Customer Relationship Management for Chemicals. Using segmentation as a catalyst to become customer smart

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1 Customer Relationship Management for Chemicals Using segmentation as a catalyst to become customer smart

2 Building leaner, more cost-effective businesses has become standard industry practice for chemical companies. As companies seek additional ways to build competitive advantage, generate new sources of revenue and increase profitability, management attention is shifting from assetbased process improvement initiatives to an intense focus on what customers truly value. It s important to look beyond traditional practices and long-held assumptions, taking a fresh look at the complete customer experience: what customers want to buy, what services they value, and how they prefer to interact with and be served. While organizations may think they know the answers to these questions, recent survey data shows significant gaps between the perceptions of chemicals manufacturers and their customers. Adopting an intense focus on customer preferences does not necessarily translate into delivering more services, better services or treating all customers more or less the same. High-performing chemical companies recognize the real cost of additional services across the board and understand that not all customer segments view these extras as having significant value. Indeed, chemical companies are often over-delivering on the service they provide to many of their customers. Thus, rather than taking a one-size-fits-all approach, chemical companies can gain by treating different customers differently and in a way that is beneficial to customer and company alike. This is what Accenture means by being customer smart. Consistent and effective customer relationship management (CRM) provides a catalyst for chemical companies to develop customer-smart business practices. Customer differentiation and segmentation are essential starting points for this smarter approach. Revitalized skill sets, improved processes and systems help marketing, sales and service teams identify and deliver the value-added products and services aligned with distinct segments and customers willingness to pay. CRM provides the tools for chemicals manufacturers to execute on customer-smart business plans, improve profitability and make major strides to high performance. 1

3 The buyer/supplier disconnect In the Accenture Global Customer Preference Study for Chemicals: The call to become customer smart, Accenture looked at buyer preferences and criteria used when selecting suppliers. Not surprisingly, Accenture found that buyer preferences and willingness to pay for value-added services varied along the dimensions of geography and business model. In addition, the study found a surprising disconnect between what buyers valued most and what the chemicals manufacturers thought they valued. The first disconnect came in terms of price. It might seem that price is one of the most, if not the most, important criteria customers use in determining a preferred supplier. However, out of 36 buyer values, nine ranked above price in the minds of respondents in the global survey. It is important to understand that these buyer values included more than traditional aftersales services (technical support being one example). Buyer values also included less commonly considered service attributes such as innovation, reliability of supply and quality of complaint resolution all of which were ranked higher in value than price. While buyers saw nine factors as more important than price, suppliers ranked 26 factors as more valuable. The discrepancy is a sure sign that some suppliers are not fully aware of their customers perceptions of value. As a result, companies may be investing in areas in which customers are unwilling to pay for added services. For example, a chemical company that maintains a knowledgeable but expensive aftersales support staff is likely to find profits eroding when customers in certain segments value price more than after-sales support. Using segmentation to bridge the divide Being customer smart requires customer segmentation, and refining capabilities in sales, marketing and services to appeal to customers in distinct segments. Segmenting customers based on their differentiated wants and needs enables companies to target the most profitable offerings and services for each segment. Customer segmentation can unlock significant business value in terms of lower cost-to-serve ratio and better margins, as well as increased share of supply. 1 For example, companies can use e-commerce and Web 2.0 technologies to execute standard transactions at reduced cost. Integrated CRM marketing and sales tools can help capture value from such transactions. In contrast to e-commerce approaches, direct sales strategies can be reserved for a company s most promising and valuable customers. An integrated, flexible and easy-to-use CRM system is essential for managing the large quantities of customer data, consisting of marketing, customer data, real-time insight and customer experience, as well as applying this information to segment-specific strategies to create customer value. 2

4 The path to becoming customer smart Assess current processes Align processes to leading practices Align CRM systems to processes Establish a highperformance culture through leading-practice application Improved capabilities can lead to impressive results Compared to businesses in other industries, chemical companies have yet to reap the benefits of consistent, effective customer relationship management. Recent reports have found that more than 80 percent of chemical companies are either in the manual or fragmented stage of CRM adoption, 2 and 28 percent of CRM implementations fail to go live. Of those that have gone live, two-thirds of users are dissatisfied with the ease of use. 3 Over the years, chemicals companies have invested in price and margin management software solutions, e-commerce systems and tools to streamline order management. These approaches, while worthy in themselves, are often not well integrated, resulting in duplicative efforts and manual reconciliation. What is needed are highly efficient and integrated CRM tools that put companies in the position to grow in tandem with their customers while capturing revenue from standard transactions. As an example, Accenture estimated that a US$1 billion business unit could boost pre-tax profits by US$40 million to US$50 million by making a 10 percent improvement in key CRM capabilities. 4 These monetary benefits could be gained in large part through strategic use of information technology and leveraging IT to enable easier customer contact ($17 million), building in greater flexibility into systems and technology ($5 million), and equipping customer service representatives to generate additional sales ($5 million). The path to becoming customer smart Many chemicals companies have embarked on a journey to increase their intelligence about what customers truly value. The journey can be seen in four stages: Assess current processes Most companies benefit from an objective assessment of their current customer-facing activities. Even practices that were once considered innovative lose currency over time, particularly when technology solutions provide new opportunities to reduce costs and improve results. Evaluation of business processes across sales, marketing and service functions can reveal opportunities for operational excellence. Companies also need to examine long-held assumptions about what services their customers want. Align processes to leading practices The temptation is to believe implementing new CRM systems will provide the fastest route to becoming a customer-smart company. The reality, however, is that CRM technology will generate greater benefits when first aligned with customer-smart processes. Customers can be differentiated along multiple dimensions, such as attractiveness, needs, industry and region. After segmenting customers, it will become clearer whether to propose price- or service-oriented offerings, or offer customized solutions or technical services. Revitalized skill sets for internal teams are also needed to effectively deliver segmented approaches and customer-smart practices. 3

5 A powerful solution delivering sustainable results For companies seeking competitive advantage in a broad range of industry segments, the Accenture, Avanade and Microsoft alliance offers a powerful CRM solution delivering sustainable results. CRM for Chemicals is built on the Microsoft Dynamics CRM platform and is tailored to help organizations effectively manage customer relationships. CRM for Chemicals can be delivered on premise or as hosted software as a service (SaaS), thereby providing companies with greater flexibility to deliver the right products and services to the right people at the right time. This cost-effective, integrated and flexible solution enables chemicals manufacturers to improve customer management, identify profitable opportunities to increase sales, and strengthen loyalty throughout the customer life cycle. 4

6 5

7 Benefit from a 360-degree view of customers Sales Marketing 360 Support Align CRM systems to processes Advanced CRM systems hard-wire processes, making for consistent and efficient interactions with customers. For example, clearly defined business rules attributed to given customer segments can provide direction for customer-facing interactions. CRM technologies help chemicals manufacturers provide the right products and services for customers, according to their willingness to pay. The greater consistency enabled by technology can save time, reduce wasted effort and improve margins. Establish a high-performance culture through leadingpractice application The final step helps to confirm assimilation of the customer-smart way of thinking into the organization. A continuous improvement mentality is needed because there will always be ways to deliver products and services more efficiently, and keen interest in innovative products and services that deliver top-line growth. High performance, in other words, is always a moving target, and organizational culture renews the drive to high performance. Benefit from a 360-degree view of customers Effective customer-smart processes and systems provide a 360-degree view of customers. Sales, marketing and service teams are able to share up-to-date information so they can be more effective at every point in the customer life cycle. A 360-degree view of the customer results in improved sales team and territory planning, well-coordinated account and contact management, and efficient case management and scheduling. This holistic view also supplies real-time insights, along with reporting and analytics, thereby enabling proactive sales and service support. Each and every customer interaction, from first contact to post-sales support, represents an opportunity to improve insight and address customer wants and needs. Customer smart: Catalyst for high performance The gains that can be achieved through effective, consistent CRM are significant. The benefits of becoming a customer-smart organization extend from operational improvements, which that can shore up the bottom line, to identification of new opportunities to increase top-line growth. The greater customer insight that comes from advanced CRM processes and systems can result in segment-specific strategies that increase customer value. Consequently, strengthening capabilities in managing and growing the customer base is a key imperative for companies interested in becoming customer smart. For a chemicals manufacturer looking to differentiate itself in the global marketplace, a customer-smart strategy, reinforced with CRM tools in support of the strategy, represents a powerful way to build competitiveness and achieve high performance. 6

8 References 1 The Accenture Global Customer Preferences Study for Chemicals: The call to become customer smart, 2010, Accenture. 2 IDC Manufacturing Insights, October AMR Research, September How Much Are Customer Relationship Management Capabilities Really Worth? What Every CEO Should Know, 2001, Accenture. Copyright 2010 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. The Avanade name and logo are registered trademarks in the United States and other countries. Microsoft and Microsoft Dynamics CRM are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries. About the author Goetz Erhardt is a senior director in Accenture s management consulting organization. He has extensive experience in consulting multinational clients in the chemical and industrial industries. Goetz specializes in marketing and sales strategy, enterprise transformation and culture change. He currently focuses on topics such as industry value chain marketing, market launch acceleration, sales transformation and customer-centricity programs in the business-to-business markets. Goetz is based in Frankfurt, Germany. About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 204,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.6 billion for the fiscal year ended Aug. 31, Its home page is ACC

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