The following describes a CRM system for managing the relationship between manufacturers and large customers, such as distributors or retail chains. The approach is highly detailed, and is suitable for customers whose spend in a year exceeds $50-100 million - we call it CRM Gold to differentiate it from the usual CRM Lite.
The system is unique in two important aspects:
It is continuously self-adjusting and does not require major set-up and preparation each time an analysis is desired
It is capable of isolating and quantifying the business drivers impacting the relationship as well as attributing them to the responsible party (or parties) or to external conditions.
The ability to identify and correctly attribute the individual business drivers behind success and failure is a prerequisite to analyzing and evaluating the relationship between a manufacturer and a large customer since the party or parties causing the situation must be identified before suitable remedial action can be initiated. The ability to understand the interplay of business drivers is also essential for establishing meaningful benchmarks, since blind comparison of current and historical figures may ignore the impact of changing economic climates, shifts in consumer tastes, introduction of competing products, or other factors outside the parties’ control.
Traditional approaches for analyzing the efficacy of business processes involve the creation of analytical models through tedious data collection, data mining, and manual creation of the models. In addition to being time-consuming, such approaches are limited in two ways:
They are usually designed for a specific purpose and contain approximations and simplifications which are geared towards the intended use, and
They generate static models, which are meaningful only as a "snapshot" in time. The usefulness of these models is limited by their inability to evolve and modify continually to reflect changing conditions.
Tupai has developed a technology that automates the entire process of creating and maintaining analytical models. What’s more, models built this way are dynamic in the sense that they are capable of updating themselves in real-time by doing their own data mining.
Using Tupai’s capability for automated data-mining, a dynamic model is created to describe the relationship between the manufacturer and large customer. The model contains sufficient detail to represent the various effects that impinge on the relationship. Some of these effects will be automatically mined from data describing the product flow to the customer. Some will be found in the geographic, demographic and economic data describing the markets and sub-markets in which the customer operates. The marketing department and the advertising agencies handling the business will provide data about the projected effects of promotions.
Once the sources of information have been identified, new data will be directed to the models continuously or at desired intervals. The Gold system analyzes the data flowing through it and adjusts the models automatically, correcting the impact of various attributes and even reorganizing itself as needed around new-found business drivers. Little or no human intervention is required throughout this continuous process.
Time series analysis forms an integral part of the operation of the model since some effects are seasonal in nature and the model needs to focus on small differences hidden in the "noise" of data pouring in from many sources.
With the information in the model continually being updated, the manufacturer will be able to study the performance of the customer, assess weaknesses and offer ways of addressing them. The customer can be assured that the manufacturer understands the market, is offering appropriate and suitably packaged products and is directing advertising towards the customer’s market in a way that maximizes both their profits.
This shared understanding of the situation forms the bedrock on which the relationship is managed. The CRM Gold system gives timely warning when the product mix is drifting away from what it should be, when volumes are likely to change, when price incentive structures are becoming counterproductive, and when the activity of other manufacturers or other large players in the market are likely to impact adversely on the relationship.
The following examples provides a closer look at some of the challenges of a CRM Gold system and how Tupai’s solution addresses them:
The volume of product shipped to the customer is affected by factors that are not under the customer’s control, such as
Seasonal fluctuations in demand
Maturity of product – are its sales rising, stable, falling
Sensitivity to economic factors – a premium product in a downturn
The manufacturer's advertising budget
Strategic CRM requires rapid response to emerging trends in the customer’s behavior. These trends are initially small and hard to see without an effective means of isolating those effects that are under the customer’s control. Also, since the impacts of outside factors are often intertwined, these external effects must be stripped-out in an integrated manner. Only when these effects have been stripped out, leaving only the factors under the customer’s control, can the customer’s success in moving the products in the prevailing conditions be judged.
Seasonal factors are stripped out using Tupai’s automated Time series analysis. Projected product life cycle data can be used to strip out cyclic effects. An economic model with appropriate consumer lags is used to strip out economic effects. What remains is the trend resulting from the customer’s actions.
To further assist in the evaluation, a best-practices metric specific to each particular customer image and market space can be established and used as a means of comparison, necessary when there are many dimensions that need to be taken into account simultaneously.
A large customer’s sales figures may dip temporarily because the organisation is executing a repositioning strategy. To complicate things even further, current performance may reflect the overlay of the tail-ends of several strategic decisions taken at different times. Once the manufacturer has been advised of the new strategy, it will need to be incorporated into the manufacturer’s view of the relationship. The model of the relationship will need to accept strategies coming from the customer as well as the manufacturer, strategies whose effects are uncertain and may need 6-12 months to play out. An important use of the CRM Gold model is to identify courses of action that will align the objectives of the manufacturer and the customer.
An early understanding of trends is important not only for managing the customer but also for providing feedback regarding changes which the manufacturer must implement in its own organization. The deeper understanding that comes from studying the relationship with the customer, their market and their reaction to other manufacturers' products, does this effectively. The most common cry – "Give me better products" – carries weight if the same story is coming from other customers who also see their sales figures trending down.
The relationship between manufacturer and customer cannot be managed in isolation since large customers acting as distributors or retailers impact each other through common markets, and informal employee communication with others in the industry. Management of a specific customer account needs to take into account all the cross links that exist, and the damage that could be done by favored treatment of a particular account. One of the differentiating features of Tupai’s technology is the ease by which different models connect and interact. This feature simplifies the representation of multi-customer cross-linkages.
The various elements of Tupai’s technology work together in a seamless whole, allowing complex situations to be readily modeled, the interactions studied and effective actions taken.
Maintaining a relationship with a strategic customer is an ongoing activity requiring the ability to identify and respond to emerging trends in a timely manner. Current knowledge-discovery and modeling technologies are ill-suited for this task because they are labor-intensive, because they lack the ability to automatically evolve and adjust to changing environments, and because they do not handle fuzzy and uncertain knowledge well.
Tupai has developed a technology that addresses these issues and enables a new breed of CRM Gold solutions capable of intelligent monitoring and development of strategic business relationships.