The Business Benefits of Customer Management

Professor Merlin Stone and Neil Woodcock

Business people sense that managing customers well leads to improved business performance, but when it comes to investing they find it hard to determine what to allocate to acquiring, retaining or developing customers. This article describes the findings from research into customer management (CM) and business performance. It shows strong evidence that if a company approaches CM sensibly, it will make considerable profit improvement. This article also gives examples of how business performance can be improved and suggests some guidelines on how to make it happen.

DEFINITION OF CUSTOMER MANAGEMENT

We define 'managing customers' as how a company aligns its resources and deploys any set of business techniques (not just marketing, sales or service) to attract potential customers and maintain or change how existing customers relate to the company as a buyer of its products and services. This does not presume that customers are managed in a relationship – there are many different models of CM, from key account management, relationship marketing, product or cost leadership, brand-led, spot buying and even auctioning. However, these are what we call 'component models'. In practice companies combine these models in very complex ways. Their success comes from: