How effective customer management can add value to your customers

How effective customer management can add value to your customers while improving your bottom line
By Mark Hollyoake and Professor Merlin Stone

Luvata supplies components and materials for heat transfer and resistance-welding technologies, for superconductors at the cutting-edge of science, for switchgear and power technology and a wide range of state of-the-art electronic technologies. This post explains why, through our Partner STAR Commercial Academy, the Customer Attuned model, framework and methodology are central to the development of Luvata’s customer focused journey. It has been a central element of their Operational Excellence Functions support programme, which brings together Procurement, Lean and Customer Management, covering Luvata’s total value chain, across divisions and across the world.

While many engineering companies lead in technical innovation, their commercial operations trail best practice.
“Engineering companies are often heavily staffed by engineers. This leads them to strive for operational or technical excellence at the expense of commercial excellence. Can a business really be operationally excellent if it is not focused on the commercial needs of the business?” asks Chris Russell, Luvata’s Head of Operational Excellence.

Approaches such as Lean have provided a blue print for operational improvement. However, sales people tend to rely on relationships and persuasion in pursuing and closing deals. If top sellers are rewarded by volume sold, they offer discounts and give-aways and negotiate informal deals. This reduces profits and raises cost to serve. Opportunities to improve customer lifetime value and satisfaction are lost. Supply chain savings often evaporate through poor customer management, with relationship-based selling giving away hard fought cost savings.

As Chris says, “Many organisations generate incremental operational improvements through lean, but few can translate this into growing the business”. The first step to sustaining value is to apply a systematic approach to customer management. As Head of Operational Excellence, Chris extended Lean from manufacturing, linking it with customer management by deploying the Customer Attuned methodology, “It is only by understanding value in the customer’s eyes that we can make that value flow through the organisation. This is obvious to companies taking a ‘market in’ approach, but many engineering companies take a ‘product out’ approach. They would benefit greatly from learning how to configure, supply and provide value added services for their products. Without a systematic approach to customers, this can become a best-guess or one-size-fits-all approach.”

Customer Attuned’s B2B Customer Management assessments allow us to pinpoint where commercial teams must improve and professionalise. Our assessment database includes over 45 B2B organisations from across the globe. It shows that focus on key customers has dominated, diluting market development, insight application and the creation of value.

Customer relationships must change, from being informal, based on tribal wisdom, historic personal relationships, tactical customer service and cost reduction, to combining insight with commercial acumen and good customer management practice, focusing on delivery of value-based propositions which slot into the customer’s value chain to mutual advantage, using a co-created business plan and a professional review process to ensure that the relationship continues to deliver mutual value.

Chris concludes by saying; “Most companies can identify many areas of opportunity. By aligning these with genuine needs, resources can be focused on the elements that will provide more gain, without the disruption of too many improvement initiatives, many of which will produce little benefit. Focus the work up front to make sure you are working on the right things!”