In the know

New customers are always welcome, but companies must have a strategy for understanding and retaining existing ones. Thomas R. Cutler reports on the importance of customer relationship management. The bottom line defines success for most companies. Their mission is to acquire new customers aggressively and grow revenues, often without regard to sustained profitability and tenure. In this environment, the existing customer is easily overlooked. In the hysteria to grab market share, businesses regularly neglect the importance of keeping and growing their customers after acquiring them. Corporate emphasis is just starting to embrace customer retention in addition to customer acquisition. Focus is starting include organic growth, customer tenure, and revenue preservation. The cost of retaining an existing customer is far less than acquiring a new one, and a successful company will recognize the need to adopt metrics that not only measure how well new business is achieved but metrics that hold it accountable for maintaining the current customer base.In a search for the most efficient and effective way to accomplish a winning formula for attracting new customers (while keeping existing customers wanting more) has led some companies to implement Customer Relationship Management (CRM) technology software. CRM helps companies to navigate through the complexities of customer relationships, facilitating knowledge of the ever changing customer requirements. Companies that stay fluid with their customers (and adopt metrics accordingly) will understand what drives the customer and what qualities will generate customer acquisition and retention.According to Larry Caretsky, president of Commence Corporation: ÔÇ£Companies must find out what customers like and dislike about products and services by asking for feedback. ItÔÇÖs imperative to maintain constant customer connections to build a meaningful profile of customersÔÇÖ attitudes and behaviors over time. This data is invaluable in pinpointing what can be done to add real value to the relationship.ÔÇØ Since 90 percent of revenue can be generated by only ten percent of existing customers, focusing on these customers guarantees a continued revenue stream, as well as creating advocates that will help attract a new customer base in a cost-effective manner. If the customer no longer perceives value in a company product or service, that customer is at risk of leaving, resulting not only in lost revenue, but loss of potential new business. The mistake that is most often made by businesses to drive acquisition of new customers is neglecting the root cause of why they lost the original customer in the first place. At risk customers can turn into loyal, long-term revenue streams if issues are addressed promptly and appropriately. Companies often presume that they ÔÇ£knowÔÇØ the customersÔÇÖ wants or values. Application of real-time feedback via an effective CRM system alerts companies by quickly and realistically identifying an ÔÇ£at riskÔÇØ customer. A meaningful, customer-desired solution will preserve that customer and improve overall profitability.From crude spreadsheets to rudimentary database packages like ACT, there are very inexpensive quasi-CRM solutions to keep track of basic customer information. This is not CRM. Assessment of readiness for CRM is contingent on the willingness to look beyond the lagging indicators including the number of lost, cancelled or discontinued customers; rather it is critical to understand the value of creating leading indicators such as value of cost, accuracy, error-free, product integrity, durability, state of the art, and loyalty as they relate to the existing customer base. CRM software vendors and businesses are now listening to the ÔÇ£voice of the customerÔÇØ. According to iSixSigma, the voice of the customer is a process used to capture requirements/feedback (internal or external) to provide customers with the best in class service/product quality. This process is all about being proactive and constantly innovative to capture their changing requirements.The voice of the customer is the term used to describe stated or unstated customer needs. Information can be captured in a variety of ways; direct discussion or interviews, surveys, focus groups, customer specifications, observation, warranty data, field reports, complaint logs, and other techniques. This data is used to identify the quality attributes needed for a supplied component or material to incorporate in the process or product. Manufacturers have funded back-end ERP systems, but front-end CRM solutions often make a substantial impact on reducing new customer acquisition cost and improving sales efficiency by first addressing data capture, data consolidation, and data sharing. Access to customer information is critical when industrial companies sell to and service customers. An industrial CRM system must capture data via the telephone, fax, email, or the web and store it in a unified database where it is immediately available to the people that need the information. Customer information must be displayed on a single screen, providing the end-user with a 360 degree view of all pertinent information. Having immediate access to customer information significantly improves the sales process and customer satisfaction. Caretsky suggests: ÔÇ£Tracking leads must be addressed via a lead automation system that automatically distributes new leads based on specific criteria such as city, state, postcode or country. A web portal capability will enable external sales people or distributors to update the status of these leads so that a manufacturer can assist during the sales process.ÔÇØThere is a difference of opinion among vendors; some believe a CRM solution should not be a separate system and that it must be an integral part of any ERP or distribution software package. According to Rebecca Gill, vice president with Technology Group International, ÔÇ£to have a complete 360 degree view of the customer, CRM must be throughout the entire enterpriseÔǪthis is a core premise.ÔÇØCRM modules can obtain full return on investment in less than two months. Prior to the CRM implementation industrial customers often struggle with centralized customer information tracking and timely, focused customer communication. With CRM in a manufacturing sales organization, the sales team is able to utilize a customized workflow process, focused marketing efforts, and system generated call schedules based on the prospect/customer step within the sales process. At its best, a CRM technology results in an initial productivity increase of 15 percent, and a sales head count decrease of 30 percent.As long as companies devise bonus incentive metrics on new sales and neglect current customers, much of the value that can be derived from CRM technology is lost whether in an industrial or any other business environment. When a company recognizes the value of an existing customer and builds a compensation structure on retention, CRM technology is beneficial in driving current and future success for both the company and its customers. How success is measured and sustained is the key to selecting a good partnership between CRM technology and the corporate bottom line.