Customers, clients, consumers, call them what you will but
without them, you don't have a business, writes Jason Nash, product
solutions marketing manager,
Microsoft Dynamics CRM. So surely it's not rocket science to
try and understand a bit about them: what they like, which ones
need a bit more love, which ones are more trouble than they're
worth and which ones are the best. After all, happy customers are
good customers and usually profitable. There's nothing
revolutionary about this idea, but it's still surprising how few
SMBs are adopting this sort of approach to customer relations.
At a basic level, it can be hugely beneficial to understand more
about the makeup of your customers. An understanding of things like
purchase and payment history as well as specific preferences and
business needs can significantly enhance their experience of doing
business with you. Customer satisfaction comes from great customer
service, so being able to 'add value' by having all the customer
knowledge at your finger tips can only be a good thing.
But beyond this, there is a lot of analysis that can be done to
find out more about individual customer profitability. I often ask
at customer events how many in the audience can tell me who their
most profitable customers are and it's always surprising how few
hands go up.
Pareto's
age old law says 20% of them bring you 80% of revenue, so
knowing which ones they are is important on many levels -
especially now, in times of economic uncertainty.
When attracting new customers and striving to retain existing
ones, there are many offers and incentives that businesses employ
to sweeten the deal. There's nothing wrong with this, but it is
important to understand the impact of these on customer
profitability - as mentioned, the ultimate goal should be
profitable customers.
However, despite these 'deals', there is often a lack of focus
on customer service which is severely impacting this. The
proliferation of the internet has changed the playing field and
made customer satisfaction all the more important. Blogs, social
networking sites and the like, have made it much easier for
customers to express their dissatisfaction which can have a
negative impact on future profits and brand value.
The problem comes in assessing the profitability of individual
customers and using this analysis in a meaningful way. Naturally,
technology, and CRM systems in particular, play a big part in
solving this. However, the trick is to adopt a more sophisticated
approach to CRM than is normally considered in order to get this
level of analysis around customer profitability.
The first stage is to bring all your data into one place and
have trust in its integrity. Multiple spreadsheets, databases or
systems are a familiar feature for many SMBs but it's impossible to
do any profitability analysis until you have a single version of
the truth.
Making sure all the details in your system are accurate and
up-to-date relies on a high level of user adoption and that has to
be a central consideration when any new system is implemented.
However, once you have these foundations laid then you can start to
make use of analysis tools and get some real insight into customer
behaviour.
It's only when you're equipped with this level of information
then can you really start to assess the success of marketing
programmes and pricing offers or judge the strength of a
relationship by something more tangible than whether customers come
along to corporate hospitality days. This is vital for customer
retention, but also for identifying which ones the low margin or
un-profitable accounts are and, more importantly, understanding
why.