Using CRM to Win in a Recession

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Depending upon whose economic statistics you look at, the USA is either just entering a recession or about to. And when the USA sneezes the whole world catches a cold.. A recession has traditionally spelt bad news for customers, employees and other stakeholders as companies cut back on their spending. Particularly spending on customer-facing activities. In spite of this, many companies still don’t survive.

But is cutting CRM costs the best way to cope with a recession? Often not, indeed, you can use CRM to gain an advantage over your competitors in a recession if you follow a few simple rules.

1. Understand customers’ changing behaviour
Customers are under the same pressures you are in a recession. The natural reaction is to cut spending and batten down the financial hatches. That means their purchasing behaviour will change as they focus on non-discretionary purchases, better value products and low-cost services. You need to spend more on understanding customers’ behaviour if you are to respond to customers with value propositions tailor-made for a recession. Just spending more on pushing the wrong products is not going to work.

2. Don’t cut back on marketing spend
It is very tempting to cut your marketing spend as customers stop buying. But there are countless studies that show that this is the wrong response. As your competitors cut back on their marketing spend, maintaining your own allows you to reach more customers for less money. It often allows you to drive a harder bargain with desperate advertising media channels too. This not only increases your share of voice in the market and customer spend during the recession, it also prepares you for the customer spending rebound once the recession is over.

3. Get more from your CRM technology investments
You have all spent a bundle on CRM technology. When times are good, you hardly need to use it at all to grow your business. A rising tide lifts all boats as the saying goes. So much of it sits underused or even idle. One Swiss bank spent over Euro 1 million on a CRM system and hadn’t even used it a year later! But when recession strikes, you need to think carefully about how you can use your existing CRM technologies to the full. That may mean changing data flows, work processes or work routines to really make use of the technology’s capabilities, but there is nothing like a recession to focus the mind on doing the right thing.

4. Reassess your customer portfolio
As recession bites, customers who were previously profitable can easily tip over into being unprofitable. And customer value at risk from defection increases for all customers. This is the ideal time to use your new insights gained from understanding customers’ changing behaviour to identify customers who are either unprofitable, or who you cannot really serve well enough to grow their profitability. You all have low-profitability, high-risk customers like these. I am not suggesting you should simply fire them, that is a bit too easy and in today’s networked world, a risky thing to do. But you should look at raising prices to cover their costs, reducing service costs, outsourcing to low-cost providers, even creating low-end sister brands so that you can make a profit from them.

3. Take your business through a Lean CRM makeover
Rather than just cut costs, do what Toyota does and apply the lean principles to cut costs by cutting out non-value adding activities from your customer operations. Lean CRM starts with an understanding of what customers really value and then systematically works through the value delivery chain so that it is the customer who drives the whole process. My own experience developing Lean CRM at Toyota showed that it can reduce time to market by 50%, increase customer purchases by 100% and reduce costs by 50%. Just by getting rid of costly non-value adding activities.

Maybe you have some ideas of your own about how to use CRM to win in a recession. Why not share them with CustomerThink’s readers.

Tip of the hat to John Quelch in his article on marketing in a recession in today’s financial times.

Post a comment and get the conversation going.

Graham Hill
Independent CRM Consultant
Interim CRM Manager

3 COMMENTS

  1. Graham

    Glad that you write again.

    In his book Sun Tzu and The Art of Business, Mark R. McNeilly talks about the six strategic principles for success.

    Principle 1
    Win all without fighting: capturing your market without destroying it

    Principle 2
    Avoid strength, attack weakness: striking where they least expect it

    Principle 3
    Deception and foreknowledge: maximizing the power of market information

    Principle 4
    Speed and preparation: moving swiftly to overcome your competition

    Principle 5
    Shape your opponent: employing strategy to master the competition

    Principle 6
    Character-based leadership: providing effective leadership in turbulent times

    Although these 6 principles provide no direction as to whether the firm should increase or decrease costs, they are pratical business tactics of all-time.

    Daryl Choy
    Make Little Things Count
    wisdomboom.blogspot.com

  2. Graham,

    This is a very timely and pertinent issue for most of our clients. I would agree with many of your observations.

    Most companies faced with a slowdown are naturally inclined to pull back on their marketing. As one my clients put it, “marketing is the last thing in and the first thing out in our budget”.

    That may be the wrong thing to do.

    Why?

    A study done by two professors at Penn State University right after the last recession, studying 150 companies, found that recessions can be an opportunity for strong companies to further strengthen their competitive advantage. click this link for more http://www.smeal.psu.edu/news/latest-news/feb08/mktgrcsn.html

    How?

    The answer is not just spending more money. You could be pushing on a string. It is about spending smarter. Companies that have a strong brand name, differentiated products, targeted communications and good customer support and service — good reputations — can take advantage of lower advertising rates and a lesser presence by their competitors to increase their “share of voice” in the marketplace with less money. It is easier to make your mark when your competition is silent.

    Search engine marketing, has grown rapidly over the past few years. Industry experts believe those prices will go down, or not climb as fast, during this recession. If that is the case, then a company that maintains this type of spending could get more visitors to its website for the same amount of money.

    A recession is also a good time to look for waste inside a marketing department. Folks tend to get sloppy during good times. We recently worked with a credit card department within a bank to look at their marketing processes. We found inefficiencies in the way they went to market. One of these was a tendency to market to people who were not really in the target market. It was relatively easy to find cost savings. These savings could fund more touches with their most promising customers and prospects, while ignoring those who are not likely to respond to offers.

    Some key things to keep in mind?

    • Take care of your best customers, particularly if they are going through rough times.
    • Identify and invest in customer segments that are still growing.
    • Maintain your spending, to the extent possible

    The old saw “when the going gets tough, the tough get going” is apt for marketing in a slowing economy. When the tide rises again, you will be well positioned to benefit, with a stronger market presence.

    Naras V. Eechambadi, Ph.D.
    email: [email protected]
    blog: http://highperformancemarketing.blogspot.com

  3. Nice piece, of course when recession strikes the obvious reaction is to tighten the purse strings. A company’s strategy vis-a-vis its CRM will depend on at what stage the CRM is, is it at the deployment stage or a full-fledged CRM well on its way to deliver ROI. You can try and slow down spending on non-critical CRM functions and maybe try to incorporate SaaS so that you complement your on-site CRM with on-demand niche applications that will cost less and yet deliver the full range of service.

    In fact, niche applications could even help you derive that much greater focus and benefits because they free you to look after the business and help from dedicated and experienced third parties can offer a lot of useful information and functionalities.

    Piyush Bakshi
    http://www.vendordemo.com

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