The job shop CRM revolution

How an integrated CRM system can improve customer loyalty

August 11, 2009
By: David Lechleitner

Implementing a customer-focused strategy can position companies for long-term health. A loyal customer will stick with a company through tough economic times, employee turnover, and even the occasional price increase. This article focuses on how integrated customer relationship management tools can help job shops achieve business objectives.

As we look forward to coming out of the current recession, most manufacturers already have chosen a method for reducing or eliminating costs. In fact, tough times often force companies to look at internal operations with a more critical eye focused on eliminating unnecessary processes while maximizing the efficiency of required tasks. If approached in the right manner, this self-evaluation can benefit shops well beyond the current economic slowdown. The strongest players can emerge leaner, hungrier, and more capable of capitalizing on business opportunities. But even the most aggressive cost-containment strategy cannot keep a business afloat if it fails to understand what drives the core business and does not bring in sufficient revenue. A successful strategy also must focus on the customer.

Customers are assets. They keep companies in business. The American Management Association (AMA) estimates that 80 percent of a company's profit can be attributed to existing customers, with a good portion of this coming from long-term customers.

This, along with the known fact that attracting a new customer costs significantly more than retaining an existing one, illustrates the value that repeat business can bring to fabricators, stampers, and sheet metal assembly shops. Of course, it's never a guarantee that a customer will return, even if his experience was positive. But if the customer is neglected, the risk of losing him greatly increases.

Repeat business must be driven through a strategic investment in developing long-term, fruitful partnerships with customers. With a combination of the right strategic focus and a balanced investment in customer relationship management (CRM) technology, fabricators can develop a loyal, dependable, and profitable customer base.

Building Loyalty Beyond Satisfaction

If asked, just about every company would say that customers are required for success. Acknowledging the customer's rightful role in the health of a business is nothing new, but many shops still operate under the assumption that product quality and price are the most effective differentiators.

Even businesses that hold a technological innovation face the reality that their competition is aggressively searching for ways to close that competitive gap. Service quality is a far more relevant differentiator today. A customer relationship does not end with the shipment of a finished part, or when payment is received; it must be nurtured and developed through every possible interaction to cultivate a loyal customer. Shops that invest in developing their customer relationships while offering high-quality products and competitive pricing hold the advantage.

A loyal customer must be developed over the long term. Some shops mistakenly believe that customer satisfaction is the goal. Customer satisfaction is a key aspect of building a loyal customer base, but it's only the beginning. In order to amass long-term, profitable customers, a business must maintain each relationship appropriately.

Even previously satisfied customers can have short memories and judge a business based solely on the most recent transaction. Customers don't forget bad experiences, and a lack of loud complaining is not necessarily evidence of a satisfied customer or a healthy customer relationship.

A loyal customer will stick with a company through tough economic times, employee turnover, and even the occasional price increase.

Nurturing customers begins with the first RFQ; continues through the buying, manufacturing, and shipping cycle; and includes follow-up after the invoice is sent. In addition, customer contact must go beyond transaction-based interactions. It should occur regularly with all company employees aware of critical issues. Every customer conversation and interaction must focus on developing a partnership, not just resolving the issue at hand.

Although every customer is valuable, not all are valuable in the same way. CRM provides a 360- degree view of your customer base, making it possible to segment it by variables, such as type, revenue, and geography. This capability allows you to make decisions about how to manage customer groups as well as individual customers. For example, highly profitable customers warrant a strategic focus on retention, whereas customers with the most growth potential require more nurturing to achieve a deeper share of that customer's business.

Contact Management versus Integrated CRM

Like all companies, fabricators, stampers, and assemblers stand to benefit the most from a system that integrates seamlessly with all supporting business processes from quote to cash, including those automated by the core enterprise resource planning (ERP) system. Nonintegrated CRM systems are a start, but they paint only half the picture. They may effectively manage things like contacts, communication, and direct marketing campaigns, but without seamless integration with a shop management system, it's much more difficult to determine which segments of the customer base are most profitable and offer the most opportunity for growth. Integrating CRM with core shop management and control functionality can offer many long-term benefits.

Integrated CRM allows shops to eliminate many redundant manual processes through automation, thereby reducing cost. In addition, shops can analyze information captured in the CRM system directly with data from the job management system. This allows them to anticipate business cycles proactively, plan for impending economic slowdowns, and take early advantage of recovery cycles.

In an ideal world, every interaction would be personalized, and every employee would understand everything there is to know about every important customer. This simply isn't possible without software. Integrated CRM software organizes and standardizes all customer information and makes it available to all employees, closing the feedback loop between the business and its customers. By tracking customer feedback and keeping that information available in a structured manner, it's possible to identify trends in deficient business areas, for example, product quality and service delivery.

In these tough economic times, it is indeed all about economies of scale and maximizing the return on every dollar spent. When disparate systems manage key business functions that are not seamlessly integrated, a shop absorbs tremendous amounts of money and time trying to consolidate and manage the data, not to mention the cost of maintenance and the time it takes to manage the day-to-day operations of multiple systems. Most important, customer satisfaction can suffer from the inability to anticipate and respond to customer needs, which constitutes a threat to the fabric of the business.

With signs that recovery is on the horizon, forward-thinking manufacturers that embrace relationship management concepts and technology can achieve a competitive advantage during the early stages of the impending recovery cycle. CRM helps set a new manufacturing benchmark. It's difficult to outdevelop or outmanufacture the competition, so it's time to look elsewhere for a competitive advantage. That advantage can be found through integrated CRM. The ability to service customers in the way they want to be serviced is, in the final analysis, the best differentiator.

David Lechleitner

Contributing Writer
Epicor Software Corp.
Phone: 952-417-5077
Epicor Software is a provider of business software systems.