Every company has their own opinion on which tactics effectively drive new business and which ones don’t. Their opinions inevitably differ, depending on what industry they work in, their role in the business development process and how closely they interact with their end customer. However, there is one common trend in nearly all of these conversations. Almost all businesses fail to consider how marketing and customer relationship management work together.

Whether you are a small company that uses a simple set of sales guidelines, or a multi-billion dollar company that requires complex software to manage your clients, the methods you choose to manage your customer relationships can determine the success or failure of your business. Marketing and advertising campaigns can bring prospects to your business. However, if these prospects are not properly managed, starting with the first point of contact with the company, it will result in a lost opportunity and ultimately, a lost profit.

Most clients find it difficult to give an objective evaluation of their customer relationship management process. This is not surprising. As a fellow business owner, I experience the same pain points. You created your business, nurtured it and helped it grow – it's difficult to admit that there may be flaws. However, recognizing areas in which you under-deliver, especially with the help of an unbiased resource, can be the most valuable investment you make in your business.

Companies seek out a marketing or advertising agency in the hope of finding ways to drive new business. What they don’t often realize is an important part of this is analyzing the way that they interact with customers and identifying inefficiencies. External campaigns can deliver call volume, traffic and interested prospects. However, if these prospects are met with poor customer service, a very low percentage of these inquiries will be converted into business. In our feature article for this month, we’ll tell you how you can start evaluating your customer relationship management to make sure you are getting maximum return on investment from your campaigns.

Respectfully Yours,

Now that we’ve touched on the importance of customer relationship management, ask yourself this: how much do you know about how your company interacts with customers? If you are seeing low return on investment from your campaigns, low close ratios in your sales department or high customer attrition, it may be a sign there are weak points in your customer relationship management strategy that should be addressed. The following list identifies three important elements you should consider sharing before developing a marketing or advertising strategy.

What is the cost to acquire a new customer?

The answer to this question helps you and your marketing team determine two important things. First, it allows you determine the value of product or service you will have to sell before you start collecting a return on investment. Secondly, it will help your marketing team make important decisions about which mediums can provide the largest return on investment.

So how do you determine the cost of acquisition? Add up all the costs associated with initially acquiring a client, outside of your fixed costs and overhead. Examples of these costs could include sales associates’ salaries, advertising campaigns, and loss of profit margin as a result of exclusive promotions. Once you have determined this number, you can estimate how much product or service you will have to sell to begin making a profit on that customer.

If it costs you $2,000 to acquire a customer and you charge $80.00 per hour for your service, you know that you will have to sell 25 hours of your service to that customer before you will start to see a return on your investment. Your marketing team can the use this information to compare the investment levels of different advertising and marketing campaigns to determine which strategy will be the most effective for your business. However, this alone is not enough to get an accurate picture of your investment in the acquisition process. You must also look at your close rate.

What is your current close rate?

Understanding the importance of close rates is essential for maximizing your return on investment. This is the time period where acquisition costs accumulate, and if you are not successful in converting the prospect to a customer, that cost translates to a loss. The lower your close rates are, the higher your acquisition cost is per customer.

For example, let’s say you invest $5,000 in a new business development campaign. From that campaign, you get 1,000 new inquiries and are successful in converting 50% of them into first-time customers. That means your acquisition cost in only $10 per customer. But what if you are only successful in converting 10% of those inquiries? Your acquisition cost is then $50 per customer.

You now must sell more products to offset the cost of acquiring the customer and experience a lower return on investment. Have an outside consultant go through your sales process, survey your loyal customers and talk to prospects you weren’t able to capture. What did they like about your company and what turned them off? By identifying the factors that affect your close rate you can make improvements that will maximize your return on investment by lowering acquisition cost and increasing the your profit margin each new customer.

What is the average lifetime of your customer?

This final factor is a good indicator of how effective your customer relationship management process is. It is typically much more expensive than $10 to acquire a customer. In fact, many companies, especially those that sell high –involvement products spend thousands of dollars on each acquisition. For these companies, it may take a year or longer to recoup their investment.

For this reason, knowing the average lifetime of your customer is vital. If the average life span of your customer is six months, but on average it takes you a year to recoup your acquisition costs, you are faced with negative profit margins. You can determine the average time it takes you to recoup your costs by tracking average customer spending and purchase frequency. If your average customer typically spends $50 per month and your acquisition cost is only $200, you must keep their business for a minimum of four months to break even.

This statistic can help your company in two ways. First, if you have a low customer lifespan, you can identify ways to improve customer service and build brand loyalty. If you have a long customer lifespan, this signals that your company is good at creating loyal customers. Loyal customers are often willing to try new products and services if they are presented with the opportunity. To maximize your profit, work on creating programs that will increase the average amount customers spend.

Marketing and advertising agencies, business consultants and research firms can be a valuable resource in determining how to increase the effectiveness of your customer relationship management program. Remember, external campaigns are designed to get customers in your door. You must also create internal marketing strategies that can effectively convert prospects into brand loyal, lifetime customers.

King Media has recently began work for Inspired Home, a company that specializes in real estate and home staging. Their mission is to prepare homes to sell through use of function, staging and design elements. Inspired Home offers services including color selection, furniture purchase or lease, art selection and installation, window treatments, accessory selection and placement, space planning and re-designing.

King Media has been enlisted to elevate Inspired Home’s online presence through a website redesign. The current website provides a limited overview of Inspired Home’s capabilities and does not adequately showcase the depth of projects they have undertaken. King Media will create a website that educates prospects on the process of home staging and provides an interactive experience that will demonstrate staging benefits.

Be sure to visit www.inspired-home.com in the upcoming months to see the site’s transformation!

King Media recently completed a project for the College of Music at Michigan State University. The College needed to effectively condense key metrics for 2009-2010 that would highlight the accomplishments of the students and faculty, as well as demonstrate the College’s contributions to Michigan State University as a whole. The proposed solution was a compact, 10-page booklet that would include statistical information, brief summaries and descriptive imagery.

King Media was responsible for developing a creative direction for the piece that would draw attention to important data, while also maintaining an aesthetically pleasing presentation that would hold the audiences’ attention and guide them through main informational sections. The final design and layout upheld the College’s current branding standards, while incorporating a fresh look and feel. King Media was also responsible for creating accurate information graphics that provided accurate representations of the data.

The final report gave a clear, cohesive picture of the College of Music’s achievements, as well as represented the College’s internal culture and public brand image. We would like to thank the College of Music for choosing King Media for their recent project. Check out all their upcoming 2010 events and projects at http://music.msu.edu.

Q: A lot of companies talk about Customer Relationship Management (CRM) Software. Do I need to purchase one of these programs for my business?

A: This is common perception when talking about customer relationship management, and for good reason. For example, if you search the term on Wikipedia, you’ll find the following definition:

“Customer relationship management is a broadly recognized, widely-implemented strategy for managing and nurturing a company’s interactions with clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service. Once, simply a label for a category of software tools, today, it generally denotes a company-wide business strategy embracing all client-facing departments and even beyond. When an implementation is effective, people, processes, and technology work in synergy to increase profitability, and reduce operational costs.

While CRM used to be pigeonholed into being a technology-based management system, today it is a much more generalized practice that refers to the implementation of a comprehensive,
customer-centric business strategy. This doesn’t mean that CRM Software is obsolete. In fact, many large organizations still view it as an effective tool that can assist them in tracking their customer relations.

However, many organizations, such as small businesses or companies that put less of a focus on actively developing new business, view CRM as more of an organic business strategy that relies on best practices, employee responsibility and customized tactics. Talking to a CRM Software company can help you determine if a technology-based solution is a good fit for your company. Many companies offer free trials and varying levels of features to accommodate different company sizes and budgets. Alternately, an experienced business consultant or marketing firm can also assist you in developing an internal strategy that streamlines sales and marketing processes, increases sales productivity and maximizes retention. The best CRM system for your company will be the one that makes sense for your business model and internal culture.

Send your questions or comments to Ralphie@KingMediaNow.com

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