Leverage the Value Equation and CRM to thrive in any economy

Graham Hill presents some great points, and sage wisdom in his post “Six Proven Rules to Beat the Recession”.

I would contend that his advice is at the core of success in business, and just becomes more clearly defined when businesses are forced to be aggressively and desperately focused  in a more challenging economic landscape.

To sum it up, “It’s all about value”. Focus on the value equation and then build/organize around it.

Point #3 below is where CRM takes center stage, though can be leveraged to execute on each of the strategic points outlined below.

Here’s to your profitability! Sound off and Happy Innovating…

May 30, 2009
Six Proven Rules to Beat the Recession
By Graham Hill, Customers & More

Type in the word “recession” into Google and at the last count, it returned over 62 million hits. Everyone is talking about the recession and many companies have already started to do something about it too. Often this means cutting swathes of staff without much thought to their long-term success: British Telecom announced it is cutting 10,000 jobs, Citibank that it is cutting 52,000 jobs and the City of London is forecast to lose over 370,000 jobs during the recession!

No Company Ever Shrunk to Greatness

Whilst job cuts are to be expected, they are by no means inevitable. Research by McKinsey showed that companies that beat the last recession in 2001/2 actually increased spending in key areas. The research tracked almost 1,000 US companies over 18 years, including during those all important recession years. The companies that emerged in the top quartile after the recession actually increased spending on sales, innovation and marketing. Although this reduced their cash reserves, the companies traded short-term profitability for long-term gain. And it worked; their book-to-market ratio was more than 25% greater than their less successful peers.

Understanding the Value Equation

The companies that beat the last recession understood the “value equation”. When times are hard, cash is in short supply and customers are in even shorter supply, you need to carry out a ‘strategic due diligence’ to understand how your company creates value. That means understanding what drives sales and margin growth, how core shareholders view the company’s prospects and how the company can return value back to them. That is the company-side of the value equation. But by itself it isn’t enough. You also need to understand the customer-side of the value equation too That means understanding who your company’s core customers are, what they buy, which channels they use, how much they are willing to pay, and what jobs and outcomes they are looking to achieve at different points in the customer experience.

Only by understanding both sides of the value equation can you beat the recession. And the value equation changes a lot during a recession; just think how people are now buying own labels rather than branded products at your local supermarket. It is critical that you spend enough time during the due diligence studying how your company delivers value to customers and how that creates value for shareholders. The recession is probably going to be with us until 2010, so it makes sense to do a proper due diligence before setting out to beat the recession. And it is no use just relying upon analyses from just before the start of the recession either. The world has changed in the last few months and it might never be the same again.

Six Proven Rules for Recessionaries

Although different companies should respond to the recession in different ways, there are a few general rules that they should follow. I call these the “Rules for Recessionaries”.

Rule 1: Protect Your Best Customers, Products & Channels

As George Orwell, might have said, “All customers are created equal, but some customer are created more equal than others”. You need to understand who your best customers are and to protect the revenues they provide. As pressure mounts to make cuts, it is essential that the cuts fall on the customers who don’t provide much revenue or who lose you money. You also need to protect the products the best customers buy, and the channels they buy them through from cuts too. Paradoxically, this may be the time to consider making strategic investments in your best customers. You can achieve much more ‘bang for your buck’ when your competitors are reducing their spending.

Rule 2: Refocus the Customer Experience Around the Value Equation

Knowing who your best customers are, what and how they buy, and what jobs and outcomes they are looking for, allows you to refocus the business and provide a superior customer experience that also delivers superior results for your company. This may require refocusing resources away from your worst customers towards your best ones. The deep understanding you developed during the due diligence will identify the core touchpoints in the customer experience and the activities which support them. And the focus on customer jobs and outcomes will ensure that you don’t forget about the product in use. This is usually the part of the customer experience where most value is delivered to customers.

Rule 3: Sweat Your Customer Management Assets

Now that you know who your best customers are and have refocused around value creation, you should look to gain the maximum from the customer management assets you have. This means squeezing a bit more value from each of the core touchpoints in the customer experience. Doing this requires that all the supporting people, process, technologies and other assets that deliver the customer experience are better aligned. And that they are used a bit more intensively to create value, whether this involves better sales calls, more targeted marketing, or products that are better at helping customers get the jobs and outcomes they want. As has been said elsewhere, a recession means doing BETTER, not just doing less!

Rule 4: Cut Non-value-adding Costs while Protecting Value

In parallel with using your customer management assets to the full, you should also look to remove all non-value-adding costs using the lean thinking approach pioneered by Toyota. By following a customer order through the entire delivery process, most companies are able to identify 20-40% of the activities that don’t add any value, i.e. that neither the customer, nor the business is willing to pay for. These are all candidates for cuts. This not only saves significant costs, it also speeds-up the business, reduces errors and increases the satisfaction of your best customers.

And don’t listen to the ignorant naysayers who clain that lean thinking only works in manufacturing. Just look at companies as varied as Vodafone, Ducati and Tesco, and of course, Toyota, who have all applied lean thinking with great success to improve their service operations.

Rule 5: Support & Incentivise Staff to Deliver Value

Tough times call for strong leadership. And not only from senior management. You should carefully assess your staff and select the ones who can help lead you through the recession. And then agree tough performance targets for delivery. That may mean upsetting the old order and hierarchy as young managers are promoted above longer-serving ones. It may also mean trouble with unions more interested in maintaining the job status quo than in your company beating the recession. You should be prepared to support, coach and mentor managers responsible for running key parts of the customer experience. It will be worth it. Not only will they feel empowered to deliver against their targets during the recession, they will also be much better managers once the recession is over.

Rule 6: Focus on the Long-term while Supporting the Short-term

Many companies make the mistake of just focussing on the short-term, particularly at the start of a recession. And you will certainly face pressure to be seen to be ‘doing something’ about the recession. The whole point of the due diligence and the previous steps is to enable you to understand what creates value for customers and shareholders over the long-term, and then to develop a plan to beat the recession. This will no doubt require some tough trade-offs. And sometimes you will be forced to make the wrong ones to placate senior management. That doesn’t mean that you should ignore the short-term, particularly revenue generation. But it will allow you to strike the right balance so that you can plan to beat the recession.

Are You Planning to Beat the Recession?

Try and answer the five questions below. If you can answer “Yes” to most of the questions, you are on the right track. But you still have a little work to do? But if you can only answer “No” to most of the questions, you had better look again at your approach to beating the recession. Your best competitors already have!

Question 1: Do you understand the total value equation?
Do you know how value is created for your company? Do you understand how value is created for customers? Can you keep abreast of changes in both as things change?

Question 2: Can you protect the value created by your best customers?
Do you know who your best customers are? Do you know what they buy, at what price, through what channels? Do you know what your competitors are doing to attract them?

Question 3: Are you using all your resources to create value?
Are you sweating your customer management resources? Are you cutting out non-value-adding costs? Are the resources aligned and integrated to let value flow seamlessly to customers?

Question 4: Are you supporting your staff and partners?
Are the right people in charge of customer management? Do they get senior management support when they need it? Are they incentivised to deliver value? Are you supporting & incentivising your partners?

Question 5: Are you focussed on the long-term?
Are you preparing plans to beat the recession over the next 1-2 years? Are you pro-actively managing customers for short-term value creation? Are you measuring the health of your business on a regular basis?

If you follow the six simple Rules for Recessionaries, you will be in a good position to put together a coherent plan to beat the recession. But if you are just intending to rely on aggressive cost cuts, or untargeted investments in the status quo to save you, then “Good Luck”. You will need it.

via Six Proven Rules to Beat the Recession | CustomerThink – CRM, CEM & Social Media – Think, Feel & Connect.

Customer Retention in Tough Times

As we collectively try to gain visibility to what is happening in the marketplace, the following contains some good basic reminders of necessary requirements to survive in the marketplace today. I’d love to hear about how your company has implemented some of the ideas below and how that has helped your organization succeed.

No doubt as the recession takes hold companies are at risk to lose more customers than new ones coming in.

The problem: If you don’t invest in keeping and developing your existing clients – especially in tough times – then it’s more than likely that your business will decline.

You’re no doubt familiar with the mantra that states that it costs about 5 times more to bring in a new customer than to sell to existing customers.

So the question is what are you doing to communicate with your customers? Do you have a structured customer development program to upsell, cross sell and above all manage your relationships in such a way to make sure these customers – whom you’ve already spent a long of money acquiring – from walking?

Here are some ideas you may want to focus on:

1. Establish a systematic, formal process to cultivate and grow high potential accounts

2. Create a schedule to “touch” key accounts regularly

o Build variable schedule based upon account potential not current value of the relationship

3. Develop a strategy to manage marginal accounts those that cannot be effectively managed by the sales force

o Outsource is one way to go

4. Raise awareness of new products and services

5. Under promise – over deliver

via B2B Sales and Marketing Blog

Risk Proof your CRM Initiative: The top reasons for CRM failure

William Band points out in his article the following results from a recent Forrester survey. I believe one of the key takeaways is that Business Process, People, and Strategy account for 67% of the problems associated with CRM initiatives. The technology is a certainly a component as it must enable the delivery of data and experience to internal and external users, but the true drivers of your success will stem from the strategy and business process.  If you focus there first, your chance of success goes up significantly.

Despite the recession, the need to create differentiation through unique customer experiences, strive for deeper insight into customer needs and behaviors, and serve customers cost-effectively remains. To support achievement of these goals, leading-edge CRM technologies are much easier to use and offer faster time-to-value — driving higher user adoption — compared to solutions available three or four years ago.

A recent Forrester survey, however, found that the risk of CRM failure can still be high. Only about one-third of enterprise-class organizations, and about half of midmarket ones, agreed that “the [CRM] application really improved the end users’ productivity.” Only about half agreed that the “[vendor] professional services team had good technical skills that helped with the implementation.” Over 200 problems were reported, across four categories.

Technology (33 percent): This category comprised functional deficiencies (30 percent), lack of the skill sets needed for implementation (23 percent), data problems (19 percent), and system performance shortfalls (19 percent). With product deficiencies still atop this category, decision-makers should keep a sharp eye on the breadth and depth of any product offering, including specific industry requirements. Evaluate customer data management abilities and usability. Examine how the application integrates with other technology systems. Gauge the size of the vendor’s customer base and the quality of systems integration partners. Examine the depth of human and financial resources available to enhance products.

Business Processes (27 percent): This group included technical/integration difficulties in supporting company processes (48 percent), poor business process design (31 percent), and the need to customize solutions (21 percent). Can you avoid these risks? At one diversified chemicals company with inflexible business processes across different lines of business (LOBs), business process experts were assigned to each business unit. These key individuals, who came from the business and not from IT, were chosen for their ability to identify the most important business needs. The business process experts were given the authority to make decisions for their group, and were responsible for designing and managing necessary workflow items pertinent to their operating LOBs. A quarterly review process ensures that, as business processes change, new requirements are captured and incorporated into the IT plan for future releases.

People (22 percent): The key pitfalls here were difficulties in achieving user adoption (49 percent), insufficient planning/attention given to change management (36 percent), and cultural resistance to new ways of working (15 percent). One global medical-products company, suffering from very low user adoption of CRM, implemented a program whereby any user could submit a question about the CRM application. These were reviewed by the CRM project team, which conducted a monthly survey to collect broader feedback from users. The team then conducted short information sessions with users to address specific issues. As a result, users came to realize the potential of the application, increasing adoption.

Strategy (18 percent): Comprising CRM strategy and deployment issues, this category included inadequate methodologies (40 percent), poorly defined requirements (25 percent), not achieving alignment on objectives (18 percent), and failing to tightly manage costs (18 percent). Successful CRM projects require a constant balancing of objectives, priorities, resources, and schedules. One financial services company created a CRM steering committee (senior IT and business unit heads with direct accountability to the board of directors), and a program committee (project and operations managers) that allocates resources as needed.

Reporting to the program committee is a project team of IT managers; the project team meets with its business counterparts every two weeks to monitor progress and document and resolve issues or escalate them to the program committee. Under this structure, there is a clear line of accountability, and decision-making processes are well defined.

via Small Business – Risk-Proofing Your CRM Initiative

Are you afraid of RISK – or are you thriving in this marketplace?

A great article by Martha Rogers related to the great opportunity that exists for those who are willing to take measured, calculated risks in the current marketplace. I know of several companies who are seizing the opportunity of a marketplace frozen in uncertainty to grab market share, retrench their infrastructure, and realign processes to thrive in the current market, and explode when things turn around. The key takeaways from the article are below:

RISK Is the New Four-Letter Word – Think customers: The 1to1 Blog

During this period of quiet belt-tightening, some companies and governments are developing agoraphobia – fear of venturing forth – afraid to take any chance at all. While it’s good that we’ve learned some painful lessons from Bernie Madoff and AIG and Ameriquest, we need to watch for signs that some companies will emerge from the Bear Period stronger than their competitors for several key reasons:

They will take this opportunity to build stronger relationships with customers by deliberately understanding and helping their own customers through the downturn.

They will build trust by doing the exact best thing for customers. We’d like to see a cell phone company that sends notices to all their customers telling each one which of the company’s subscription plans would be best for each, and offering to switch them.

They understand that no business has a 100 percent guarantee, but use careful predictive modeling to minimize risk by focusing on customers who are the most valuable now and in the future high actual and potential value customers and meeting each of their needs better and better.

They balance the short-term revenue that provides cash flow with the long-term equity creation that ensures future success for shareholders, customers, and employees – and they build that balance into the metrics and management of the organization.

Ultimately, these are the companies that will proactively save lives rather than retreat behind the safety of preventing death, and will emerge from the current downturn outshining their competitors. I want to invest in them. I want to be their customer.

Read the full article here: RISK Is the New Four-Letter Word

Recession Strategies: Why it is important to invest in CRM Now

Should be a good one. I am planning on attending

Date: Thursday, April 2, 2009

Time: 2:00 PM EDT

Duration: 60 minutes

Smart companies know you can’t save your way out of a recession. That said, with the economy struggling and not expected to improve for the foreseeable, businesses need to be more frugal with their spending and put their money into areas that improve sales, better services customers and/or helps them gain operational efficiencies.

Customer relationship management (CRM) technology is one of those critical areas that companies need to continually embrace, especially during tough economic times.

Attend this Webcast to learn how CRM can:

* Increase your revenue opportunities

* Help you better understand your customer base

* Provide relevant data to your sales force

* Improve your marketing strategy

When times are tight, customers expect more for their hard-earned dollar—more value, more service and more attention! Those companies that stay current with technology improvements and invest in CRM solutions will be at a competitive advantage when the economy bounces back.


Ellis Booker, Editor, BtoB Magazine


Chris Bucholtz, Senior Editor, InsideCRM

Michael Thomas, Director of CRM and Social Media Strategy, Neighborhood America

Sign Up Here.

Guest Blogger William Band: Six Trends That Will Drive CRM Decision-Making in 2009 – Think customers: The 1to1 Blog

In light of the recent sudden and dramatic deterioration of the economic climate, what are the key developments driving CRM strategies and the adoption of enabling technologies now? I recently recorded a podcast summing-up my take on the situation, based on Forrester’s latest research. Here’s what I know: Locking-in customer loyalty through deeper engagement and differentiated experiences will continue as critical priorities. Six trends will drive CRM decision-making in 2009.

via Guest Blogger William Band: Six Trends That Will Drive CRM Decision-Making in 2009 – Think customers: The 1to1 Blog .

Why Bother with Customer Centricity?

CRM Magazine asked their subscribers “What is the number one concern that keeps you up at night?”.

I found it interesting that none of the responses resembled anything like: “My kid is failing out of school”, or “My spouse works too much”, or “I can’t make the mortgage payment”. Oddly enough, all of the responses were CRM related. Go figure.

Nonetheless, the results were as follows:

Creating and Maintaining Customer Satisfaction: 27%
Providing a Return on Investment: 27%
Maintaining User buy-in and enthusiasm 16%
Cementing Customer Loyalty 15%
Finding the right CRM Tool 6%
Keeping up with CRM Innovation 4%
Respondants who sleep soundly 5%

Today, I’d like to focus on the number one reason that people are not sleeping at night, “Creating and Maintaining Customer Satisfaction”. We’ll talk about the other number one, ROI, in a few weeks. But, first, I’d like to take a step back and observe some findings from another study.

In a survey conducted by CRMGuru.com, it was discovered that having a Customer-Centric Strategy was the most important driver of success of any CRM implementation. In a future post, I’ll take the time to illustrate that Customer Loyalty has significant impacts on both the top and bottom lines.

So how do each of these pieces of the puzzle fit together? What is the relationship between Customer Satisfaction, Customer Loyalty, and implementing a Customer Centric Strategy?

Customer Satisfaction and Customer Loyalty are two golden keys to giving your company competitive advantage. Building and implementing a Customer-Centric Business Strategy is created with the intention of increasing both your customer satisfaction, and customer loyalty.

The first step in implementing a customer centric business strategy, (or any other initiative) is to take a snapshot of where you currently are. This makes it possible to measure your progress along the way. The two main benchmarks that can help measure the success of your initiative are:

How many of your customers are satisfied with the products and services you are providing to them?

In other words, how many of your customers are defecting and choosing your competitor’s products and services.

The second step is looking at 5 key areas in developing your customer centric strategy. I have listed a few things to consider in each area:

1. Overall Business Strategy

– What are your customer’s needs? Spend more time understanding this, as opposed to trying to get your customer to interact the way you want them to
– Focus new product development around customer feedback

Graham Hill just made a great post related to this How Harnessing Your Customers Doubles Your Innovation Success>/a>

2. Organizational Issues

– Senior management committed to leading company through organizational changes
– Sales, Customer Service, and Technical Support given incentives to work together to provide outstanding customer service
– Move majority of CRM technology selection authority from IT to “business” decision makers

3. Work Processes

– Build and modify work processes around servicing the customer better
– Work hard at increasing efficiencies, streamlining processes
– Seek to be the Low-Cost producer in your industry

4. Technology

– Consolidate all customer related data into one repository
– Integrate key front-office, back office, and web office systems to interact with each other
– Choose leading technology with capable vendors to assist in the process

5. Training and Support

– Provide your staff with excellent training
– Budget time and resources to make sure they are confident with the new system
– Adjust compensation incentives to encourage use of new systems, and transition sales focus from new customer acquisition to retention

“Being customer centric focuses your business decision-making processes on the impact that those decisions will have on your customers. The real trick is making the “right” decisions that result in a positive impact. In order to do that, the organization needs to understand who its customers are, where they are going and how can the customer’s needs be met. That type of understanding requires information, and information comes from data.” says Kevin Murtha of Greenbrier & Russel’s, in an article in the September, 2002 edition of DM Review. http://www.dmreview.com/

It is essential for your company to be able to have the systems in place to be able to capture, analyze, and share the information about your customers so that you can be more responsive to their needs, provide them with unparalleled service, and keep them as customers for life. But it all starts with strategy.

Media turn to CRM to cut losses

More and more companies across industries are turning towards CRM in order to better understand their customer base, and provide them product and service offerings that provide an extremely high value proposition. Times like this provide the backdrop for the greatest need and delivery of innovation. Are you waiting and hoping for things to turnaround, or are you driving change to compete and excel in this marketplace?

Beleaguered by declining reader­ships and the exodus of advertis­ers, media companies have begun furiously experimenting with new strategies they hope will help them retain their relevance, including personalized newspapers and online migration.

These companies also have re-energized interest in robust CRM programs, like the one Disney launched last week.

via Media turn to CRM to cut losses – DMNews.

The Limits of Customer Analytics in a Recession | CustomerThink – CRM, CEM & Social Media

Customer segmentation is a big issue as companies look deeper at their existing customer base, and as Graham points out, not only are companies needing to readjust their strategic initiatives and sometimes entire operational models, the data that they have in their database may not mean what it meant just a few months ago:

The recession has resulted in a number of companies having to change their ‘business operating models’ and to switch their emphasis. Sometimes this can have unintended consequences . For example, talking to one telecoms executive, his company’s emphasis has changed from acquiring new customers, to retaining the ones it already has. This is quite a change for the telecoms industry, more used to spending huge sums of money acquiring new customers to replace the ones that it lost the previous year, than to keeping existing customers. This change applies to many other industries too.

As the recession evolves into something more frightening, I am sure that there will be many more of these ‘phase changes’, as businesses switch from their current operating model to a different one.

The difficulty with changing the emphasis from customer acquisition to retention, is that it requires very different business capabilities. Acquisition is generally done through mass marketing campaigns to the market as a whole. What is generally on offer is a bundle of product, service, even experiential components, that are almost identical to what competitors are offering. The emphasis is on competitive intelligence and mass marketing capabilities. Retention on the other hand is mainly done with a combination of mass-customised follow-on offers to individual customers based upon their recent behaviour. The emphasis here is on customer analytics and mass-customised marketing capabilities. Making the switch can be very difficult, as although most companies already have these new capabilities, they are not always there in the right quantities to deliver against management’s change in emphasis

via The Limits of Customer Analytics in a Recession | CustomerThink – CRM, CEM & Social Media – Think, Feel & Connect.

Customer Retention: The greatest opportunity to increase profitability in a recession

“The customer is the most important part of the production line”

In this newsletter, we will be talking about probably the biggest opportunity to increase your company’s value in a recession, or in any market, for that matter.

What is CRM? Most of you know that it stands for Customer Relationship Management.

CRM in its truest form has nothing to do with technology. Putting on a football helmet will not make you a football player. Buying a lot of books will not make you smart. Similarly, simply buying the latest technology will not make you money.

CRM is a mindset. It is the implementation of customer centric business strategies that are intended to make the customer feel like they are your first priority. Implementing these strategies will most liklely require the proper technology as an enabler to successfully deploy and implement the new systems and processes that will lead to higher customer retention in your organization.

If relationships with your customers are well managed, then, your customers will be happy. Right?

But why is this important? The simple thought goes:

If a customer is happy, they will remain a customer. If they remain a customer, they will spend more money over time. This is a basic idea that just about everyone can grasp.

But is that it? Is that all there is to it? Let’s look a little closer at the enormous value in properly managing relationships with your customers, which leads to higher customer retention.


Depending on your industry, the costs associated with acquiring new customers can be huge. Marketing initiatives, salesperson’s salaries, collateral, and promotional materials, wining and dining the high profile potential clients are all costs associated with acquiring new customers. In addition, even once new customers decide to purchase your product and service, they may be responsible for the majority of your customer service or technical support calls. Industries vary, so it is hard to put a hard dollar amount on each of these, but if you were to add these costs up, I am sure you would be surprised by the results.


Most new customers are already buying your product or service from someone else in some way, shape, or form. Something has inspired them to search for a new vendor. This may have been a referral, bad experience with their current vendor, or a compelling marketing promotion that you are running. In more cases than not, this search has led this new customer to purchase a “relatively small” initial purchase that will grow as you provide them with superior product quality, customer service, and technical support. Hopefully their business has grown over time, and this has increased their buying volume.


A customer referral is the best way to acquire new leads. You have an ally in the marketplace evangelizing for you. Happy customers refer people who trust them, are like them, and who have already heard about the great products and customer service you offer. Customer referrals have a much higher percentage of close that your normal marketing driven lead. Higher customer retention generally leads to more referrals, which leads to more sales, which leads to more growth. In most industries, customer acquisition costs for referrals are significantly less than for a stranger off of the street. Not only do referrals increase your revenue, but generally they also reduce your acquisition costs, as well.


With extra time being spent to educate new customers about your order process, credit checks and verification, new account setups, and other steps that need to be taken, it takes longer in almost any industry (and costs more money) to process orders from new customers instead of already existing customers. Your already existing customers know how things work with your company because they have done it before.


Most likely, many of your new customers have purchased your product because of some price break or promotion. They are taking advantage of a special marketing campaign that you have made available to “First Time Customers Only”. Existing customers generally pay the normal price, providing a higher margin on the products and services you provide.

According to the Harvard Business Review, an increase in customer retention by 5% could increase the value of your average customer by 25-100%.

That means that if you earn $50 million in profits each year, by increasing your customer retention rates by just 5%, you could increase your profit by $12-50 million.

1. Do you know what your company’s acquisition costs are?

2. Do you know what the rate of defection is among your current customers, and why they are defecting?

3. Do you have the systems in place to begin increasing your customer retention?
– Enabling your sales reps to sell more efficiently
– Enabling your customer service and technical support teams to quickly and proactively provide your customers with top notch service?

4. Do you know the top 5 reasons your customers call you after the sale?

5. Are you sharing critical information across your organization with all customer “touch point” departments?

6. What is the current financial impact to your company from your customers taking their business elsewhere?