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Lean Customer Management for Lean Economic Times

Should you change our Customer Management Approach in tough times?

Getting a clear picture of the economic outlook for the UK is no easy task. We often come across terms like ‘recession’ and ‘downturn’ in the media. And whilst we are still trying to understand what the extent of the slow down will be, most businesses are already focused on implementing tactics to help them remain agile enough to ride out the storm, no matter how bad it turns out to be.

Reducing discretionary spend is the first predictable tactic in any downturn and during past periods of economic uncertainty, customer management activities – outside of sales – would have certainly been considered discretionary. However, over the past decade, attitudes have evolved and it’s interesting to see that in a recent Gartner CIO survey, customer acquisition and retention is viewed as the second most important objective for businesses this year. The analyst house predicts that CRM software revenues will also increase by 14% in 2008, supporting the fact that companies view CRM as an essential tool; businesses are prepared to invest in CRM solutions, even when overall IT budgets may be under threat.

But as with any tool, CRM solutions will only help companies weather a downturn if they are used intelligently. And this brings us to the question of how companies should change their customer management strategies to cope with economic uncertainty. Firstly, we need to clarify that the idea of ‘recession proofing’ as a new customer management approach is a fallacy. The ground rules of good customer management remain constant, independent of economic conditions. However, given a reducing addressable market and increasing competitive pressure what becomes imperative is the need for leanness.

The companies whose lean customer management tactics will help them negotiate the economic trough will have answered three important questions.

  1. Where is the real value within our customer base?
  2. Have we realised the full potential from our CRM technology investment?
  3. Can customer experience affect whether we survive or thrive?
1. Invest in the customers who help you meet your strategic objectives

Intelligent customer segmentation and targeting are at the heart of all good CRM strategies. If you ask a CEO to define their ideal target customer you should get a clear and logical response defining customer’s attributes, and what unique value the company delivers to that niche customer set. Ask the sales director who their ideal customer is, especially during the closing weeks of a tough quarter, and the answer could differ substantially. The tension between these two approaches to customer acquisition results in a diverse customer base, comprising ideal customers and what can be called ‘stretch’ customers.

The term ‘stretch’ refers to the fact that dealing with these customers involves stretching outside your strategic objectives and potentially beyond your area of core competency; perhaps you may even have to stretch to implement non-standard processes, products and pricing models. Clearly, all of this investment creates no value to the customers that you really need to achieve your strategic aim, and with budgets tightening, it’s difficult to justify this type of investment.

2. Sweat your technology assets

From a technology perspective, businesses should always ask whether they are getting the most out of existing systems. Answering this question effectively will involve three parties: operational staff, who can articulate your current processes and issues; your IT stakeholders, who understand the wider context of your CRM application and infrastructure landscape; and the CRM technology vendor.

Involving the vendor is important for two reasons. Firstly, the vendor’s knowledge of their application is unsurpassed. Secondly, the vendor will have seen other companies address issues similar to yours in a variety of ways, so can help you investigate both traditional and less orthodox solutions. From experience, these roundtable sessions always uncover hidden potential in even the most established and sophisticated CRM implementations.

Companies are able to please the board by demonstrating that they can comply with the perennial mantra “do more with less”, and technology vendors benefit by demonstrating how their applications deliver additional benefits to valued clients in testing economic times.

3. Experience can be more important than price when it comes to discretionary spend

Businesses traditionally focus on price, promotions and product when trying to stimulate hard-pressed customers to spend; however, these might help the top line but also erode margin. What should not be underestimated is how experience affects the propensity to spend and optimising the customer experience does not have to involve major capital investment.

Assuring consistency of process across different media channels will make spending easier for customers. For example, my old bank gave me one password for phone banking and another for internet banking, one log on process for the phone and one for the net. That’s one of the reasons they’re not my current bank. They made it too difficult for me to give them money. If they had thought of interactions in a way that reflected my customer view point, rather than their company’s organisation structure I’d still be spending with them. However, the bank continues to use the phrase ‘customer-centric’ in its annual report.

In contrast, a positive experience – and by that I mean one where service goes beyond expectation, or when exceptions are handled with sensitivity and leniency – generates faith and foster relationships. Although improving experience may not immediately stimulate revenue growth, as disposable income shrinks and the loyal become price sensitive and then cease spending, good will becomes a major factor influencing where money is spent.

Ultimately, once companies have answered these three questions they will be well on their way to creating a more streamlined and targeted approach to customer management which will in turn serve in good stead through all economic climates – good or bad.

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