Unprecedented levels of market volatility, paired with staggering declines in consumer spending and confidence, rendered 2008 a tumultuous year for companies of every size and industry; the outlook for 2009 indicates even more challenges in the months ahead. As tough as the economy is, now is the time for you to differentiate your business against the competition, take charge of your customer relationships, and invest in the technology that will grow those relationships in the long term.
Driven by information technology, your customer relationships are the key to increased revenue and market share. Pareto’s Principle estimates that 80 percent of sales come from just 20 percent of your customer base. Thus, your first step should be to identify which customers are the most profitable or which customers will be the most profitable. I recommend that you use customer relationship management (CRM) software to gain insight into the needs and wants of your core customer base. CRM software can be deployed to work in tandem with your data warehouse and data marts to extract rich insight into customer activity and their interactions with your business, including products owned and recent store visits.
If you have never implemented CRM in your business, let me offer you the basics about what to expect. CRM technology is offered primarily as packaged software, available from most software vendors either in a premise-based version which is installed on-site or increasingly through software-as-a-service (SaaS), which allows enterprises to use the full functionality of the software without the hassles associated with installation and updates. Ultimately, you should use CRM as a business intelligence tool to determine the buying patterns of your customers, and then develop targeted plans to provide the additional products and services that customers are most likely to buy. Plans can include customer loyalty programs, electronic commerce, and up-selling new versions of products to previous purchasers. Make sure employee training and acceptance is part of your roll-out plan to ensure consistent usage of the system.
Speaking of employees, you should understand that your people are at the heart of any CRM initiative. The information mined from CRM software drives the sales force to improve services and connect with customers on a deeper level. Your sales force can enter, store, track, and access customer information and interactions critical to identifying the customers that are most likely to buy and will yield the most profit and highest margins for your company. Also, as many companies struggle to keep cash on hand in an economy where cash is now king, your sales force can improve the order-to-cash ratio. Companies can also avoid additional costs through reducing duplicate or redundant activities.
Boosting customer satisfaction
While CRM technology yields insight into customer spending and product demand, it also drives satisfaction levels. Poor customer service is the top reason customers switch service providers. A 2008 study of consumers of wire-line, mobile, cable, and satellite services found that, while most consumers are happy with their providers, many would switch for a better experience. The Amdocs Experience Matters Index revealed that of the more than 2,000 consumers surveyed, interest in switching increases significantly when subscribers are offered a better experience -- up to one in three U.S. subscribers (33 percent).
When employees have a clear understanding of all customer interactions, it helps build credibility with your customers. Rather than ask the customer when they last visited the store and purchased a specific item, employees can retrieve the necessary information from the customer’s contact history in the software. CRM tools create institutional memory beyond the most recent customer interaction and are a proven method for you to differentiate yourself through outstanding customer service. A good CRM tool will protect your customer base and build consumer loyalty.
While the current economic climate is leading some businesses to assess expenditures and spend conservatively, now is the time to make key technology investments and set the stage for increased profits and revenue. The foundation of your success -- and profitability -- is your customer base, and driving customer relationships with technology allows you to focus on the core 20 percent that are the most profitable.
Mike Gorsage is the National Technology Practice Leader for Tatum LLC. Tatum is the nation’s largest executive services firm, providing financial and technology leadership to businesses of any size.