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CRM from a Supply Chain Perspective

Analyst Insight: Customer relationship management evolved from contact management, a sales-focused process for suppliers. In many cases, CRM must be rethought; it should be stood on its head, starting with customers' needs and working back to suppliers. Because most companies lack sufficient resources to satisfy every customer, this approach initially leads to frustration. But "every customer totally thrilled" is the wrong objective. To the contrary, it's critical to focus: to "wow" the most profitable customers, and serve them perfectly. Supply chain responses must match segmented and targeted relationships to build satisfaction and profit. – Robert Sabath, Principal Essentialist SCM, Trissential

CRM from a Supply Chain Perspective

Winning CRM strategies focus the right responses on the priorities of the right customers. Everybody created equal doesn’t work for customer success. Companies just don’t have enough resources to provide phenomenal service to every single customer related to every single SKU. It may sound like a sacrilege, but, when resources are focused on the best profit-generating customers (not as a percentage, but in actual number of total dollars), both revenues and profits grow dramatically. And at the same time, the drama that disrupts customer relationships drops off to virtually nothing. Simply because of their volumes, their large number of regular communications, their regular exchange of data, and the history of working together, the best profit generating customers are surprisingly far more predictable than the profit losers. That means less safety stock, less expediting, more consolidation, better route planning, fewer returns – and more to the bottom line.

The challenge of customer relationship management is to understand the current and potential value of a customer related to the current and potential cost of satisfying them. CRM requires a constant sensitivity to many tough questions: from beginning to end, what is the cost of building and maintaining the relationship? (Often very difficult to find; one excellent source of information is Religence.com).  Do your customers actually want all the service you're giving them? When was the last time you checked? What customers and actions are most important? What causes their anger and loss of sleep? What resources do you have, and what resources do you need to be more responsive than your competitors? What are the special things that you do to keep your top five customers from ever moving away from you? What else can you do? What is the cost of keeping the best customers ecstatic, the middle-of-the-road customers happy, and the worst customers satisfied? How much time do you spend expediting orders for customers that you'd rather not serve (such as money losers)? Why do you do it?

Overall, do you know the cost of serving each customer or at least each customer category? If a company is your biggest customer, does it also produce the highest amount of bottom-line dollars for you? If not, does it generate enough profit to take special care of it? If not, what has to be done to achieve a reasonable level of profit while satisfying this important customer?

                                             The Outlook

Is this playing fair? For every 100 companies that treat every customer equally yet get mediocre results, there is one that consistently generates a spectacular bottom-line by playing favorites: customers that contribute the highest profit dollars, plus prospects for this exclusive group. It isn't easy. Computing customer profitability is a challenge with most measurement systems. Treating customers differently is not popular with the salespeople who manage bottom-of-the-pile relationships. Yet, fostering this segmentation is arguably the best CRM tool to support rapid, profitable growth.

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