Know-Your-Customer Proves Good Business
CXUSTOMERS dread dickering, a Florida car dealer realized. So he fired his sales force, leaving only managers. A month later, sales had doubled.
That anecdote captures the essence of ``The Streetcorner Strategy for Winning Local Markets'' by Robert Hall. Based on local market information, the dealer saw a need to reallocate resources to make the right sales effort, of the right service and product, to the right customer at the right cost. Then he acted.
``It seems so obvious and logical,'' Mr. Hall writes. Nor is he the first to push the know-your-customer strategy, he admits.
But what is common knowledge is seldom common practice, Hall adds. For instance, a survey of billion-dollar banks by ActionSystems, Hall's Dallas-based training and consulting firm, found that 88 percent consider market management a critical strategy. However:
* Only 15 percent tier their customers by profitability of the relationship, the survey found.
* Only 17 percent train their managers to analyze market data and develop a market plan.
* Only 29 percent of the banks have a strategy to enhance service for their best customers and cut the cost of service to their least profitable customers.
Rare indeed, Hall writes, is an operation like 7-Eleven's in Japan. There, cashiers key in a customer's gender and estimated age so they can break down favorite purchases and preferred shopping times by market segment.
That's why Hall spends three-quarters of his book on what's wrong with businesses and what they should do about it. The remainder is devoted to how to overcome in-house resistance to get it done. ``The ultimate challenge in more effectively managing local markets is managing cultural change [within the organization],'' Hall writes.
One obstacle to instilling a market-driven culture is employee burnout from previous ``programs of the month,'' he writes. For example, sales drives likely misfocus on high-cost, low-retention customers. Quality drives often add quality without adding any value for customers.
No doubt, those programs failed because they were mandated by headquarters.
``I am often amazed by how many `free market' business executives and managers are running `central planning' units in their companies: Capitalist talk, but a socialist walk,'' Hall writes.
Hall advises national companies to act like local ones through their branch locations. Let each outlet find the best way to please its own customers.
Segment the market, he adds. Give the best customers the best service. Cut the cost of serving marginal customers.
``Some current service expectations will probably be violated,'' Hall writes.
Breakthrough productivity will come from ``owning'' the customer - retaining his business as long as possible. Company cost reductions must be market-driven so the best customers do not sense a decline in the value of the company's service, Hall writes.
For the company that pulls off a change to a market-driven culture, the reward can be a 20 percent to 30 percent increase in profits, Hall reckons.
The book is easy to read and well-organized. The book would have been more fun if Hall had included more real-life examples. Some anecdotes concern anonymous clients of his, while others are ones like Wal-Mart that everyone cites. Because Hall overuses foreshadowing and flashbacks, as it were, finishing the book is like reading it twice. Managers may find that double dose worthwhile.
