At a recent BI-congress I listened to a presentation of a solution for the measurement of customer value. In this case, the visually attractive graphical representation showed the “value” of each customer in four quadrants and the suggestion was, that customers shown to be unprofitable should be phased out. That sounded reasonable, but on more careful examination a number of questions were raised.
A more careful look at the basic data showed many weaknesses which could lead to damaging decisions. The calculation was made on the basis of invoiced goods and services minus costs. OK, but how are costs measured and applied? It appeared that in this case many of the costs were estimated, cost of sales for example, or support costs on the basis of a calculated cost per hour.
This raises two questions:
- How should calculated sales, marketing and support costs be applied to individual customers?
- Can customer value be defined purely on the basis of profitability?
The first point is a question for controlling and relates to processes and practices in the company. The second point is more interesting from the CRM point of view.
What is customer value? Is lifetime value the criterium or the value over a specific period? Which factors should make up value?
From the CRM point of view, the pure financial situation over a given period is only one aspect. The following aspects should be considered in any analysis:
- Does the customer have more potential?
- Is the customer important as a reference?
- Does the customer provide leads or other marketing value?
- Is the customer networked with other customers or potential customers?
- Is market share important for the acquisition of new leads?
These aspects may not be easy to handle with the BI Tools currently available, but are of critical importance to sales and marketing. An analysis without reference to these factors will produce misleading results and a frustrated sales force.
Tags: BI, Customer Value
Sorry, Thursdays blog will arrive on Friday
Sales people need data when visiting existing customers (see “ERP meets CRM”), the level of detail depending on the products concerned. A sales person selling for example to retailers or wholesalers will be more interested in purchase patterns than a person selling CRM software. All sales people will be interested in certain factors such as share of budget and order frequency and size.
In well organized companies there will be a sales plan per customer, so what the sales person really needs to know, is whether or not the sales are above or below plan. In this case it is only necessary to know if sales are on plan or not. Detailed information is only required when there are deviation from plan or when new requirements arise. A display as shown above will tell the sales person at a glance if all is OK or if there is need to examine things in more detail.
During the planning phase of a new CRM installation, I would strongly recommend an analysis of sales data required and close attention to the presentation of the data. In many cases a simple red-yellow-green indicator could be informative and time saving.
Tags: BI, crm, ERP, KPI
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Tags: CRM Expo, crmquergedacht, Messe
In a discussion today with a major PC systems integrator, I was told that the company worked quite happily with Microsoft Excel and Word for CRM purposes and had no plans to make any changes. This was bad news for someone offering CRM consultancy, so I followed up with some questions.
The sales and marketing organizations are producing good results. Sales activities are largely not documented, but a well organized ERP application provides reliable information on goods and services purchased. A simple ticketing system provides a record of service activities. The company has a stable customer base. Sales processes are simple and are supported by the ERP-System.
In this particular situation, there really would be little gained by introducing a CRM system. There is no need for sales persons to produce offers or take orders while on the road. News letters and customer correspondence can be produced and sent with Microsoft Office products. A Sharepoint depository holds all customer records.
The situation would change however, if the owner/manager were not coordinating and guiding operation himself, thus ensuring a high quality of customer service. If further management levels were introduces this would also change the scenario as would a period of rapid growth. In this case the strategy of the company is to maintain and protects its customer base and to grow only through the sale of more services to a slowly growing number of customers.
So what am I trying to say? Basically that CRM sales persons should be aware that CRM systems are not per se essential for a successful operation. This will depend on the size and processes of the organization. Particularly in the case of an owner managed company, the owner will (normally) be the first to notice when the operation is not running efficiently.
Tags: crm, Excel, Sharepoint, Word
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