Manage More Than the Relationship - CRM Drives Business

Suppose for a moment that you owned a gas station at a fork in the road, both branches of the fork lead to the same city.  You owned the only gas station, and everyone who came down the road had to refuel at your station.  People liked the right fork in the road because it was more scenic, so they took it most often.  However, you had a friend who owned a restaurant on the left fork, and he needed to get more business.

So, he makes a deal with you.  For every passerby that takes the left fork, he will pay you $1.  You own the only gas station, so you can’t compel anyone to take the left fork.  So put up a sign that says, “Take the left fork, save $.50 on your gas.”  You now have created a win-win scenario – your friend wins, the passersby wins, and you win.  You have just done on a small scale what airlines and others do on a massive scale – you manipulated pricing and availability to improve business and give customers a better deal.

King Customer

The customer is king.  However, corporate servants to the king have a chance to help the monarch do things in a way that improves their business. Airlines get king customer to travel in the middle of the night voluntarily. This is an amazing accomplishment and is worth billions of dollars every year.  It also improves the relationship with the customer.

In the world of customer relationship management, the emphasis has always been on relationship. How can you optimize the channel of communication to lower overall cost and improve experience?  What is the best way to increase customer loyalty?  These and many other questions occupy the thoughts of customer service managers.  They’re important issues and need to be addressed.

However, what if the focus of customer relationship management shifted from managing the relationship to managing the customer?  While building a relationship is still critical to the success of the company, managing the customer opens opportunities to drive important business outcomes that ultimately are better for both the company and the customer.

In a recent edition of SupplyChainBrain magazine, I wrote an article about demand planning and demand management.  The article points out that if one could manage customer demand in a very low-cost way, there can be immediate margin improvements.  These improvements don’t come at the expense of customer satisfaction, but rather result in increased customer satisfaction as win-win scenarios bring real value to customers in exchange for their changed behavior.

Managing the Customer to Good Effect

The specifics of creating win-win opportunities for customers are covered in the article mentioned previously.  Corporate operations will need the tools and training to understand how to generate opportunities for creating win-win opportunities.  Once they are created, they need to be communicated out to customers for their evaluation.  How they’re communicated, supported, and realized is the business of the CRM group.

Let’s take an example where operations determines that an increase in demand of 2,000 units will result in a per-unit supply chain savings of $2.  Historical demand is such that absent some other intervention, customer demand will not change.  Sales and marketing determine that a ten day price reduction on the next two days of $1 are sufficient to increase demand in the current period.  What happens next?

Sales people are given immediate instructions regarding the pricing change.  Customer service people are given scripting changes that cover the new pricing guide.  The website needs to be updated.  In short, each of the contact channels needs to be updated.  Further, campaign effectiveness metrics need to be tracked and reported at the end of the ten day period.

This kind of change is very different from typical operations.  Even if pricing changes are communicated, most of the time they’re done in response to market conditions, not as a way to influence customer buying behavior.  Consider it pricing with purpose.  CRM is the key channel that makes this possible, not only in terms of communicating and executing a dynamic pricing strategy, but also to get even closer to customers.  This kind of program will lead to a better understanding of what will influence customer buying behavior, and thus make the relationship more productive for both the customer and company.

In a tough market, 1-2 points of margin improvement is significant.  The tools already exist – just put them to work for you.

Note: I have a companion to this posting from a supply chain perspective at the following link:

http://www.supplychainbrain.com/content/industry-verticals/automotive/single-article-page/article/planning-and-managing-demand-a-modern-supply-chain-imperative/