In my last post, we’ve established that the right level of visibility is crucial to be able to react — or even better, anticipate – changes that can hit your business from any angles.
Let’s take one of the most important aspects of a business: Customers, and see how we can design a system that provides the right level of visibility to customer information through out the company.
What “System” Are We Talking About?
The word “system” has its own share of abuse, so to prevent that here, we’ll narrow it down to a system that tracks Customer Scores only.
Why Customer Scores?
A Customer Score is a number we assign to a particular customer or customer type. When it is applied to all customers, then we can rank them from the most valuable to the least.
This is one of the most important component of running a successful business, yet it is one of the most delayed if not avoided. Reason? Because it is tricky to figure out consistently , it takes a lot of thinking, and nobody has time for that, furthermore, after you figure out how to do it, then you have to come up with a continuous process to cope with the myriad parameter changes
Now, really, who has time for that? Our most successful clients do find the time.
Before we begin, the system we are prescribing here (in truth, all the systems we at nextCoder build and design for our clients) is designed with these rules:
- Any information is entered once and only once into the system
- The system adapts to the different roles within the company
- The information (customer in this case) is consistently represented to each company department (the key here is “consistent” not “identical”)
Having established what system we need to deal with Customer Scores tracking, let’s get started by discussing what does it take to calculate a score for a customer.
How Much Is Each Customer Worth?
Notice that I am not simply asking how much does a particular customer contribute to your revenue, that is just the first part of the equation, but what matters equally is how much does it cost to retain them.
At first blush, the first question (how much do they contribute) seems to be an easy one. We just have to ask the Account Receivable department, right? Until we start to ask the follow-up question, are they current on their invoices. Suddenly what seems to be an easy question started to become tricky to figure out.
The second question is much harder to answer. In reality, it cannot be answered until you have a system that asks the right question to every single department in the company involved in servicing the said customer.
The third question is how long has the customer been with the company? This question matters especially when the business depends on customer retention.
But what if my customers comes and go (and I have 100,000 of them)?
If the business only touches the customer for a short period of time (to buy a product, for instance), then a better question would be how likely for the customer to come back or to recommend the product. TIP: E-Commerce systems and their hooks to analytic services is your friend here. (Yes, we help our clients with this also, it’s quite amazing to gather data from six marketing platforms to answer a single question).
Ready for number four? What is the projected value of a customer? The earlier in the sales process we are able to assign the score to a customer, the better visibility we would have. In this context, visibility means the ability to forecast and predict revenue pipelines more accurately. This is crucial for business with long sale cycle and hard to predict trends.
NOTE: Obviously, depending on the nature of the business, you may end up with 5th, 6th, or even more aspects that you have to consider. But for the space that we have here, this will get us going.
Out of this exercise, we get Customer Scores formulas.
The System Itself
What does a good Customer Scores system look like? For starters it would have these components:
- Screens for each department to enter information that is relevant for each customer. And other sources within the department that can be automatically extracted from.
- A nightly (or hourly) process that gathers the data entered at the screens above. The data is then processed according to the Customer Scores formula while at the same time making sure that the three systems rules above are followed. If not, a business alert would be generated
- A set of Dashboards for different roles within the company. From floor-supervisors to CEOs (even Board members), visibility is manifested in an always up-to-date, always accessible centralized online system
- A set of automatically generated reports are sent via email, or get dropped-off a remote server (for example vendors’ or banks’ or government-agencies’)
Once this system is running, everyone in the company will slowly gain the right level of visibility on Customers. Only at this point ideas, innovations, shortcuts without compromise on quality could emerge organically (unforced). Why? Because everyone is thinking about how they can help serve the customer better within the constraint of their own department
This is the fruit of visibility.
Furthermore, when everyone in the company has this kind of visibility, then as a company, you would be able to anticipate industry-wide changes and you will be in a position to withstand crises that would otherwise bring you down.
Do you have a Customer Scores system? Wait. Scratch that… Do you have at least a Customer Scores system? How about Employee Scores system, Vendors Scores system? How about Profit Scores? there are bad profits as well as good profits, right? Is there a good scoring system for Costs?
In this post we focus on the Customer only because it will take a book to discuss the others aspects. But the thrust is the same. Whether you have 10 or 100,000 customers, you still have to “See” them in the right context that is relevant to your business growth.
So it comes down to: Do you want your business to grow? If so, you need visibility, all the time. Without a system that is designed to provide that for you, how can you maintain the visibility over time?
Too many companies are too busy running and not looking for information that can result in better directions. This is why nextCoder was founded, to come alongside companies and build systems that give them visibility where it matters.
If any of the above resonates with one of the needs within your company, hit me with a note and let’s discuss. And of course, follow this space for more Business Intelligence tips. This post is also published at our website: nextcoder.com