R2ISC Associates




Best Practices CRM


Best practices are proven strategies and tactics used by leading companies to increase efficiency.  Other companies can emulate these companies and use the strategies and tactics as a benchmark for comparison to determine how well you are doing.  R2ISCSM Associates believes middle market companies should not use bleeding edge strategies, tactics or technology unless doing so will give strategic advantage over  competitors.  Rather middle market companies should use leading strategies, tactics and technology that have been proven by other companies.  


 Cross Industry

Best practices are obtained for a process regardless of industry.  For example, accounts payable is the same in most companies.  The best practice used by The Ford Motor Company for paying vendors when they receive material without the use of an invoice can be used by most companies regardless of the industry.  (Not having to handle the invoices saved Ford hundreds of thousands of dollars.  The payment is made based on the unit price from the purchase order, and the quantity received as recorded on the receiving report.)  



The first step in implementing a best practice is to determine where you stand in relationship to the best practice, is called benchmarking.  It allows you to determine the gains you will achieve by implementing the new strategy or tactic.  


 Customer Relationship Management

Customer Relationship Management, known as “CRM”, has been gaining attention over the last few years.  At R2ISCSM Associates we believe CRM is a mind set, not a computer application or group of applications.  We believe that CRM is knowing everything about your customers and putting the customer first in everything you do.  Bellow we will discuses three important strategies and tactics that midsize companies should use.  They are: customer segmentation, up-selling, cross selling and down selling and market of one.  These three were chosen because they are basic to CRM and can make a substantial difference to the bottom line.  


 Customer Segmentation

Not all customers are alike; some customers are very profitable while others cause you lose money.  Customer segmentation is grouping customers based on their lifetime value.  By using Customer Segmentation, companies can increase sales, reduce cost, reduce the risk of good customers defecting to the competition, etc.


Airlines are a good example of customer segmentation. Each airline has a frequent flier program that while offering points for each flight, also offers its best customers preferential treatment.  This includes free upgrades, a special telephone number to make flight reservations, preferred seating, early boarding, special luggage handling, etc.  Most airlines have three levels of preferred fliers with the top level having the most benefits.  Airlines did not institute these programs because they like their passengers.  They did it because it made good business sense.  Six percent of airline customers account for 24% of the miles flown and 37% of the revenue.  By rewarding the frequent flyers, airlines feel they are increasing their profits.   


In order to determine the profitability of a customer, you must have a good cost accounting system.  It must give you an accurate cost for each of your products, the cost of the indirect services you provide, and then it must allocate these costs to a customer.  These services include order entry, billing, purchasing, etc.    


 One rule of thumb is that 20% of your customers will account for 80% of your profit.  You must give this 20% special attention.  You need to know everything about them so you can anticipate their every move.  (You do not want to wake up one morning to find out that one of your best customers has filed for bankruptcy, switched to another supplier or found an alternative product.)   You should have one person in charge of attaining the market intelligence and plotting strategy to maintain and grow each of your top customers.   


 You should also review the bottom 20% of customer to determine if it is in your best interest to maintain them.  In this analysis you need to determine each of these customers’ future value.  Just because they are small customer today does not mean you might not become larger customers tomorrow.  Review each of these customers to determine if they have potential, and if so, develop a plan to grow them.  If they do not have potential, consider helping them find another source for your product.  This could be a supplier who sells your product. 



 Up Selling, Cross Selling and Down Selling

Today we need to anticipate our customers’ needs.  This way we can try to sell them the right product which may not be what they are requesting. It means not selling them items that are inappropriate.  It also means, when appropriate, selling them a better product that has features they need (known as up selling). 


Cross selling is offering the customer products related  to the item they are buying.  For example, if the customer is buying a camera, you can offer them film, batteries, a camera bag, etc.  Amazon.com and b&n.com cross sell by listing the titles of other books that buyers of the original book have purchased. In other words they are suggesting other books that may be of interest to the buyer.   


 Down selling is telling the buyer that the item he/she want to buy is inappropriate. For example, Garden.com informs customers if they are buying flower bulbs during the wrong season or for the wrong geographic area.  Naturally, they then suggest alternate products that are better suited for the customer.   

Up selling and cross selling increase revenue.  Down selling increases revenue because a happy customer will return and tell others about his/her good experience.  Down selling also reduces the cost of returns.  Up selling, cross selling and down selling should be done on the Internet, call center, in person and any other way you sell.   


Market of one

The 80s and 90s were the eras of mass marketing.  Today we have returned to marketing to the individual.  Before the era of mass marketing, if you were hungry for a light meal you would go into your corner luncheonette and order a hamburger.  The waitress would recognize you and ask if you want ”the usual”, a burger cooked medium, hold the lettuce and the onion, a side of fries and a large Coke. If it was not made “your way” the waitress would catch the problem and  have it fixed before she served you. In the era of mass marketing you went into McDonald’s, Burger King or an other such establishment and you had to tell the person behind the counter exactly what you wanted and you hoped for the best.   


Today companies have many touch points with their customers: call centers, the internet, in-store sales, customer service, etc.  But no mater where, how or through which channel you make contact with a customer, the customer should have the same experience.  You should never have a customer ask “if you and another employee both work for the same company.”  If the customer places an order on the internet, that customer should be able to easily follow-up the order on the phone or in person.  That means information about the internet order (and the customer) is easily accessible to employees on the phone or in the store/office.  It is very frustrating to have to wait for someone to locate the information you are requesting, especially if you feel it should be at their finger tips.     


You should be able to recognize your customers on the phone and internet the same way the waitress, in the luncheonette, recognized her good customers.  This means that you know their preferences, the items they buy, and are able to make suggestions for additional products.     


One of my pet peeves is having to enter information on my telephone keypad, such as credit card number or account number and when the live person answers the phone and asks for the same information.  I always tell the person I just entered the information, to which they reply, “I am sorry but I do not have the information”. My perception of these companies is that they do not mind wasting my time; they do not care about me.   


To summarize, this third strategy is Marketing 101, treat customers with respect and show them that you value them as customers.   


Once you have successfully implemented these strategies, you will be well on your way to improving your bottom line.


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