Turning Customers into Partners
Customer management, or customer intimacy, is a major buzzword in the consumer products industry today. Many companies are embracing the concept that getting closer to the customer's real needs is important. Ironically, in the middle of the Internet boom, many companies tried to jump on the customer management bandwagon and then abandoned ship once the bubble burst in 2000.
The great companies in the industry did not follow this pattern and have stayed true to the vision that getting closer to customers is essential for future growth. The tools, standards, connectivity and focus on service have continued to evolve aiming to enable better customer management. Ten years ago, few systems existed that automatically reported fully loaded customer level P&L statements. Companies that outperformed the market never lost sight of the importance of customer intimacy, and have continued to aggressively pursue new ways to become more customer focused.
Simply defined, the customer intimate model means understanding your customers and responding to their needs quickly. Clarkston Consulting's industry research shows that most consumer products companies now have well-established Internet-based customer portals, integrating order-processing information with other key metrics to enable customer self-service collaboration. What the leading companies are working towards is a three-step progression to become truly customer intimate.
Stepping Up
The first involves advanced analytics -- analyzing data such as customer profiling to effectively target customers through effective trade promotion management, pricing and loyalty programs. The second, analytics integrated with product and brand development, results in customized products for key customers. The third is migrating from a push to a pull mindset, meaning companies will only make a product and meet customer's needs after joint collaboration about product attributes and confirmed orders are received. Advanced analytics and integrated product development (steps one and two above) involve a convergence of several key technologies, namely CRM, ERP, data warehousing and dashboard/reporting tools. Drawing data and information from these disparate systems and building robust models that analyze and report key trends by customer/product are the foundation. Although many models exist, all point to the same conclusion -- to better serve your key customers efficiently, a clear stratification of your customers by revenue contribution, cost to serve and percent of total is required.
The interesting thing to monitor is what the leading companies are doing with these newly acquired insights. Most use the information to raise process and organizational questions within their own organization. For example:
Should we centralize or decentralize ownership of certain customer touch points in efforts to drive better service, and what would that cost?
Can we achieve "one face" to the customer model across multiple divisions without sacrificing efficiencies and costing us more?
Are the account teams able to have daily or weekly checkpoints with key customers and credible dialogue based on real facts?
Should we fire some of the low-value, high-cost customers?
What customer loyalty programs are yielding the highest sales gains with the lowest costs to serve?
Organization is Key
The only way to ultimately achieve this responsiveness is to be organized in a demand-pull model. In the future, great companies will not make products to stock, store them in inventory and release them against orders. Great companies will have the capacity to produce and ship their products quickly, with enough detailed information so that products are only created when firm orders exist. Today's industry reliance on short-term, detailed, mix-level forecasts will disappear. Forecasting will return to what it should be -- quarterly or annual higher-level forecasts used for strategic planning rather than day-to-day drivers of the business. In fact, the basic foundation of CPFR will migrate to straight order execution, with emphasis on forecasting diminished, but collaborative planning enhanced.
Companies are spending more resources to determine how to cut lot and batch sizes down in manufacturing rather than attempting to raise forecast accuracy rates by another one or two percentage points. Procter & Gamble publicly stated that it wants to produce every SKU every day, ensuring complete responsiveness. Customers will then become partners, as they can now be involved in the definition of the product attributes, place ordersand benefit from rapid response.
The Bottom Line
The year 2004 will see greater understanding of customers' needs. Business analytics and a focus on service and execution will be the basis, but leading companies will embark on a detailed vision around adopting a true make-to-order mindset. Just imagine the possibilities for the CG industry.