Emergic: Rajesh Jain's Blog

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No-Frills CRM

July 30th, 2004 · No Comments

Strategy+Business writes:

We think it is possible to reap some, even many, of the rewards of CRM without buying a specialized software package. We call our method Cheap CRM. It involves leveraging the customer data the company already possesses and most companies already possess a lot more customer information than they think.

The payoff from the kind of Cheap CRM we propose is significant. Managers can dramatically improve customer profitability and retention and reveal new opportunities without incurring the disadvantages.

Much of the data needed to implement Cheap CRM already exists, in fact, on the humble invoice. Most multinational companies have invested massively in mainframe enterprise resource planning systems. These have brought rigor to their sales administration, summarizing each months invoices at a customer or business unit level, but they dont necessarily provide transparency in sales reporting, thus leaving the organization blind to the richness of transaction-level analysis.

By downloading invoice data into a simple database tool such as Microsoft Access, however, company analysts can construct a revealing picture of the shape of the business. Which customers are delivered to, and where? Which supply points generate the most revenue, and which receive the most orders? With this data, managers are able to calculate profitability with a precision that occasionally leads to revelation. They can also monitor changes in profitability inside a given reporting period. This is of particular significance with products subject to variable supply prices and potentially volatile margins. Knowing the number and types of transactions, managers can allocate fixed administrative expenses effectively. They can then link the database to external factors that may be driving buying behavior, such as the weather or advertising. By subjecting this data to regression analysis, one can get very close to the heart of CRM: understanding the customers propensity to buy.

Tags: Enterprise Software

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