Distributors today often find their margins squeezed from all sides. While customers expect their orders to be filled faster and more accurately than ever before, a low price continues to be a primary decision factor. In these profit-squeezed conditions, businesses must be managed to work harder and smarter than ever. Yet many distributors still rely on manual processes, hunches and intuition-based decision-making for keeping customers satisfied.
This white paper looks at the importance of using a totally integrated IT system, focusing on customer satisfaction and at the same time making the most of those ever decreasing margins. The challenge is to have a complete understanding of the most profitable and unprofitable customers, in order to sell more, encourage more frequent buying and ultimately make more profit.
In this competitive environment, many distributors are realising that they must seize opportunities to develop innovative service agreements, repackaging, remanufacturing, or other value-added services that can capture customers' orders and create a competitive advantage. Others have found that they can please customers and increase their own efficiency by offering online access to information such as order status, pricing, and product availability, or take orders directly over the Internet.
Properly implemented and used, modern, integrated solutions are highly effective tools for customer retention. It is important that focus doesn't shift too far, concentrating too much on building new business. Without new customers, new opportunities and new revenue lines, businesses are unlikely to flourish, but once the best customers are identified, by understanding what they like and how to keep them loyal, the search for new customers will be much more productive.
Sell more to existing customers
It is often easier and more effective to increase sales to existing customers than it is to acquire new ones. Understanding existing customers purchasing criteria with a specific company allows greater analysis and examination of how to get them to buy more or more frequently from that company. Where appropriate, customers should be encouraged to buy a premium product or service that better meets their needs and provides a superior return. Other methods include purchase incentives and price promotions on items that they usually buy from competitors, such as 'buy one get one free' or 'buy for ten months and get two free'.
Encourage more frequent buying
Market share can be increased by getting customers to buy more frequently. If research shows customers buy at a particular time, make contact with them just beforehand. For example, knowing that a business buys its stock at the end of each month, a courtesy phone call, email or letter in the middle of the month can be effective. Adding value to products and services to ensure repeat business is also very effective. For example, is there anything that can be added to a service at little cost that is useful to customers, such as a free overall 'tune up' every time they send their car or computer in for repair?
A joined-up approach
Lacking a joined-up picture of customers has knock-on effects for the good management and fiscal probity of any business. The problem is, most companies can't measure the value of individual customers; and so offer the same mediocre service to all – instead of directing their efforts towards their best payers or strongest prospects. Many also have no way of predicting the revenue from their sales pipeline, despite the fact that short-term cash flow problems are the biggest cause of business bankruptcy. Others waste time and money contacting customers twice or performing manual processes that could be automated.
The 80/20 rule
The Pareto principle - often referred to as the 80/20 rule - says that 80 per cent of success in any given field is often due to 20 per cent of effort. This idea can be used as a starting point to analyse how more can be sold to existing customers. For example, if a small number of products and services account for most profit, can more of the less profitable products be sold to customers? Or if higher-margin products or services are only being sold to a small percentage of your customers, how can that percentage be raised?
Whatever the ratio, those customers can be found using IT systems. These systems should show what they bought, how often they've bought, how much work went into each sale, the cost of each sale and most things in between. A totally integrated solution allows further analysis in even more depth, such as payments history and credit status.
There are few things more frustrating to customers than when service appointments go wrong – for example if a person is sent on site without all the information they need, or worse still, no one turns up when expected. Situations like these can seriously damage reputation and quickly lose customers. But, if service staff can demonstrate they are trying to help customers, that they're listening and understanding customer's needs and are taking responsibility to try and meet these needs, there's a greater chance of customers staying. Correctly configured, the right business solution will strengthen customer service processes and make staff more efficient and effective.
Don't Rely On What is Already Known
It's easy to use the IT system to confirm what is already known about customers. But that's not adding much value or helping retain them, especially if it merely gives reasons to continue doing what has always been done. As customer data builds, just actively using the system day by day will help with knowing customers even better. When new information comes in, new patterns and opportunities can be found without any reporting.
However, companies shouldn't rely on the regular use of just parts of the system, to understand customers requires a totally integrated solution covering all aspects of a distribution business from CRM and fulfilment through to warehouse management, finance and reporting. In addition, for identifying customer trends, a business intelligence tool is essential. It can help identify previously hidden features and trends by say, overlaying data about customer transaction history, products, revenue, marketing campaigns and so on. Techniques like this often uncover valuable nuggets of information which would otherwise have remained concealed. For example, it may show particular buying trends within customer behavioural groups (groups that were previously unknown), which can then be used to predict future purchasing patterns.
Target More Effectively
By using an integrated system to analyse purchasing history and product preferences, it's easier to segment specific customers more precisely. Direct marketing tactics such as direct mail, email or telesales can then be highly targeted making only relevant offers. So, this not only makes direct marketing campaigns more cost effective, it helps retain customer loyalty by only providing customers with offers they may be interested in and not annoying them with irrelevant communications. And of course, the powerful mail, phone and email opt-out management in modern systems make for good business practice and legal obligations in these areas much tighter, more reliable and generally easier.
Make Sure Customers Know What They're Buying
Sales teams may know their products inside out, but have they communicated the full details to the customer? Customers need to be educated about products. They need to be fully enlightened about what they're buying, so there are no surprises or disappointments. A company may have the best product in the world but if no one has told them that it comes in 100 pieces and takes four hours to assemble, it is unlikely to score highly on the customer satisfaction scale.
Most systems will have a knowledge base which can be used to hold product information. Storing product information in the system alongside the entire history of communications, including the product information a customer has or hasn't received can pay dividends. With complex product or service documentation, products like Microsoft Dynamics can integrate with document management systems that will eliminate time-consuming and cumbersome paper-based processes so that cost savings can be achieved, as well as faster response times to customers and a reduction in the company's carbon footprint. This includes Microsoft Sharepoint, which makes it easier to work together, allowing easy connection with customers so they can access important information like invoices, logging service calls and manage documents from start to finish.
Dealing with unprofitable customers
As well as the valued customer, what about the alternative: the customer who isn't as valuable as the salesperson believes? Sales calls in these circumstances are at best a waste of time, at worst a risk of incurring bad debt. There are the customers who are consistently late payers, frequently giving 'reasons' why they haven't paid and taking up resources in admin, accounts or even legal departments. Then there's the terminally dissatisfied: no matter how hard the company tries, they will always find a problem. No matter how much time and energy is devoted to them, the scenario will just keep repeating itself and the cost of servicing particularly difficult customers can outweigh their value. In which case, it can well be worthwhile gently dropping them, or even pointing them towards your competitors.
The slippery customer
We've all experienced companies whose left hand seems unaware of what the right hand is doing – like the bank that is always contacting us to open an online account when we already have one, or the stationery company that tried to sell a new product even though the last order didn't turn up.
New technology has created many more channels for businesses to reach their customers, but ironically this has added to the management problem. While offering a range of channels may be seen as positive, if they are not fully coordinated, they can have a negative impact on customer experience and ultimately on the organisation itself.
It makes a business look amateurish and today's savvy consumers simply won't stand for it. A couple of pub conversations, five minutes on a comparison website and hey presto: the careless operator has lost a valued customer and alienated many others.
Do more with less
A system like Microsoft Dynamics gives companies access to one version of the truth providing full history of a customer's dealings with an organisation, including contact details, items purchased, payment history, service schedule (if applicable) and any outstanding complaints. For example if a customer makes a complaint, they don't have to explain the whole problem to every new person they deal with, and better-informed complaint-handling staff can be empowered to make decisions and offer solutions on the spot. Meanwhile, managers can extract in-depth metrics for the bigger picture; tailoring their own reports within a matter of minutes. This means two important facts for any business.
Firstly, every member of staff becomes an ambassador for the company. Everyone from the CEO to the receptionist can pick up the phone and offer excellent customer service (or even sell more products). Secondly, companies can do more selling and engage in more customer interactions, despite having tighter resources. Successful users don't just report increased sales; they consistently also mention reduced returns or service queries, better customer satisfaction, and increased breadth of products sold.
Top level view, bottom line benefits
Every company should invest in information technology, whether to retain customers, grow its base, better understand its customers or gain an end-to-end view. But in today's climate, organisations are looking for new efficiencies, including business applications which are streamlined. For that reason, a suite of products like Microsoft Dynamics provides much more than CRM and is able to manage everything you need from lead capture through order fulfilment to finance and business reporting.
As well as highlighting your most profitable customers, the system will help you deal with them effectively, too. Workflow is an essential element of automated businesses today. It enables the creation of uniform processes that save salespeople's time and ensure that vital stages aren't overlooked, allowing ultimate levels of productivity.
But Don't Forget the Basics
Whatever technology is implemented, creating and maintaining a good impression with customers, strengthens the relationship from the beginning. Often a first impression, the first few interactions – from the website layout, the length of 'hold' from the switchboard, to the early conversations with sales staff, can dictate the attitude of your customer towards the business for a long time. So it needs to be right.
Further down the line, do all staff know the importance of good, clear, friendly, supportive, empathic and helpful customer communications? Even staff that don't normally liaise with customers and prospects will talk to customers sometimes, so it's vital they are aware of the importance of maintaining customer satisfaction and a pleasant customer experience.
Keeping staff positive is also important. Everyone has off days, but if this turns into unhelpfulness or leaves a bad impression with a customer, it can have serious consequences. Just as dissatisfied customers tell others and will have a strong negative influence, if negativity originates from within the business supplying the customer, the influence of that negativity can be amplified many times.
Good customer service cannot be achieved if staff do not realise how their place in the team affects it. To provide excellent customer care, team working is essential. All members of staff must understand how they fit into the overall business and how an organisations' different functions operate and interact with each other.
Once loyal customers have been nurtured, rewarding them for their loyalty will help keep them coming back while providing valuable feedback. Setting up special user-groups, networking sites, fast-track service or support, or direct access to senior staff are all ways of doing this. Loyalty schemes also have their place, although they can be expensive to set up and run effectively. It comes down to whatever works for the business model to make these key accounts feel particularly valued. Keeping customers is an essential component in maintaining a profitable business.
Many distributors look at information technology as an expense they would like to avoid, but the right business management system is more like your inventory itself—it's an investment that can make money for a company by helping it to overcome the challenges to take advantage of the competitive opportunities they represent. With a comprehensive Microsoft Dynamics solution for distributors, companies can integrate CRM, order entry, inventory management, fulfillment, shipping, financials and business intelligence reporting to help get information and goods where they are needed—fast. Distributors can get immediate feedback on business performance, automate manual procedures, eliminate rekeying of data, improve replenishment decisions; process orders more quickly, improve fill rates and customer satisfaction and get better returns on inventory investment.
Qurius provides technology answers: design, architecture, infrastructure, deployment and systems management of Microsoft-based business and IT solutions. Headquartered in Zaltbommel, the Netherlands, the company serves customers across Europe, including Belgium, Germany and Austria, the Netherlands, Spain, the UK and the Czech Republic. In 2010, Qurius openly declared a target of 100 per cent sustainability by 2014. A bold objective, designed to drive the company to European leadership in the field of sustainable ICT. The company aims to be the number one choice for customers with the same ambition and the same sustainability goals. Qurius has been publicly quoted on Euronext Amsterdam since 1998. For more information, visit www.qurius.com
Qurius UK is based in the Manchester area, and is a specialist in delivering Microsoft Dynamics NAV, Microsoft Dynamics AX, and Microsoft Dynamics CRM based solutions. Qurius has over 15 years' experience in implementing Microsoft Dynamics ERP software, and as one of the few with integrated solutions using ERP in perfect cooperation with the CRM system within an optimal infrastructure, whether or not in a portal based on .NET and SharePoint technology. With approximately 350 experts, Qurius UK serves clients in the Care Industry, Industrial Services, Professional Services and Environment. In addition, Qurius offers distinctive Infrastructure and Hosting Solutions.