, a large home improvement retailer decided to take a different approach when a competitor entered one of its markets. The competitor advertised that it offered the same quality products, but with better service and at lower prices. Under the retailer’s previous set of tactics, the individual demand-side functions would have responded in silos, by adding store personnel, improving service levels and matching prices on every item where the competitor was lower. Instead, the retailer opted for a cohesive response that built on a full understanding of the customer. The retailer added store personnel where that market’s customers needed it most, expanded services in other categories to provide more value, and then used price cuts only in remaining areas where customers were most sensitive. By avoiding redundancies and overreactions, the retailer maintained market share while saving more than $9 million in a single competitive entry in a single market area.

3. ANALYTICS Is it smarter to take the fastest route into Manhattan, or try avoiding all bridges and tunnels?

Predictive analytics has become an area of intense interest in the past few years. Strategies set a direction, tactics outline what to do and analytics determine how much, which helps to optimize decisions. However, many companies are not using analytics to their full potential. Since the analytics were designed by individual functional areas to meet segmented goals, they can actually exacerbate the problem that plagues the demand-side. When harnessed appropriately, however, analytics can not only tell how a function should best address a problem, but also help determine which function can do it more efficiently.

Many companies have already developed advanced algorithms to predict customer and market responses to various actions within each functional area. Rather than throwing this investment away in

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favor of a new set of analytics, there are steps companies can take to use existing algorithms in a more integrated fashion. Start with the employees running the analytics. Do they work within a function with responsibilities for just that area? How well do they know the analytics at work in other areas? Unifying all analytical resources and processing into a single area or “center of excellence” can provide insight into tradeoffs between functional areas, when responding to different situations.

For example, some agribusiness and nutrition companies have benefitted from bringing together various sources of analytical talent into a single group responsible for finding insights. Each company’s internal group, typically consisting of resources from marketing, sales, pricing, finance, HR and IT, can focus on analytics ranging from customer and product strategy through to cost-to-serve considerations. Working together to pool analytical and functional knowledge, such a group can find new, cost-effective methods of serving customer needs and wants, while also cutting costs.

Next, look at the analytics in use to determine their ability to serve a multifunctional purpose. After all, companies rarely make decisions in isolation, but they tend to predict effects as though they were. For example, a business can usually calculate potential returns on marketing investments, but how does the return change when the marketing is being used to advertise a new low price, an expanded service offering or another permutation in the host of decisions? In most cases, companies will not need to recreate their analytics to start generating these insights, but they will need to make adjustments to get them interacting appropriately. As an intermediate step, try calculating a tradeoff factor from historical data to bridge the gap.

4. PROCESS AND ORGANIZATIONAL STRUCTURE Should others help drive the next 1,500 miles?

Continuing with the trip metaphor, the next question is who is responsible for what? A company’s process and organizational structure has to support the integrated approach to the customer. Operating models have evolved over the past three decades, shifting away from the vertical business unit silos that dominated the 1980s, to regional shared services models, to global functions that work across the business. These functional silos had potential to keep the function consistent across all points of contact with the customer, but often led to inconsistencies between the various demand-side elements.

Although operating models continue to evolve, a functional-based mindset still exists, rather than an outcome-based one. How often has the pricing department attempted to blame sales for poor profitability, who in turn blame marketing research, who in turn fault another function? Imagine the potential if all of these functions instead genuinely collaborated to find the best solution to each issue. It is possible to accomplish this without moving back to segmented businesses, but it requires more than the right hierarchical structure; it also requires the right processes and compensation to keep resources from falling back into their comfort zone or sphere of interest.

First, consider where all of these functions come together. In the ideal state, several firms have found it beneficial to develop “task forces” assigned to groups of customers, consisting of

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representatives from marketing, sales, product development, pricing, customer service and other areas, as appropriate. These task forces report into a member of the executive team dedicated to specific sets of customers. All members are compensated on overall outcomes, not on the performance of individual areas. This is a significant cultural change, and one that will require a phased approach, but even small steps toward integrated teams can drive returns.

During the recent years of consolidation, a leading financial services firm discovered the benefits from integrated decision making. Many times, financial advisors (the sales force) would clash with pricing,

marketing and corporate strategy because what was best for the firm’s growth and profitability was not always best for the advisor’s compensation. However, simply changing the compensation structure would not work if the advisors had little involvement in the other functions. An annual series of strategic refreshes brought these resources together to plan the year’s goals, looping leading advisors into the process of setting direction for various clients, while a policy of “discount sharing” better aligned the advisors’ objectives with those of the firm. This led to more creative and integrated solutions to attract target clients without simply cutting price and expanding services until the formerly valuable clients actually eroded profits.

5. TOOLS AND TECHNOLOGY Does the vehicle supply the latest traffic and weather updates to reach the destination quicker?

The toolsets that support and enable the various demand-side functions can act as shortcuts to expedite a trip. If selected carefully, they help companies achieve goals while freeing up employee time for more valuable activities. For this reason, along with the significant investment it will usually entail, any decision around enabling technology requires rigor and participation from multiple areas, but it is typically not done that way. More often, a toolset serves a discrete functional area and the requirements evolve almost solely from that function. Rarely do product engineers weigh in on whether the tool that evaluates scenarios for marketing return on investment meets their development needs, but they should.

The continued progress of big data, as well as steady improvements in the integration with ERP and CRM systems, should further improve the net present value of an investment in enabling technology. If competitors have developed their own integrated demand-side capabilities and are using a big data solution to put it into practice, then a company will need to equip its sales force with an appropriate toolset to deliver optimized quotes. Fragmented systems often prove incapable of providing sales with comprehensive, just-in-time information to make better business decisions.

Think about the crossover of analytics required for fully integrated decision making, and how the toolsets that enable their use should allow a similar crossover. The proper toolset to support an integrated approach has to account for interactions between product management, pricing, marketing, promotions and more. For example, if the analytics exist to predict how functions interact, then a product manager needs the ability to model scenarios that account for them, and this will only occur if technology enablement ceases being a functional decision.

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The hospitality industry has long made use of tools and technology that integrate several functions, such as pricing, inventory management and customer segmentation, under what is termed “revenue management.” As a result, it is common practice to optimize pricing and offering features based not only on the type of customer, but also on the buying context, supporting the ability to choose from a host of options to improve profitability and customer satisfaction. These integrated tools address the requirement for a more sophisticated and immediate response to customer needs, making them right for any industry, especially as product features expand, trends come and go, more resources are necessary to improve service, and portfolios become more complex.

Furthermore, integrated decision making requires an integrated approach to data. As capabilities evolve, many ad-hoc analysis methods and offline spreadsheets spring up across an organization. While this provides some benefit, it poses the risk of disparate analyses using different sources of data to provide multiple versions of the truth. Keeping data, cleansing approaches and modeling techniques consistent across functions from the beginning will avoid clashes about whose model is wrong, or who made a mistake in their source data. A territorial battle over which function’s toolset is superior is the last thing needed in a quest for a better integrated one. Avoid it at all costs.

STRATEGY

Does the strategy for each function align to overall brand image and corporate goals?

Are they sophisticated enough to maintain consistent messaging as the market changes and reacts?

Do they require the organization to think about how di�erent demand-side functions interact?

Do they allow for easy refinement and adaption to market changes over time?

TACTICS

Are the tactics supporting a much broader and more enhanced strategy?

Does the playbook for each function include responses from other functional areas?

Was the team who created the playbook composed of cross-functional resources?

Is brand image and overall message providing additional flexibility in the response?

ANALYTICS

Do the analytics tell which functional area to leverage, as well as how to do so?

Does the company have a single, integrated analytical team to maintain models and provide insights?

Are the individual functional algorithms capable of interacting with one another?

Has the company calculated tradeo� factors between various functional responses?

PROCESS AND ORGANIZATIONAL STRUCTURE

Have the functional resources left behind the traditional “us versus them” mentality?

Does the company have the right hierarchical structure to bring together functional resources at the right level?

Do the processes require cross-functional collaboration prior to responding to customer needs?

Does the organization incentivize resources on overall outcomes rather than functional performance?

TOOLS AND TECHNOLOGY

Have multiple functions participated in the design and selection of the toolset?

Do the tools account for the interactions between di�erent functional areas?

Can the company model scenarios based on actions taken across multiple functions?

Are the data inputs, cleansing approaches and modeling techniques consistent across functions?

Figure 2: Demand-side function integration checklist

Accenture Integrated Quote-to-Order Solution

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Pricing has evolved from a supply and demand curve to the value of a company’s product in the context of its customers. In order to meet customers’ needs and understand their willingness to pay, evaluation criteria and decision process, it is essential to invest in big data and collect valuable context to set prices rationally. At the same time, product and services offerings have grown exponentially in the past few years, and the opportunities to cross-sell and upsell have increased in parallel. To continuously improve win rates, sales organizations must understand each customer’s specific needs in order to tailor the most attractive proposal—and beat the competition.

An integrated Quote-to-Order solution, especially one based on a software-as-a-service (SaaS) model, can reduce process inefficiencies and allow the sales force to respond swiftly and spend time building relationships with customers instead of tedious administrative tasks. It also allows a company’s pricing organization to build an audit trail, develop analyses and models to proactively bundle different combinations of products and services, and set optimal prices. With these strategies in place, companies can achieve sustainable profitability gains.

In response to this need, Accenture developed an integrated, end-to-end Quote-to-Order solution. The solution is designed to help improve sales representatives’ efficiency and effectiveness, improve margin and accelerate time to value. Companies can host the Accenture Quote-to-Order solution in the cloud, which alleviates the need to invest up-front in new hardware, networks and software licenses. The solution can be implemented for one or multiple functions and scaled as needed.

How do companies ensure they are delivering an accurate quote on an ideal product mix? At the best price? In the fastest time possible?

Conclusion

Integrated, holistic decision making holds a great deal of potential for today’s companies. Businesses have the opportunity not only to provide customers a united, consistent message across all points of contact, but they also can do so in the most efficient and effective way possible. However, this requires that higher-level, leadership decisions spanning functions from product development and marketing, through pricing, sales and customer support, are just as sophisticated and well supported as those made at a more granular level.

References1 “The Key to Building Customer Relationships: Serve Your Own Team First,” Forbes, Nov. 15, 2012, http://www.forbes.com/sites/microsoftdynamics/2012/11/15/creating-new-relationships/

2 “Nissan’s Increased Customer Focus Leads to Higher Satisfaction Scores,” Nissan press release, Nov. 18, 2013, http://nissannews.com/en-US/nissan/usa/releases/nissan-s-increased-customer-focus-leads-to-higher-satisfaction-scores

3 “The Digital Insurer: 2014 Digital Consumer-Driven Innovation Survey”, Accenture, 2014, http://www.accenture.com/us-en/Pages/insight-consumer-driven-innovation-survey-2013.aspx)

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Before diving into a specific function’s response, a company needs to better understand which function should respond. What is the total offering package that presents the best value proposition to the end customer? Until the strategies, tactics, analytics, processes and technologies start supporting this, companies may be taking exceedingly costly paths in the journey to meet their goals.

ABOUT ACCENTURE Accenture is a global management consulting, technology services and outsourcing company, with more than 293,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.

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CONTACT USTo learn more about how Accenture is helping companies develop an integrated, holistic customer approach, please visit www.accenture.com/strategy or contact one of the authors:

Anthony Milani Managing director - Accenture Strategy, Sales & Customer Services, Pricing and Profit Optimization anthony.k.milani@accenture.com

Calvin Chow Manager - Accenture Resources, Pricing and Profit Optimization calvin.chow@accenture.com

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