Strategic customer management (Part 1)
The first item in the Profit and Loss Statement is Gross Revenue. That top-line figure by itself is a critical measure of a company’s performance; and even if a company generates higher profits, but gross revenues are falling, there is need for carefully considered action at the strategic level.
SALES REVENUES COME FROM CUSTOMERS
Considering that revenues from sales come from customers, it is critical for the entire process of strategic customer management — a process encompassing marketing, sales and customer service — to be high on the agenda of every business that intends to differentiate itself in an era of product parity and aggressive competition.
TACTICAL PLANS DON’T SOLVE STATEGIC PROBLEMS
This marketer’s experience is that in some Jamaican companies when there are major customer service issues or the sales force is not meeting revenue objectives, the remedy is to conduct customer service and sales training and expect a transformation both in staff behaviour and in financial performance.
While that approach may have resulted in some measure of success in the past, we must ask, how effective is it today? In such cases, are we guilty of employing tactical approaches to addressing what should be one of the firm’s most important strategic concerns?
As we discuss strategic customer management, let’s draw from two very credible sources on marketing strategy and sales management — two of its pillars.
SALES AS A STRATEGIC IMPERATIVE
“There is nothing short of a revolution taking place at the front end of our manufacturing and services organisations. It has been a long time in coming, but it is fundamentally changing the way we deal with customers and how we manage customer processes in our businesses… The front end of our businesses is moving into an era of strategic customer management. The sales organisation is becoming a strategic imperative rather than a tactical tool.
For many companies, the strategic management of customers and customer relationships has become a higher priority than conventional marketing activities, which is why we are already seeing major organisations transferring resources from marketing to strategic sales and account management initiatives, to achieve better alignment and to achieve the goals of business strategy.”
(Piercy and Lane, 2009)
“Today’s competitive environment demands a radically different approach. Specifically, the ability of firms to exploit the true potential of the sales organisation requires that companies adopt a new mindset about the role of the selling function within the firm, how the sales force is managed, and what salespeople are expected to produce. The sales function must serve as a dynamic force of value creation and innovation within the firm.”
(The Sales Educators, 2006)
THE NEED FOR DIFFERENTIATION
“The ability of organisations to achieve superiority in how they manage customer relationships to create value and to sustain profitable relationships is increasingly recognised as a core capability. Many marketing strategy implementation failures are caused by poor alignment of strategy with sales capabilities. Perhaps the biggest reason is that many traditional marketing and sales approaches were not designed for complex consultative and collaborative, technology-based customer relationships where for example, the product is being created jointly by a buyer and a seller as it is being ‘sold’. Sales capabilities provide critical resources which differentiate suppliers from each other in the eyes of professional purchasers.”
(Hooley, Piercy, Nicolaud, 2012)
CUSTOMER SOPHISTICATION
One of the results of the revolution in information technology is the rise of the sophisticated customer who often finds traditional sales models obsolete, if not offensive. As a result, some global pharmaceutical companies, recognising that the era of the ‘hard sell’ is over in their sector, have been developing new sales models. The thinking is that fundamental changes in business buying require a strategic response from sellers that is more robust than a ready acquiescence to demands for reduced prices and improved customer service.
NEW CUSTOMER SERVICE PERSPECTIVES
Let us accept that conventional sales practices are no longer effective in many situations; but what about customer service? Does your company consistently go beyond the expected service to offer the augmented service and the potential service? Not sure?
If you aren’t sure, maybe your company does have a problem that is best addressed through strategic customer management, for as Drucker reminds, the purpose of a company is to create and keep a customer. And that, we suggest, is what strategic customer management is all about.
Shall we take a closer look at approaches to developing and implementing strategic customer management next week?
Herman D Alvaranga is a Fellow of the Chartered Institute of Marketing and president of the Caribbean School of Sales Management (CSSM), the region’s first sales, marketing and brand management college. E-mail hdalvaranga@cssm.edu.jm