Walking the Talk in Customer Management

Keep your customers. And don't just keep them. Keep selling to them.

Very few would debate this piece of advice. In fact, academics, journalists, and practitioners have been extolling the virtues of the proverbial 'land-and-expand' sales philosophy for decades. This body of work has generated innumerable financial justifications for harvesting your customer base, including the following:

• Acquiring new customers is five to ten times the cost of retaining existing ones, and the average spend of a repeat customer is 67% more than a new one, according to Inc. magazine.
• A 5% reduction in customer defections increases company profits by 25% to 85%, according to research from Harvard University that was first conducted nearly 25 years ago.
• Winning back a customer after you've lost them can cost 100 times more than what it cost you to retain them in the first place, according to a study McKinsey published back in 2003.

So how are marketers faring in helping their companies capture the revenue and profits that are often hidden within their customer bases? The answer depends on how relevant marketers are within customer management operations ' the third war room CMOs need to inhabit.

Talk is cheap

Customer management usually shows up within the marketing organization in the form of a 'customer marketing' function. Tasks overseen by this function typically include case study development, user conference coordination, and maybe reference program management. All important tactics, but not one of which figures prominently, early, or frequently enough in customer management operations to substantially influence revenue or profit coming from customers.

Many CMOs understand that customers are becoming a vital extension of their companies' organizational and strategic fabrics. This was plainly evident in findings from a survey IBM fielded with 300 executives as a precursor to its 2011 CMO report (Figure 1).

Figure 1 ' Most impactful market dynamics cited by CMOs (Source: The Economist Intelligence Unit, in cooperation with the IBM Institute for Business Value)

But crafting a profitable response to this dynamic of 'customer power' requires CMOs to challenge the boundaries that have traditionally hemmed in their customer marketers.

As is the case with the other two operational war rooms of product management and sales, CMOs desiring to impact the financial and strategic metrics driven by customer relationships and overall experience must tap into the operational core of customer management.

The following four workstreams are found at the core of any operation, and the degree to which the CMO participates in these workstreams is directly proportional to his/her operational relevance:

1. Organizational design
2. Capital allocation (i.e. financial and human)
3. Process engineering
4. KPI management

We will explore practical methods marketers can employ to participate more fully in these four workstreams in customer management operations in the next few posts.