Private Equity Lessons for CRM During a Recession

From CustomerThink, here’s an article on how non-Private Equity held companies could benefit from PE in understanding the ‘customer value equation’ to drive out non-value-added costs. The five lessons include:


  • Understand the Customer Value Equation – As George Orwell might have said, “All customers are equal, but some customers are more equal than others”. The ‘more equal’ customers are those that are the most profitable, that are the best repurchasers and whose needs most closely match what your company has to offer. These are the customers that you should focus your CRM activities on. That doesn’t mean you should ignore the other customers, just that they are not a priority at the moment. And feel free to decline to serve unprofitable, promiscuous, difficult customers. Just do it nicely. Don’t do a Sprint 1,000 on them.
  • Focus on the Core CRM Activities – CRM covers a vast array of activities: From customer intelligence gathering, through targeted marketing, all the way to loyalty programmes. Just as we need to focus on the best customers, we also need to focus on those CRM activities that deliver the most value to these customers. And of course, to shareholders too. That may mean redirecting funds away from CRM projects that add nice-to-have bells and whistles towards better targeted marketing for example. Or from generic customer service towards shorter call queues for priority customers.
  • Accelerate Results through Venturing – Funds of all kinds are in short supply in a recession. And they have to be made to work much harder to earn a decent return. That means running CRM operations with one eye focussed on the efficiency, effectiveness and productivity metrics. To do anything else is to leave money on the CRM table. It also means running CRM projects as though they were venture capital-funded projects. Far too many projects continue on merrily in a recession as though they had all the time in the world to deliver results, rather than having to produce them quickly. If your CRM project can’t deliver results in 90-100 days, it either needs restructuring so it can, or canning!
  • Devolve Responsibility for Results to your Best People – Even while you are watching the metrics like a hawk, you need to be devolving responsibility for delivering results to the best people you have in the company. And your best people will not always be the people who are running bits of the CRM operation at the moment. This can be very tricky. But on the other hand, it gives you a long-overdue excuse to get rid of people who aren’t pulling their weight anyway. It almost goes without saying that great care needs to be exercised here not to demoralise the rank and file left behind.
  • Drive Through Lean CRM to Cut Non-Value-Adding Costs – I talked about the importance of Lean CRM in my March blog post. If anything, the deepening financial crisis brought on by the current liquidity problems in wholesale financial markets only serves to emphasise this point. Most CRM operations are stuffed full of activities that add no value to customers (they wouldn’t pay for them given the chance not to), add no value to your business (you wouldn’t pay for them either) and should be removed as soon as possible. For example, my own experience implementing Lean Marketing suggests that most marketing contains 30-50% of non-value-adding activities. Get rid of those non-value-adding activities!

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