In this guest post, IBRS adviser Guy Cranswick argues that the period 2017-2025 will see lower economic growth which translates into lower per capita income growth. These conditions should make customer relationship management (CRM) a top tech priority for businesses and marketers alike…
The business climate over 2017-2025 will present new conditions that are more challenging. Based on various forecasts the eight year period will see moderate growth and that will have a direct impact on business operations affecting how they conduct business with customers and others.
Enhancing CRM capabilities and related skills, such as statistical analysis is necessary in order to provide the intelligent insights organisations need.
Observations: CRM suites have fulfilled the basic requirement of archiving and recording the tracking status of relationships. These features are typically itemised into the categories below:
- Register leads and contacts. Categories such as, Customers, Lost Customers, Prospects, Suppliers, Partners, Potential Partners, Influencers and Inactive Customers. Distinguish customers into A-, B- and C-customers depending on different customer programs for each segment.
- Track all customer interaction which builds long-time relationships.
- Data reveals possibilities. How many prospects have bought and/or could be moved up in the next quarter?
- Customer data is a valuable asset. For many organisations customers, stakeholders, suppliers, the records that CRM holds are essential to operations.
While perennially important there are additional use that CRM can be applied which are related to a current and on-going business environment. The context and application of business or market related technologies is not commonly articulated. It should be to highlight the need and value of such technologies at certain periods. It is also likely that a requirement for technologies will also lead to skills related to the task and use of the technologies.
In the Australian Bureau of Statistics’ last survey the top reason businesses innovate was to produce greater profit. This objective has become and will remain the most challenging goal for businesses for the period 2017-2025 as this note explains. It will not be central to IT but it will be for business strategy. This objective will also impact other public sector organisations even though they do not have the same financial objective.
Achieving profit involves various and sometimes combinations of factors: price market share, competition. It also entails greater analysis of data. Analytics packages associated with CRM have complemented the ability to investigate the data.
From 2017 there are three core reasons to ensure CRM and associated analytics are effective.
The growth rate is critical because it determines the amount income within a period. The income flow passes as expenditure which is income to other sectors. Reduction in the growth rate influences the incomes of individuals and businesses.
This is shown in the chart: Sources of real (less inflation) per person. The constituent elements are not vital to understanding the dynamic. The outlook is for a halving of growth over the decade to 2025.
The growth rate is critical because it determines the amount, or stock, of income at any point in time. A reduction in the growth rate influences the incomes of individuals and businesses. The income flow passes as expenditure which becomes income to other sectors.
The sensitivity of households and consumers to income pressures is examined every month by the RBA. The household income and consumption chart underlines the sideways movement of both measures since 2011. Savings ratios have fallen to make up the difference. Over time, up to 2020, this strategy will become more stretched and that will consequently affect consumption.
Likewise, retail sales growth is falling. Annual turnover is 2.8 per cent but the trend is a more important figure per month and is indicative of future prospects.
While these figures focus on the consumer, the business to business indices from Australian Industry Group have been soft for three years, rotating a few points above or below 50 – the breakeven for either growth or contraction.
The business sector is highly concentrated on the domestic economy and given the household income growth outlook, it is probable that the business to business sector will move sideways for a while.
Identify the User/Consumer
The purpose of the CRM and analytics is to be able to target buyers efficiently. This is not as simple as it seems because consumers fall into discrete categories which analysis reveals.
In the conditions described above, the most effective CRM will be able to target and reach the most profitable customers.
In a market, prices are fixed by the buyer that is willing to pay the highest price. This buyer is the “marginal buyer”. The marginal buyer determines price levels and price stability and has a direct influence over the volatility of prices over time.
Businesses tend to overlook the role of these buyers because price setting is assumed as a given and it is assumed to be fixed within quite long periods. That sanguine attitude may be partially accurate during buoyant periods but not in softer business environments. Vendors of CRM never acknowledge the role of the marginal buyer but they should because it would enable them to sell their products.
Sales and marketing professionals take note of the marginal buyer when the price is uncompetitive. However,
if a business does not identify this buyer, or niche, it loses its margins.
The keen observation of all social media channels which marketers devote resources to, is an example of the marginal buyer being monitored. Although the term is not used in this context, it is the influence and attitudes of those consumers on social media which have market effects on volume and price. Even if actual purchase and price is not articulated, analysis will use proxies, such as favourable statements, endorsements or similar signs which suggest propensity to buy.
Organisations need to take a comprehensive and strategic outlook on the business forces over a period of time, per- haps up to five years. The strategic assessment should:
▪ Account for the customer and market intelligence tools and whether they are capable for the future;
▪Audit the availability and potential skill sets to make use of the data and its application within the organisation’s management.