Does how customers are managed impact on business performance?

Abstract

This paper contains first-time-published findings from an ongoing quantitative study on the impact of customer relationship management on business performance. The paper begins by observing the frustration felt by many sales, service, customer management and marketing managers in business: that senior managers often pay lip service to 'customer management' without believing in their hearts and minds that it really makes a difference to the bottom line. The problem with this is observed when, through competitive or market pressure, the companies find volume and margin targets difficult to meet. As a reaction to this, they may introduce measures, counter to good customer management, which can further impact on business decline. The hypothesis for the analysis is then introduced, which is 'companies that manage customers well achieve better business performance than those that do not'. The paper goes on to attempt to answer two fundamental questions necessary to test the hypothesis, neither of which is particularly quick to answer; what is meant by CRM, and what does 'good business performance' mean? The paper necessarily describes the methodology and research base in some detail. It can be unequivocally stated that for the 21 companies studied for this paper, the positive correlation between business performance and customer management is clear: if a company has developed a set of practical, sensible customer management practices it is likely to be a good business performer. However, there are no doubt other causal reasons outside the scope of this study for the effect that is seen as excellence in business performance (eg the quality of the CEO, the power of the brand), and some of these may also correlate as well as CM or even better. This paper reports simply and unashamedly on the findings of the research study, and they are worth restating. Companies who manage customers well using sensible, observable, well-implemented business practices are very likely to be best-in-class business performers. Conversely, customers that do not set up good customer management practices are likely to be poorer performers. This in itself is an important finding and can be used to help win the hearts and minds, and therefore the real commitment, of senior management.