Analyzing your customers is key to profits
It seems as if business is always undergoing transformation. We’ve gone from TQM (Total Quality Management) and BPR (Business Process Re-engineering) to Six Sigma and ISO.
We’re always trying to improve because quality = profits. (This is a little like that old chestnut that time is money. Time IS money and so is the channel and sales method you use in the time that you have).
In these times of a tight economy — caused partly by our global economy where things are made more cheaply in China, India and other countries, this increased globalization means your competition is also global and can produce products more cheaply than you can. They are targeting our top customers. Think of Toyota compared to General Motors and now translate that to ALL industries. It is happening and to stay competitive you need to become more efficient.
Add to globalization the leveling of the playing field thanks to the internet. Now small companies can compete with large and reach the same customers. Mom and pops are as much your competition as the global firms. Add to the internet and globalization the ideas of cost management / reduction, restructurings, mergers, etc. Change, nothing but change! This dynamic world has changed the competitive landscape by:
- More competition for profitable customers,
- More demanding customers less likely to remain loyal,
- Customer sophistication requiring quick access to service via multiple channels.
All of the above makes it critical that companies understand their current and prospective customers from both an economic and behavioral perspective. Many medium and large companies think they have embraced customer relationship management (CRM) as an important element of their corporate strategy. But have they? CRM is not just a call center automation application or giving your sales reps a laptop with funnel tracking software. If a company doesn’t know which products are selling and which aren’t they are losing money. If a company is spending millions on automating the sales reps but don’t know what the cost is to keep that rep in the field compared to the margins and revenue that rep is generating it is about as useful as throwing money out of a window.
To take advantage of CRM programs (Siebel, SAP, Microsoft CRM, ePiphany, Salesforce.com, Oracle (now owner of Siebel), etc.), companies have to do more than invest in customer-facing solutions such as sales force automation, customer service centers, marketing automation, business to consumer (B2C) Web sites and others.
While these applications help facilitate better service and more efficient interaction with customers through each respective channel they don’t add much to the bottom line if they have been implemented as independent, non integrated solutions. As a result, they have yet to make several important CRM objectives, including:
- One view of the customer in a vacuüm (if that),
- No consistent and thus accurate customer information across the enterprise,
- Duplication of service and sales efforts (costly and possibly irritating to the customer),
- Islands and silos of information that is untapped.
If companies don’t have integrated customer information that they analyze to interpret which customers are profitable and then leverage that information they cannot apply the customer analytics (e.g., propensity to buy, channel preference, churn analyses, segmentation, target marketing, etc.) required to deliver real value from CRM.
Duplicate Customer information or one view of the customer?
Whereas CRM was the great hope of the late 1990s now the bloom is off the rose. There have been many articles published about the high failure rate of CRM projects. Many companies bought front office CRM applications (like sales force automation) but it is like buying a horse without a saddle — or a car and then neglecting to fill the tank with gasoline — they didn’t have an end to end CRM plan in place.
Far too many companies have implemented new CRM technologies without changing the basic processes for serving and interacting with their customers. If you throw technology at a problem without doing basic TQM / BPR (or Six Sigma) to determine what is working and what is not you are doomed to failure.
If you throw technology at sales and customer service but your customer still can’t get one answer about his or her account you are losing the battle for their loyalty.
If you don’t know who is profitable and who is not you are losing money.
The companies who have failed with CRM have not truly understood what CRM is and can be. They were sold point solutions rather than a continuous loop solution that manages the front end of sales and service and the back-end of analyzing how well it was done, how profitably and what can be replicated for others.
As a result nothing changes.
Well, something might change. Your company may be less profitable.
Using business analysis to track your sales results will tell you what your sales force is doing right and wrong) turns into revenue- and cost-drivers of the business, thus a user will quickly see if the sales force is spending too much effort on low-value deals, or if the revenue stream has high exposure by being composed of just a few very high-value deals. In other examples, a user could see what percentage of target his district has reached compared with the same time last year, or determine the impact lapsed customers will have on this quarter’s revenues.
By the same token analyzing what your customers are buying (and aren’t buying) enables companies to understand and optimize the value of their customers throughout the customer life-cycle. Using business intelligence companies can track and analyze key customer segments and loyalty metrics and use this analysis to create an optimal customer acquisition, development, and retention process. Once you know who your customers are, who is profitable and who is not business managers can see critical changes within the customer base and quickly take action to improve the status of those customers. For example, a user might identify high-value customers who are spending less over several months, and feed that group of customers into a campaign management system to run a retention program.
CRM business analytics measure customer value at both the individual and segment level, at the current customer and potential customer based on demographics, too. In the end it enables users to understand the changing behavior of groups of customers over time. Users can even drill down to the profile of individual customers to discover their signature, that is, the pattern of their individual behavior, segment membership, and value.
Analyzing your customers is the key to CRM and it is the key to profits.