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The end of market protection and the growth of large retail chains have changed the business environment in Cyprus. Consumers are becoming more sophisticated and less loyal, while businesses are more demanding in terms of prices, credit, rebates, merchandise and delivery conditions.
In order to compete, companies must work more effectively with customer segments of variable profitability. Today, not all customers are equal, yet suppliers persist in offering uniform terms of service.
In order to succeed, companies must determine three factors:
1. Which customers are truly profitable;
2. Which customers are less profitable, but contribute to corporate overheads or ensuring volume discounts from suppliers;
3. Which customers are neither profitable, nor central to overhead cover or operations.
Customer Relationship Management (CRM) comprises a customer-centric marketing and sales approach that includes:
Analysis: The determination of net customer profitability; customer profiling accor-ding to purchase value and frequencies; demographics and behaviours;
Tactics: The development of value-based marketing and sales methods and structures which focus resources on customer segments of varying profitability.
CRM implementations begin with an analysis of sales per customer account. Gross profit margins (product profitability) are calculated, together with any overheads that can directly be assigned to the customer. Indirect overheads are allocated according to cost factors, such as distance, frequency of delivery, share of sales, share of total deliveries, financial costs of credit and other factors.
In addition to profitability, any other useful information is gathered to determine customer behaviour. This usually includes purchase events and frequency, value per purchase, shopping preferences, responsiveness to special offers and discounts, etc. This information is collected for B2B and B2C customers (corporate customers and individual consumers).
Once the analysis is complete, the time for difficult decisions has arrived: will we cont-inue to serve all customers with the same general policies for discounts, terms of credit and delivery schedules? Or should we differentiate these, reducing service (or raising prices) where we have greater bargaining power, but continuing or improving service for truly profitable or critical customers? How do we anticipate our customers to react? How do we forecast developments in retail structures in the next 5 years?
Once the strategy is clear, we define a series of tactical marketing programmes. These include internal and external measures, as follows:
| External (Customer-focussed) Measures |
Internal (Organisation-focussed) Measures |
Predictive Marketing
Event Marketing
Cross-Selling
Up-Selling
Loyalty Programmes
Special Purchase Occasions
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Minimum Order Sizes
Salesforce Training
Salesforce Restructuring
Salesforce Incentives and Compensation
Lean Distribution Programmes
Unit Objectives and Priorities
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