The competitive environment is changing. First, the Internet-connected global economy creates unprecedented choices for customers and gives them greater control of the way they do business. These empowered customers force an ever-increasing commodity leveling of products and services on the global chemical marketer. Second, the slowdown in the U.S. manufacturing business segment makes it difficult to continue growing sales revenues. Third, complicating matters for individual chemical firms is the economic reality that it costs a company more to attract new customers than it does to retain existing ones.

Because of this, customer maintenance has become a competitive advantage. In this new economic landscape, astute chemical executives realize that growth of sales and profit depends on the only remaining source of sustainable competitive advantage — the customer relationship. The essence of this relationship is the “value” the customer places on the supplier’s role. The higher this perceived value by the customer, the stronger is the “loyalty” to the supplier. Therefore, to survive — and thrive — organizations should build interdependent business relationships with customers based on mutual trust and benefit.

The Emergence of Customer Relationship Management (CRM)

CRM depends upon the entire organization adapting a customer-driven business strategy. For a company to succeed with CRM a fundamental organizational shift is required — from being traditional product-driven to being customer-driven. In the customer-centered CRM model, an organization designs strategies, tactics and ongoing employee education that focuses on exceeding the expectations of the customer. To ensure achievement, performance measurements are implemented in the form of quantifiable goals.

In its basic form, CRM is a business strategy that attempts to ensure every customer interaction (whether for marketing, sales, technical, manufacturing or financial) is appropriate, relevant and consistent. The primary objective of CRM philosophy is to build a highly satisfied, loyal base of long-time customers whose value to the organization increases over the years. For many chemical companies, the implementation of a CRM strategy is a formula for success to boost share-of-market and overall profitability.

Cultivating a Customer-Centered Organization

A general premise for all businesses states that “The more you know about a customer, the better your understanding of how to meet that customer’s specific needs.” The key is that CRM is not a sales/marketing program, but one in which all the functions within an organization focus on “delighting” the customer. With virtually all forms of traditional competitive advantage disappearing, or duplicated, or caught between the spiraling costs, the only remaining competitive advantage is to build solid customer relationships based on value. Certainly with all the developments in digitization, computerization and the like, this sounds easy. But is it really?

Two Basic Dimensions to Successful CRM

1. A Customer Database. Development of a marketing database is an essential starting point in the CRM process in order to organize prospects and customer information. The database begins with a profile for each prospect and customer. Whether kept on index cards or PC software is a matter of organizational preference. However, more technologically adept organizations establish databases on PCs because of their flexibility in analyzing information.

Next, the company should categorize its various industry segments. Most chemical organizations can identify four to six industry segments with as many as 20 to 50 key prospects and customers in each segment. Through this market segmentation process it becomes possible to identify specific groups of prospects and customers who share similar needs and buying patterns. When products are marketed based on the needs of customers within a particular segment, the organization’s capabilities can better serve the customer.

Once this data is compiled, specific products either considered or purchased by each customer are then added to the profile. Next, a subjective rating of how the customer perceives the value your organization offers is added. This may prove difficult because it cannot be quantified. Yet because it is difficult, doesn’t mean it should be eliminated as a criterion for classifying customers. Determining profitability of the products or services sold to each customer is then added to the database. Lastly, names of competitors and the products and services they offer complete the profile.

The customer profile is essential in developing a CRM strategy. A customer represents a relationship that can be placed in a market segment, assigned a sales/profit value to the organization, and cultivated and nurtured according to the value received. In this context, because customers segments are not equal in generating sales/profit value to the organization, they should not be presented with the same products or even the same level of service.

2. The Marketing of Products and Services. This defines the appropriate methods of “how we contact” our customer in today’s global and Internet business environment. Using the information we have gathered in customer profiles within the defined market segments, we can then analyze this against the current methods of customer contact. Success in the future will involve the optimization of the ways in which customers gain access to products, to our services and to our product information — including both assisted (i.e., sales/distributors/agents) and unassisted (i.e., Internet) channels.

The variety of traditional marketing and sales tools should be evaluated and modified according to the “needs” of the customers that have been identified within a market segment. Even within a market segment, customers could be differentiated and served by the producer using certain combinations of sales tools. Targeting the marketing resources on those customers with the greatest long-term value to the organization should be key. It is vital to learn more about the customer, because learning will lead to a better understanding of the perceived reasons the customer buys from the organization. Then, companies can better serve these customers and intelligently cross-sell and up-sell products and services, thereby leading to improved customer loyalty and increased sales.

Following are 10 Tips for developing CRM solutions

1. Obtain senior management commitment to CRM strategy. Senior executives must be the driving force to shift the corporate culture from a product- to a customer-driven focus. But why embark on such a momentous change from product to customer-centric perspective? For each there is a different answer. Yet, before launch, it must be apparent that CRM ranks as a strategic business issue. Since it involves the whole company, it must become a management strategy, rather than a marketing issue. And to succeed it must be “sold” by senior management within the organization in order to gain total support.

Trying to introduce CRM into only part of a business is a prescription for failure. With CRM, it is all or nothing. Once in place and enthusiastically endorsed by top management in regularly scheduled employee meetings, all functions of the organization can work toward a common goal. Implementation of CRM strategy includes financial and marketing goals and objectives, which are reviewed frequently to determine if objectives are met. Such constant feedback enables the organization to revise tactics to bring results in line with objectives.

Lastly, senior management commitment is vital because the keys to long-term success will focus on strengthening business relationships, cost savings through increased productivity and globalization. Heightened competition for customer loyalty, both domestically and internationally, will involve selling systems based on products and services. The strategic profit implications of intensifying competition also require management focus because alliances with other companies will need to be evaluated and negotiated by senior management.

2. Build a cross-functional project team. The use of a team approach that consists of members of sales, marketing, customer service, web development consultants, and others who have important responsibilities throughout the organization is needed to implement the CRM strategy. Involve talented employees and enhance their data management, analytical and value-creating skills above all else. CRM benefits are long-term, not short-term. Institute the core fundamentals, then scale up.

3. Use a phased implementation approach. CRM is an evolving process within an organization. It begins with evaluation of current functions and work processes. It is not about using the latest PC software. The primary objective will be to emphasize customer interaction and dialogue. With implementation occurring in an ongoing business environment, it is essential to establish benchmarks that measure the ability of a company to quickly adapt products and services in real time in response to customer demands. To maintain enthusiasm, it is important to build CRM in small attainable stages that work and evolve rapidly. This will foster employee creativity and innovation. It is crucial that the focus should be on customers and business strategy first and technology second.

4. Partner and outsource as necessary. CRM will require an integrated marketing approach that achieves specific results by taking a customer-driven view in publicity, advertising, direct mail, the Internet and field sales channels.

5. Focus on the customer, not the technology. From a practical standpoint, it is difficult to implement a successful CRM business plan if your solution means throwing out the old and replacing it with all new. You may, or may not have answered questions such as: How do you interact with customers? Do you understand how they would like to interact with your firm? Who are the decision-makers and the influencers within each firm? Who can best serve the needs of a particular segment of your customers, within their profit/value to the firm? Is it the field sales organization, or can the customer relationship be more successful by using inside customer service representatives with direct mail, electronic communications and telemarketing?

6. Measuring CRM success. A basic challenge in CRM is to establish the metrics to gauge success. Are the company’s strategic objectives to gain new sales prospects in the domestic market that lead to selling more products? Or, is the goal to expand into international markets? Track performance at least quarterly against objectives. Measures of CRM efficacy should emphasize the level of customer satisfaction. Ask customers if the company strives to add value to every interaction. Customers should feel that communications are appropriate to their needs. Another metric is customer profitability. It allows a company to determine the level of service that is appropriate for each customer. Market share data, which is an external view of organizational performance, allows a company to understand if it is acquiring and retaining customers sufficiently versus competitors. Finally, relationship duration is a measure of how many years a customer account remains with the company, as well as the firm’s continuing relevancy to customers.

7. Choose open compatible technologies. In evaluating new hardware and software, recognize the opportunities to deploy it throughout your organization, as well as compatibility with systems used by third parties. New technology is not the driver for CRM, but one of the many pieces in the strategy. This is because it supports the implementation for accomplishing specific sales results, not the result itself. Focus most of the organizational efforts on what you can do with the technology to add perceived value from your customers.

8. The Internet is a powerful selling tool. In many cases a chemical firm’s website is modeled after the company’s literature and receives e-communications regularly. However, in the immediate future the Internet could become a more important channel to reach customers. In the e-business economy, you need to deliver customer organizational knowledge on demand, anytime, anywhere. For example, does your firm have a “secure” feedback link so that a customer can pose questions directly to your technical experts? Is current business being lost to competition because customers cannot place orders on your website? If you haven’t done it already, ask every customer if they are purchasing raw materials using the Internet. Now is the time to evaluate how and when your firm would enter e-commerce.

9. Expand efforts, as the organization becomes more customer-centered. The “old” organizational system put information in the hands of sales representatives and their managers. The new business CRM paradigm makes available information the customer seeks so they can access it and control the business process. Become flexible, adaptable and sustainable. Never be tempted to think that you are done. Maintain unrelenting focus on creating customer value. Nor should you underestimate the resistance within your own organization to CRM. As globalization of products becomes more widespread, and e-commerce evolves, customers will become more demanding about value received. They will be delighted through relentless high quality products that solve problems, rapid delivery and competitive pricing.

10. Obtain increased customer loyalty. Superior quality, high customer service, competitive prices and adept technical service enhance customer loyalty. CRM strategies focus the company’s efforts on retaining today’s best customers, deepening the relationship by cross-selling and up-selling products they need, understanding who the valuable customers are, then working to acquire more like them. Keeping your customer and developing a deeper, more loyal relationship is what differentiates companies. A chemical marketer can better focus his resources on the market segments that perceive higher value from that particular supplier. This will enable the organization to retain its customers during an economic slowdown in the short-term, and over the long-term improve revenues and overall profitability.

Summary

As CRM strategies unfold, the Internet and e-commerce will become more important selling tools to help astute marketers communicate with prospects and customers. Nevertheless, they should be considered as options within the wide variety of available marketing tactics. Remember, too, that it is not the application of PC software that will shift the focus to a customer orientation. The successful chemical company evolving into a CRM focus will concentrate on business strategy first and technology second. Keeping your customer, especially in a slow-growth economy, and developing a deeper, more loyal relationship is what differentiates companies today — and will become even more important tomorrow.

For more information, contact Mort Spiegel by e-mail to mspiegel@gti.net, or visit www.gti.net/mspiegel/.