Making Customer Management (CM) work: some lessons from the past


The return on investment from customer management can make or break a business. DOUG LEATHER, CEO of REAP Consulting, says companies that manage customers well will achieve better business performance than those that do not, but they have to believe in their hearts and minds that it really does make a difference to the bottom line. Here he looks at some of the CM lessons learnt from the past and suggests a way forward for organisations which want to manage their customers well.

 

Defining your strategy – start with the positives

Many organisations use CM principles to manage their customers better; others are well on the way. But all experience problems, as customer expectations are still well ahead of what most companies can deliver upon, and the expectations keep rising. It is important to learn from the successes and challenges of those which make good progress, and whose business performance improves as a result, and to follow some basic rules:

 

  • Know your customers and how you manage them. Why do they buy from you versus the competition? How much are they worth, by different groups? How committed are your best customers to you? What do they value about the relationship? What do they dislike? How many leave – in particular, how many valuable ones leave, and why? What is the quality of those you acquire, or are you acquiring poor quality customers and developing a problem for the future? What are the main elements of cost in servicing your customers? How could you be more effective or efficient in serving them?
  • Make sure you really need to change how you manage customers. Are you comfortable with  your existing business and marketing model? Is the rest of the marketing mix – particularly brand, advertising, general direct marketing, PR, customer service, channels, pricing – doing the job perfectly well? Some companies which don’t focus on CM make lots of money and gain many customers, because they focus on factors such as product range, location and in-store proposition that meet customers’ needs, and a smart supply chain. In other sectors, such as mobile telephony and banking, managing individual customers better is proving the key to more competitive customer recruitment, retention and development.
  • Sort out your definitions, your logic and your measures. Marketers can be lax in the use of terms, and in the logic associated with them. When you use the term “customer value”, do you have a common understanding within the business of what this means to your company? Do you know whether a customer who buys more products is more or less profitable than one who buys a lot of one product? If you use the term “customer experience”, do you know what experience you deliver now, in different circumstances or contexts, through different channels, for different customers, and how this relates to the value you give and receive? If you use “multi-channel marketing”, and try to offer the same experience in each channel, what evidence do you have that customers expect consistent experience across all channels, rather than each channel being used for a different purpose?
  • If you do need to change, make sure that you don’t just add to costs. Use research to identify whether customers are likely to respond positively, rather than just enjoy the supposed benefits of being managed better without giving you more value.
  • Ensure that senior managers and staff experience what competitors offer – the good and the bad. Make sure they understand what your research and measures are saying. Otherwise they will be making decisions in a vacuum.

 

Planning

  • Know where you are starting from and plan to move forward steadily, taking regular health checks. Be clear and unemotional about how well you manage your customers now. This will affect your programme structure, timing, risk and payback.
  • Develop a clear picture of your “desired state”, what works for your customers, your people and your shareholders or other stakeholders.
  • In your desired state, balance all aspects of how you manage customers – how you analyse, strategise and plan, your systems, data and measures, your people and organisation and how you understand what you are doing and how your customers experience it.
  • Develop a business case that gives increasing benefits to your customers and to your company over time. Don’t expect major benefits immediately, as you may need to invest in your marketing and sales infrastructure first, particularly systems and data (though don’t expect systems and data to do the job for you by themselves), but focus some of your plan on a few easy actions that lead to increased profitability quickly.
  • Use change management disciplines, not just marketing disciplines. Too often consultants and clients trying to make CM work forget the people disciplines of change management. Indeed, one of the most important elements of effective CM planning is to manage stakeholders. Keep the change management focus as you implement. Just observing technical disciplines won’t work.

 

Implementation

  • Manage the programme by outputs as well as inputs, to ensure that what you expect to happen with customers does actually happen.
  • Convince leaders in the business, engage their support, and use them to make your CM programme visible. Make sure they support you during the tough times in the project, and that there is some sort of succession plan for seniors in the team. There is little that frustrates people in large companies more than the stop-start nature of change projects.
  • Have a proper implementation programme. It ensures that all parties work towards a common sequence of changes. This may include customers.
  • Appoint an experienced, knowledgeable, senior programme manager to oversee the whole programme.
  • Make sure the executive sponsor really supports the programme manager within no-blame rules and with a tolerance of some failures.
  • Set up a team to develop and manage the programme, and draw it from the main business functions affected – not just marketing, sales and service but also customer administration, finance, and logistics.
  • Keep people informed of progress, and keep seeking their input.
  • Ensure the training, motivation, coaching, and measures you implement don’t cause conflict between customers’ interests and staff interest. For example, aggressive cross-selling targets may be bad, steadily increasing targets for customer profitability or customer commitment are probably better.

 

Keeping going and making progress

  • Focus on a few indicators which tell you how well you are managing your customers, how you and they are getting increased value from how you manage them, and how well you are managing the things you need to do in your company to make sure that you deliver customer management outside your company.
  • Ensure that these indicators are closely connected with what you stand for as a business. For example, if you are a private sector company which needs to make profit, and if your profit comes mainly from customers you have had for some time but who grow in value to you the longer they stay with you, your indicators should measure how many of your customers grow in value with you each year, why they do, how they felt about it.
  • Make sure your customer management approach stays an essential part of all the other marketing, sales and service approaches that your organisation uses.
  • Maintain your focus on the quality of your customer information, the insights that you derive from it, and how they can be used to improve what your customers get from you, and the value you obtain from them.
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4 Responses

  1. Hi Doug Greetings from Melbourne. Enjoyed your article. I have been working with Colin & Elaine here in Australia. I hope to meet you at some point in the future. I have a real interest in Customer Management and am currently working on a project to support CM implementation. Regards Ray

    • Hi Ray – thanks for the note. I too hope that we can meet sometime and best of luck with your CM implementation project. All the best, Doug

  2. Having personally been through a Customer Management program driven by REAP consulting, the most important determinant to the program’s success is ensuring CEO / Exec total buy in. The challenge, as Doug says, is that CM is not an ‘instant gratification’ thing and its effects and impact on financial results can take several years to manifest. With short term strategic thinking and more specifically strategic goal setting, becoming an increasingly entrenched aspect of modern day corporate thinking, the challenge is getting execs and boards to cast thier view beyond the next set of financials.

    • Hi Erik – great to hear from you. Thanks very much for your commentary and ‘pearls of wisdom.’ Erik is one of those Execs who do get it, who understand it. He built a great team and together they developed some highly relevant and great initiatives – no doubt that the business benefited and with continued focus and effort will steadily establish an incremental competitive advantage that will be difficult for competitors to match. I hope that Eriks’ successors continue to have the widom, insight and focus to continue building on what he and his team achieved.

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