Case Study One ABB

June 02, 2014

Monsanto Group






















ABB Case Study One
Question: Based on the Descriptor Data tab of the spreadsheet about the location of customers and the
sales potential of each account or prospect ALONE, to what companies would you direct the new direct
marketing program? Specify the accounts and customer, or prospect type.
1.) Immediately, we would go through the ABB Descriptor Data and note the companies with the
highest annual spend at ABB. It is logical to assume that these companies are existing ABB
customers and are already utilizing ABB as a primary provider of goods. We would then try to note
any correlations with annual spend and the district in which the customer is located. To make the
data more approachable, we sorted the ABB Descriptor Data table with the following filters: Firm
Chosen (A = ABB) Annual Purchase Volume (Highest to Lowest) District (Highest to Lowest)
which yielded the following results:
Ann. Purchase Firm
Customer Volume ($ K) District Chosen
44 44 $10,997 2 A
11 11 $1,722 3 A
37 37 $767 2 A
42 42 $752 1 A
21 21 $749 3 A
57 57 $736 1 A
58 58 $700 3 A
54 54 $660 1 A
3 3 $643 2 A
50 50 $584 3 A
69 69 $528 1 A
13 13 $466 2 A
61 61 $462 3 A
41 41 $444 1 A
45 45 $415 1 A
87 87 $395 2 A
24 24 $322 1 A
38 38 $182 2 A

It can be seen that of the 88 responses provided by customers in ABBs area, 18 of these responders
are already working with ABB. Furthermore, 11 of the 18 existing customers are spending over
$500,000 per annum on ABB goods which demonstrates segment loyalty in our opinion. To increase
market share, ABB would benefit mostly from maximizing its competitive segments potential
spend and taking customers from competitors. Of ABBs existing customers we would shift our
attention to the bottom 7 existing customers (customers 13 38 on the list above) to direct the new
marketing program to increase their existing annual purchase volume.
Next, we would shift our attention to winning over non- existing customers. In deciding on which
non-customers we would direct the new marketing program to, we would take note of which
districts ABB is already enjoying the most success in and focus marketing efforts in these districts as
ABBs brand has clearly been established here.
Customer Volume ($ K) District Chosen
42 42 $752 1 A
57 57 $736 1 A
54 54 $660 1 A
69 69 $528 1 A
41 41 $444 1 A
45 45 $415 1 A
24 24 $322 1 A Total Spend District 1 $3,857
44 44 $10,997 2 A
37 37 $767 2 A
3 3 $643 2 A
13 13 $466 2 A
87 87 $395 2 A
38 38 $182 2 A Total Spend District 2: $13,450
11 11 $1,722 3 A
21 21 $749 3 A
58 58 $700 3 A
50 50 $584 3 A
61 61 $462 3 A Total Spend District 3: $4,217

From the table above, ABB has its highest volume of customers in District 1, which interestingly is
the district with the lowest annual purchases. However, District 2 is by far the leader in annual
dollars spent with District 3 just edging out District 1. This trend is perpetuated with ABBs
competitors. The table below presents the amounts purchased by NON customers in each district.
District
Annual Purchases by
Competitors (in 000's)
1 $19,502
2 $40,189
3 $21,544
TOTAL $81,235

To gain market share (and win over new customers), ABB would benefit greatly from focusing its
marketing program in District 2 as this represents half of the total market share enjoyed by ABBs
competitors in addition to being the District that ABB already enjoys the most success in with its
current customers.
The data shows that there are several customers who despite investing in ABB equipment would still
choose a different firm. The ABB marketing program should focus their attention to these
customers so that ABB will be their primary choice. The marketing strategy will have to be executed
in different districts for different customers. These customers have the highest annual purchase
volume (above $1M) with ABB and yet still prefer ABBs competitors as first choice. The table below
specifies.




Ann.
Purchase Firm
Customer Volume ($ K) District Chosen
35 $14,798 2 Edison
43 $12,514 2 Westinghouse
66 $9,793 3 GE
32 $6,270 1 Westinghouse
84 $1,404 3 GE
17 $1,364 3 GE
74 $1,219 1 GE
20 $1,009 2 GE

2. Which variables are the key drivers of choice in this market?


Based on the above table, the key drivers of choice in this market are (in order of ranking):
1. Energy Loss
2. Quality
3. Price
4. Problem Solver
5. Warranty
6. Ease of Install
Although Maintenance has a positive value estimate, it is not statistically significant.
B. Based on your analyses, on which firms would you focus your efforts? Why?
Based on our analysis, we would focus on our efforts on GE and Westinghouse. We would focus on
these companies because improvements in ABB variables shows the elasticitys to have the greatest
impacts on these companies. The table below illustrates the top 4 keys drives.
Variables / Coefficient
estimates
Coefficient
estimates
Standard
deviation
t-statistic
Energy Loss 2.655609373 0.673705707 3.941794387
Quality 2.639411874 0.687749269 3.837753079
Price 2.180581123 0.586578426 3.717458784
Prob Solver 2.032180072 0.54967581 3.697052037
Warranty 1.140702152 0.330994613 3.446286152
Maintenance 0.59369178 0.437028185 1.358474809
Ease of Install 0.520022504 0.172875214 3.008080166
Const-1 -0.12379144 0.678548909 -0.182435544
Spare Parts -0.132620299 0.217569998 -0.609552329
Const-2 -0.671217439 0.719410204 -0.93301073
Const-3 -0.687234929 0.715046053 -0.961105829
Baseline n/a n/a


3. Assume the marketing efforts targeted at companies in the Loyal and Lost categories result in no
incremental gain. On the other hand, suppose that you could retain or win half the companies in the
Switchable and Competitive segments with this program. How much improvement in sales
productivity can you realize by applying this choice model to the allocations of your efforts?
We determined the competitive and switchable groups utilizing two means. The first method was to
look at the Predicted and Observed choices on the Estimation tab. We took customers who were
predicted ABB and chose a competitor as well as customers who were not predicted as ABB but chose
ABB and placed them into this pool of customers to focus. The second method was to look only at the
probabilities. We sorted the ABB column to only show probabilities below 70% and above 30%. We
choose this because we felt probabilities above 70% were Loyal ABB customers and probabilities below
30% are Lost customers.
We added all the customers from the two different methods and looked at the value for the annual
purchase on the Descriptor Data Tab (see table below). The total amount of customers was 15% of the
market share. We added the annual purchase price of all the customers and took 50% of that value
since the question stated to assume we can win or retain half the customers. With this method, we can
improve our sales productivity by $50,000.


ABB GE Westinghouse Edison
Elasticities of Energy Loss 4.643836254 -1.516862885 -1.287844244 -0.724631277
Elasticities of Quality 4.317409462 -1.284260603 -1.305749559 -0.677423272
Elasticities of Prob Solver 4.098007443 -1.298963958 -1.180654321 -0.628140544
Elasticities of Price 3.634615238 -1.161306586 -1.022970805 -0.576942029
Customer Ann. Purchase
4 562 $
7 664 $
11 1,722 $
13 466 $
16 894 $
26 899 $
36 511 $
37 767 $
41 444 $
50 584 $
61 462 $
84 1,404 $
86 480 $
Total 100,126 $
50% Total 50,063 $
4. What other recommendations would you offer to ABB Electric to improve its segmentation
marketing program?
ABB Electric should protect its market share by monitoring the ABB Electric Loyal Segment. I
would recommend using the Estimation Sample Details tab to analyze which customers reside in this
loyal segment.
The marketing team at ABB Electric can leverage the customer probability data to define which
customers are loyal to ABBs power transformers and should be marketed to when it comes time
to repurchase transformers. Using this data the decision maker can efficiently use sales resources
with the goal of making these customers lifetime buyers and defending their market share.

The chart above is an example of customers that would be ideal to protect. Customers in this
segment have a higher probability that they would buy from ABB Electric rather than the next
closest competitor. With a retention system in place will improve ABBs retention rates and thus
improving profitability. Proactively stopping a customer from leaving is far easier than trying to win
them back once they have left.
5. Comment on the uses and limitations and possible extensions of this modeling approach.
Regarding uses and limitations adding fields that could be used to track loyalty would be a useful
feature. Such data as: how long has a particular supplier been used and have there been any recent
changes. Another data field that would be beneficial is tracking how and/or who the decision maker
is for partners. Knowing how businesses make decisions and who carries the most weight in this
process will allow the company a strategic advantage in gaining and/or retaining the business.
Finally, tracking historical data and setting a frequency, building data trends around this information
to make efforts to improve percentages.

Other possible extensions of this approach could be to narrow the focus down to the marketing of
particular products. As well as, use the marketing program to develop an internal auditing system.
Asking questions such as: If we know we need to improve quality what is affecting our quality in
the first place? or If we need to improve our prices how come our prices are high in the first
place? Using this data and thought processes we should be able to look inward and improve the
overall product our company is putting out.