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Advantage Asset Advisor Funds:

The KnowledgeSCORE Lead Optimization Pilot1

On Friday evening, March 21, 2014, Ms. Anna Turner, Director of Business Analytics of
Advantage Asset Advisor Funds (AAAF), logged into the portal of the KnowledgeSCORE pilot
and began to review the results of the four-month lead optimization program. Throughout the
pilot, the marketing analytics team had reported dramatic sales improvements; however, from the
sales management team, she knew that the implementation of the pilot had been uneven.

The pilot was designed to analyze the company’s sales leads and predict the likelihood that any
particular lead would make a purchase during the next thirty days. The KnowledgeSCORE pilot
prioritized the top 75 leads for each salesperson, each month, and reported these
“KnowledgeSCORE leads” directly in AAAF’s customer relationship management (CRM)
system. All salespeople were able to access prioritized leads in the AAAF CRM system, but
there were rumors that some of the more experienced salespeople had ignored “the no-
Knowledge leads” and instead followed their own call plans. At least two territory sales managers
were becoming increasingly vocal in their skepticism, claiming that “all these so-called ‘scored’
leads would have been called anyway” and that “our best salespeople are better at finding good
deals.”

On Monday morning, Turner was scheduled to brief the company’s chief sales officer and chief
marketing officer and make a recommendation to expand or end the KnowledgeSCORE lead
optimization program. Turner estimated that the cost of expanding the program to AAAF’s entire
sales force and continuing it for another year would be in the range of $180,000-$200,000.

The Mutual Fund Industry

In 2013, United States mutual fund companies had more than $11 trillion in assets under
management (AUM). The industry was considered unconcentrated, with 650 companies
managing more than 7,500 funds. That said the top 25 firms in the industry held 73% of the
AUM.

From 2009 through 2011, fund holders redeemed almost $550 billion, as more and more Baby
Boomers reached retirement age and average savings rates declined to 3% from the thirty-year
historical average of 8%. Most industry analysts forecasted increasing fund redemptions and
greater competition for new fund sales.

Mutual fund industry channels. Aside from investments made through their employers, most
investors (81%) purchased mutual funds through professional financial advisors. In the U.S., a
total of 300,000 professional financial advisors formed the core of the financial advice network.
Because most of these professional fund advisors worked with a short list of preferred fund
companies, there was competitive pressure to sell to the most productive professional financial
                                                                                                               
1
Dr. Gordon Swartz, Founder of GTM Advantage, Mr. Bill Sheldon, Chief Solutions Officer of Angoss Software, and
Prof. Raj Venkatesan, Bank of America Research Professor of Business Administration, prepared this case as the basis
for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. The
data in the case have been altered to protect confidential and proprietary information. The case is not intended to be
relied upon as a public disclosure document, for investment purposes, for research or for any other purpose, other than
discussion in a classroom setting. (Version 08may14)
Copyright © 2014 by Gordon Swartz, Bill Sheldon and Raj Venkatesan.

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advisors and to retain them as long-term fund purchasers and recommenders. When financial
advisors redeemed funds for their investors, it was considered good sales practice to suggest
alternative funds as potential replacements, and fund company salespeople sometimes saw
redemptions as “cross-sell” or “up-sell” opportunities.

Advantage Asset Advisor Funds

Advantage Asset Advisor Funds was founded before the Great Depression and through “prudent
investing and wise counsel” survived and prospered. By 2013, AAAF was a Top 25 firm in the
mutual fund industry, and the company had more than $350 billion in AUM.

AAAF sold more than 100 different mutual funds, categorized by asset allocation (stocks vs.
bonds, time to maturity and risk), risk (conservative, moderate or high growth), income
production, full and partial tax exemption and domestic vs. international holdings. In addition,
AAAF sold independent retirement accounts (IRAs) and college savings plans (529 accounts).
Most fund purchases were subject to a front-end sales charge of 2.5% to 5.75%, which were
typical for the fund management industry.

AAAF Go-to-Market Organization. AAAF sold its financial products to the network of fund
advisors through a company sales force; the network of fund advisors then resold AAAF products
to individual investors. Almost all fund advisors purchased and resold financial products from
more than one mutual fund company.

The AAAF sales force was organized into 75 geographic territories. Each territory included
1,400-1,600 fund advisors, who were covered by one field sales person and one inside sales
person. Although the field sales person and the inside sales person most often worked
autonomously, calling on different fund advisors, occasionally they would coordinate a series of
face-to-face meetings and telephone sales calls. Field salespeople averaged 120 face-to-face
meetings each month, and inside salespeople averaged 175 telephone sales calls.

The KnowledgeSCORE Pilot. During September-October, 2013, AAAF’s business analytics

team extracted data from the company’s CRM system, transaction database and web logs,
combined these data with purchased third-party data and then developed a statistical model to
predict the likelihood that any particular fund advisor would make a purchase from AAAF within
the next 30 days. They also developed models to predict fund advisors likely to redeem funds as
well as the “next best product” to offer each fund advisor. The business analytics team validated
the lead-scoring model on a hold-out sample of transactions, and they claimed that the predictive
results were “excellent.”

The KnowledgeSCORE lead optimization pilot began in November, 2013 and included 20 of
AAAF’s geographic sales territories. During the pilot, the lead-scoring model was recalibrated
each month to provide new priority leads for the coming month. The model was applied to all
fund advisors who had not been met or telephoned within the most recent thirty days. (Fund
advisors who had been covered by sales during the past thirty days were excluded from the lead-
scoring model, because they had already been targeted by the sales team and often had sales
transactions in progress.)

From all the scored leads in each territory, each field and inside sales person was given the 75
“KnowledgeSCORE leads” with the highest probability of purchasing from AAAF within the
next thirty days. The high-probability leads were placed directly into AAAF’s sales CRM system
and published directly to each sales person’s lead folder. Each high probability lead was

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highlighted in the CRM system with a star ranking: one star for priority leads and five stars for
the very highest priority leads.

During the KnowledgeSCORE pilot, individual salespeople used their own discretion in deciding
when and how to use the prioritized leads. Some salespeople quickly adopted the system and
covered all of the KnowledgeSCORE leads, while other salespeople continued to target their sales
calls based on their experience and knowledge of the individual fund advisors in their territories.
(See Exhibit 1 for a summary of each pilot salesperson’s utilization of KnowledgeSCORE leads
compared with their total selling time.)

The KnowledgeSCORE pilot also included a sales management portal that allowed each territory
and division sales manager to monitor sales performance. The reports could be aggregated and
summarized by time period, sales region and sales district. Sales managers and individual sales
people could also see the detailed results for their territories. (See Exhibit 2 for a summary of
sales results for the KnowledgeSCORE pilot in February, 2014.)

The Northeast and Southeast Sales Regions. Mr. Mike Nichols and Mr. Henry Hernandez
were respectively the directors of AAAF’s northeast and southeast sales regions. Because of the
population density of the eastern U.S., their sales regions contained some of the most productive
fund advisors, and they managed some of the most experienced salespeople in the AAAF sales
force.

During the first month of the KnowledgeSCORE pilot, both Nichols and Hernandez reported that
some of their salespeople were selling large transactions to fund advisors who were not
prioritized as KnowledgeSCORE leads. In the following months, they continued to report that
their best salespeople were better than KnowledgeSCORE at identifying high-value sales
opportunities, and they also openly counseled their salespeople to define their own sales call
plans. In early March, 2014, Nichols and Hernandez wrote an email to the chief sales officer,
complaining that they did not “want some IT geek who has never been in the field and never met
a fund advisor telling our best salespeople what to do.” They attached a summary of February,
2014 transactions to their email. (See Exhibit 3 for a partial listing of Northeast Region
transactions.)

The KnowledgeSCORE Decision

As Anna Turner prepared for the Monday morning briefing, she paged through the sales
performance reports in the KnowledgeSCORE portal. She reviewed the summary results for each
month, and she reviewed the monthly lists of the largest transactions in each territory, including
those that had been identified by the scoring model and those that had been identified by the
salespeople. As she looked at the charts and tables of numbers, she asked herself:

• Does it really make sense to spend $200,000 to expand this program to the
entire sales force?
• If so, how do I make a convincing argument that addresses the experiences of
the Northeast and Southeast regions?
• If not, what should the business analytics team work on next?

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 Exhibit 1
Percentage of Time Spent on KnowledgeSCORE Leads
(Utilization) versus Total Selling Time (Capacity)

AAA Funds

The size of each bubble depicts the value

of KnowledgeSCORE leads that were not
called in each sales territory, e.g.
102 = $665,000 807 = $4.3 million
KnowledgeSCORE Utilization

KnowledgeSCORE Leads as a % of Available Capacity

4
 Exhibit 2
Average Gross Sales for Sales Calls on
KnowledgeSCORE Leads and Other Leads

AAA Funds

Knowledge Not
SCORE Scored
Priority Priority

KnowledgeSCORE

Not Priority

Knowledge Not
SCORE Scored
Priority Priority
5
 Exhibit 3
Northeast Region Transactions
Identified by Salespeople in February, 2014

AAA Funds

Not KS Priority

Not KS
Priority

Not KS
Priority

Not KS
Priority

Not KS
Priority

Not KS
Priority

Not KS
Priority

Not KS
Priority

Not KS
Priority

Not KS
Priority

Not KS
Priority

Not KS