Managing Customer Relationships in Uncertain Times 13 of 13

The Bottom Line

The world economy has experienced many shocks over history. Some aspects of today’s economic environment are unique and create a level of uncertainly not seen since the 1970’s. Today, the global economy is more tightly integrated. Capital flows relatively freely across borders. Trade is an increasing percentage of nearly every company and country. Still, the threat of terrorism and other disruptions may become a continuous process.

Customer relationships, especially existing ones, have never been more precious. In an attempt to manage cost and hedge risks, companies must not neglect their customers. Fortunately, as our discussions have shown, investments in improving customer relationships often yield cost savings. Pick two or three areas of sales and marketing that show short-term promise and make sensible investments.

Integrating and standardizing customer data as the foundation for better decision-making are an obvious investment that can yield rapid results. Clear customer processes that span channels enable companies to move any phase of the customer life-cycle to the most efficient channel. Conversely, there are tremendous opportunities to harvest revenue from existing customers if the relationship is strong and data is transformed into actionable information.

This too shall pass. Companies that invest intelligently during this difficult period will have the best chance to ride the next wave.

Managing Customer Relationships in Uncertain Times 5 of 13

Option 3: Increase focus on customer loyalty and retention programs

Over the years, much has been written about building customer-centered companies. There is an old saying: “When all is said and done, more is said than done.” This has certainly been true in customer relationship management. There have been many studies on the relative costs of customer acquisition versus customer retention. The most famous of these was done by the Harvard Business Review, which showed that the cost of acquiring a new customer was six to seven times greater than retaining them. Other analyses put the cost ratio at between three and twenty times.

In the current business climate, the cost of customer acquisition is likely to increase. Each existing customer relationship is sacred, since attracting new customers may become more difficult. Investments in loyalty and retention programs should increase as a percentage of overall spending. This is particularly true in customer analytics. We anticipate that there will be a significant increase in initiatives that enable companies to better understand and anticipate the business needs of their customers in order to maximize the value they provide to them.

Managing Customer Relationships in Uncertain Times

“May you live in interesting times,” intones the old Chinese curse. Our times are more than interesting. They are troubling. Markets fall precipitously and rise tentatively. Credit is in crunch time. Doom and gloom are the currency of the day. However, despite the intervening problems, the economies in United States and other G7 nations will almost certainly flourish over the coming years. What exists in the immediate future is uncertain and there may be an understandable reluctance by management to invest too heavily in the future. This is particularly true of investments in marketing and sales, especially in areas that are perceived as discretionary or without an immediate return on investment. One thing is clear throughout the current business climate: the customer is king. Strengthening relationships with customers is no longer simply important; it is imperative. Each existing customer relationship is now sacred. Retaining and developing customer relationships are the life-blood of every company. After talking to our clients, both large and small, we find that there is a strong belief in the long-term economic health of the Americas and Europe. In the very short-term the U.S. Federal Reserve and other central banks are attempting to insure liquidity through increases in the money supply and cuts in interest rates. The attempt to inflate the economy with a continuing series of rate cuts, will spur investment over time. Certainly there will be increased government spending to rebuild and fortify existing defense, communications and healthcare infrastructure. Inflation, for the moment at least, is next year’s problem. Given the slowing of economies in the U.S. and Europe over the last several quarters, there has been much discussion of the form of a widespread global recession. Economists often picture economic downturns as a series of letters – a “V,” “U,” or “L” shaped recession. In the fall of 2008, most economists predict a U- or L-shaped recession with the sharp downturn followed by a lingering trough. Our view is that the recent turmoil in the market and the political structure increased the potential for a U-shaped recession. Our discussions with clients suggest that we may experience a continued downturn followed by an at least one temporary upturn over the next three to four quarters. Whether we are correct or not, business will go on. This blog series distills our thoughts and those of our clients. Opinions are many and varied. There is some consensus on actions, but less on their potential results. The following posts highlight a new role for customer relationship management in these difficult times, with a focus on nine issues that every company must consider over the coming months and years.

Cut your marketing budget, not your strategy- part 8

For our last installment, we have the cost-cutting idea of leveraging every contact with your customers. Each and every touch-point with your customers, from mailing an invoice to waiting on hold, provides an opportunity to communicate with them. Be creative! 8) Leverage every contact with the customer. Look at all the ways a customer has contact with your organization and try to leverage all the relevant touch points. Postage is expensive, so make sure you optimize any mail-based touches. Statements, invoices and even the physical delivery of your product may all be great places to drop in a marketing message. Think about the inbound touches as well-- can service reps up-sell or get a product message across? What are your customers listening to on hold– music or the pitch on the value of upgrading to the newest version of your product? Treat every customer-related interaction as an opportunity to educate them on your products and services.