Tuesday, August 26, 2008

CRM: Who Are Your Most Profitable Customers?

By knowing the answer to that question, you will discover how to multiply your profits. Let me ask you another question, if you knew who they were would spend most time with them? Now be honest, have you ever thought to really look at who your most profitable customers are, what similar characteristics they have, what made them be your best customers.

Because when you know that?it then becomes a lot easier to keep them profitable and happy and to ensure that you have new customers joining this elite group all the time Do the following and guarantee that your profits will increase exponentially.

Depending on the size of your customer base, you can decide on how many you wish to select. For this example, we will look at the top 5.

Without a proper CRM system, this is going to be quite difficult to calculate. If you had an automated system, this would be one of the Key Performance Indicators (KPI) that you would always be looking at. Let's start by looking at your biggest spenders.

You will need to calculate exactly how much profit you get from each of them. You will need to apply some simple accounting rules in relation to fixed and variable costs. To calculate your fixed costs, look at all the items that you spend money on every year. Things like; rent, light, telephone, salary costs, etc. When you have the total, then divide that by the amount of customers you have, and that is the amount you will assign as the fixed cost to each customer.

Now look at the variable costs. This will be made up of cost of goods sold to each. Items such as; material costs, variable manufacturing costs, sales commissions, lead generation costs, service costs, etc. Now apply this to each of your largest customers.

So how much does profit does each generate? Do the same with your 5 smallest customers and the 5 customers in the middle of the revenue ranking.

Have you noticed any interesting trends? Is the percentage of profit consistent? Are the largest customers still your most profitable ones? If like many businesses at this stage, you have not got any clear cut answers, you will need to perform this exercise for your whole base.

OK, let's assume for now that you have finally identified your most profitable customers. You will now need to look at what they have in common. Some suggested commonalities might be as follows:

They are all in the same industry
They have the same size
You have a specific sales or service representative looking after them
They are all in the same area
They buy a specific set of products

Whatever the answer you come up with, you now will have the secret to multiplying your profits. Do the following and guarantee that your profits will increase exponentially.

Spend the most time with them, love them to death

Cross sell to other customers, those products which your most profitable customers buy.

Focus your lead generation efforts on prospects with similar characteristics

Ask each one of them for two referrals, after all, since they are giving you so much profit, they must be happy!

There are many other things you can do to boost your profits with this sort of information, so my key tip to you, is ensure that you get some automated system in place which can answer these questions. What is more, you will guarantee that you repeat success and avoid costly mistakes.

This article was written by Peter Lawless, founder of 3R Sales and Marketing. For previous articles like this, visit 3R's Articles. Alternatively, subscribe to Success our free monthly Information Bulletin with sales and marketing articles.


Things You Need To Know When Switching A Crm

CRM database migration is never an easy undertaking for any company, no matter what its size. Naturally it is always best if you thoroughly evaluate and choose the right application for you first. Then moving to new a customer relationship management application becomes unnecessary. But unforeseen things can happen and making the switch can become something that simply cannot be avoided.

One possible reason could be that your company's needs change. A new manager may recommend a system that he is more familiar with. Or the company may have outgrown the old system, requiring a CRM with greater functionality than the old one can provide.

There are many issues to consider when migrating from one CRM application to another. It is important to ensure that there is not system downtime. This can mean that both systems are running concurrently for a short duration while the switch over is made. The data migration needs to be properly monitored to ensure success with no need for data fixes required.

Even with the best attempts to get everything right you can still run into problems. For example, if you are currently running the latest version of ACT!? software, and you want to switch to another popular application, such as the GoldMine? software, you will discover all manner of difficulties. Transferring the complete calendar, history and customer information across will prove difficult at best, and because of restrictive measures built into the newer versions, impossible in some cases.

Contact management software like ACT!? and GoldMine? are desktop based. But web based systems fare no better in many cases. Extracting the full files with all the history information required, along with calendars and notes for your sales team, may prove equally impossible, or very difficult at least.

After years of using one CRM system, such as the GoldMine? software for example, it is likely that you will have made many customizations that are specific to you and members of the sales team. It may be the case that it is not possible to make the exact same customizations in the new application. Modifying customizations in the new system so that you have something similar to what you had in the old system may not be acceptable.

It is likely that staff members will require some degree of training before they are fully comfortable with using a new customer relationship management system, whether it be ACT!? or GoldMine?, or any of the other applications available. Proper training will reduce the need for tech support. Sometimes the changeover from an old familiar system to a new unfamiliar system needs more training than may be obvious. Old habits can die hard.

On the other hand, if your sales team are totally fed up using an outdated system, they may welcome a new one that has all the bells and whistles they have dreamed about, with open arms. This kind of staff attitude is likely to reduce any training time required.

If the task of database migration from one CRM system to another seems to be just too daunting, there are companies who specialize in these matters. One such company is CRM Switch. Really Simple Systems produce a free online guide outlining the 10 CRM pitfalls to avoid, which may help in getting it right first time.

Syed Ali, is the lead CRM consultant for a Toronto based company. His company offers, GoldMine CRM and ACT! Software CRM Syed can be reached at Tel : (905) 815- 1995 ext 22, email :asyed@cqsolutions.com


CRM: Culture or Technology

I was recently asked to present on the impact of technology on sales, has it helped, in what way, or has it had a negative impact?

After examining the issue with some colleagues and experts in the field, it became clear that technology is an enabler, and as such amplifies what is already there, and what is not.

I don't think that that there is anyone in sales today that has not heard of, used or been impacted by a CRM package of one sort or another, be it a simple contact management application with some added functionality, to a top of the line CRM that fully integrate with other enterprise applications. Many companies will tell you of the disasters they have encountered rolling out a CRM, in fact an article in the February 1, 2002 Harvard Business Review: Avoid the Four Perils of CRM, stated that "55% of all CRM projects don't produce results", and went on to say that "According to Bain's 2001 survey of management tools, which tracks corporate use of and satisfaction with management techniques, CRM ranked in the bottom three for satisfaction out of 25 popular tools. In fact, according to last year's survey of 451 senior executives, one in every five users reported that their CRM initiatives not only had failed to deliver profitable growth but also had damaged long-standing customer relationships."

Yet by November 2004, one of the same writers in an article entitled CRM Done Right stated: "Senior executives have become considerably more enthusiastic about CRM. In 2003, Bain & Company's annual Management Tools Survey of 708 global executives found that firms actually began to report increased satisfaction with their CRM investments. In 2001, CRM had ranked near the bottom of a list of 25 possible tools global executives would choose. Two years later, it had moved into the top half. In fact, 82% of surveyed executives said they planned to employ CRM in their companies in 2003-a large jump from the 35% who employed it in 2000."

While the piece went on to suggest a number of factors, we've experienced a number of key things in our work with clients that are worth noting.

First, we very much believe and have seen numerous examples to support the view that Customer Relationship Management is a way of doing business. Most of our successful clients have a consistent view on Customer Relationship Management.

To them CRM is part of their culture, part of their corporate DNA. They see CRM as the proper alignment between software and process to effectively manage their relationships with their customers. The alignment is based on objectives:

Corporate objectives drive the sales organization's objective; which in turn are the foundation for regional/territorial objectives, and client objectives; when properly executed, these objective form the basis for each client/prospect interaction.

It is as much about process as it is about software. If you don't create a balance and alignment between the two, you will fail to manage the relationship with you key customers, and not derive much benefit from your investment. In fact we are working with a company that has spent in excess of $13 million dollars over the last 5 years implementing a CRM software with little tangible results to show in improved sales, increased productivity or understanding of their clients and how to mutually improve their relationship.

A study I read recently showed that over 80% of the CEO's surveyed said their sales organization had a process that was poorly defined or a process that wasn't being followed. A sales process is like a good map or a GPS if you will. Used properly it helps you determine where you are, if you are in heading in the right or wrong direction, also helps you plan what your "next step" should be to get to your destination. A well defined sales process gives a sales organization the same advantage. It should have logical and defined steps that allow both parties to develop a better understanding of each other and a set of questions that help you qualify or "disqualify" an opportunity.

When we meet with a new client we always enquire about their sales process. A VP we recently met responded: "why yes of course, we use XYZ" (name change to protect the innocent, us). Yet he openly admitted that he struggles with forecasting, prospecting, and his people were spending too much time with unproductive activity, in the little activity he was able to glean from the system. (Unfortunately no software will pick up the phone and do a cold call, I'm working on it.)

The clients who do use the software to support their process tell a different story. Activity is focused on the client experience. It is still true that getting new business from an existing client, is much more cost efficient than from new prospects. No I am not saying you should stop prospecting, but don't ignore those that have rewarded you with their business, show them some love, make it easy for them to deal with you, and hard to leave you.

A good CRM (software and process) provides you with a complete view of the client, allowing you to align your resources to best serve them. Reducing service calls, reducing time to respond, reducing the effort to take orders, reducing the cost of sale, increasing their satisfaction level and creating a mutual economical value add relationship.

The data available to you will also help segment your clients better, allowing you to decide where you want to put your focus, and which clients you may want to off load. Remember that some 30% or your lowest margin clients suck over 50% of your resources. A CRM done right can assure that you are retaining the right clients.

CRM system can also break down hierarchical communication barriers allowing everyone, not just sales to focus on the customer relationship, allowing top executive to get involved in meeting client expectation and driving revenue. Of course this will only work where the CRM culture is present. And in many companies that have rolled out the software without the process, with out the training, without the internal value proposition, it is not. As stated earlier it in fact diminishes the client relationship. Many companies are experiencing push back from the front line because they failed to show the ROI to the users. Like the clients sales reps want to know what's in it for them. There is a lot, if there is a supporting process focused on everyone's success, the company, the rep, the client. This can be achieved with a sales process that aligns around key objectives.

One last thing to consider, CRM systems are usually associated with sales organizations. But client satisfaction is the function of the whole organization. A truly successful CRM extends beyond sales to all groups with in a corporation, and as such, a key success factor is the alignment of the sales process with other processes impacting the client relationship.

Tibor Shanto, is a Principal with Renbor Sales Solutions Inc., Renbor Sales Solutions Inc. enables companies achieve sustained growth, by focusing on critical aspects of revenue growth. By recognizing that an outstanding sales force is THE differentiator in today?s environment, our clients with our help, focus on the development of both strategic and tactical initiatives to foster a winning team that will out think, out sell and out perform competitors while consistently gaining market share.

Renbor?s Objective Based Selling (OBS) is a structured approach to delivering ongoing results and improvement by focusing the entire sales organization on a key set of objectives. The overarching objective for any sales organization is to achieve exceptional and sustainable revenue growth. This is accomplished by creating a culture of sales excellence built around the principles and processes adopted by world-class sales organizations.


CRM-Turn Customers to Clients

Customer Relationship Management (CRM) is the process of bringing the customer and the company closer together. Estimates show that just 20 percent of customers account for nearly 80 percent of total revenues in some businesses. While getting more customers is critical for the sustenance of any enterprise, optimizing returns by furthering relationships with the existing clients is a key business practice. Barry Stamos, in "Best Customers: More Profitable Relationships" points out, "Why spend resources attracting new customers until optimizing the profitability of your client relationships?"

"Successful CRM is about competing in the relationship dimension" explains Bob Thompson, CEO, CustomerThink Corporation, "Not as an alternative to having a competitive product or reasonable price- but as a differentiator. If your competitors are doing the same thing you are (as they generally are), product and price won't give you a long- term, sustainable competitive advantage. But if you can get an edge based on how customers feel about your company, it's a much stickier--sustainable--relationship over the long haul."

Customers come first in business. Managing relationships with them is very vital. Through cross-selling and up- selling techniques, you can continue to add more leverage to your business. High value referrals from them can also procure endless opportunities. Cutting down time and marketing costs through client network selling, you increase the profitability of your organization. Usually, a 'sale' converts a 'client' to a 'customer'. More and more sale transactions with him make him a client. By then, he has developed a liking for your service and has taken you in his confidence. The first transaction was just not a one-time event; it perpetuated continuing business through credible relationship building with the customer.

CRM has clearly defined roles:

? Focus on the customer and develop sustainable relationship with him.

? Manage the post-sale period well.

? Provide flexibility to your solutions in meeting customer requirements.

? Get qualified referrals for more business expansion within the network.

? Always keep in touch and have an explaining mindset.

Customers bring business. The more healthy relationships you have with them, the more is the value addition to your business. Continuous introspection about the level of service being offered and providing innovative solutions can help you to stay in the front. To quote former New York City mayor, Ed Koch, simply asking clients, "How am I doing?" is a great way to know where you stand. CRM provides you with tools and techniques to help you in nurturing healthy and dynamic client relationships and turning more customers to clients.

T Chakrabarti and his global colleagues write for KPO2INDIA (http://www.kpo2india.net), a premier Writing and Content Development Farm.

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