In the first part of our two-part series on improved pricing models for manufacturers, we introduced the notion that pricing is an area where shrinking margins can be countered. Insofar as traditional qualitative methods for pricing are unable (or unwilling) to control for supply-chain and customer variables, as well as automation, most approaches end up being manual and/or ad hoc. Simply put: These approaches have minimal chances of producing maximum margins.

To achieve a more precise pricing scheme, manufacturers must employ quantitative pricing methods that overcome the challenges found in modern production. Doing so means making pricing decisions based on business intelligence—not business guesswork. The process of quantitative pricing begins by first recognizing what is working and not working with regards to methodologies, then deciding to take the pricing task to a more formal level that is informed by a variety of data.

First, it is vital to realize that ad hoc pricing facilitates price differentiation; that is, diversified manufacturers typically have extensive product portfolios and very sizable customer bases, and therefore (more…)

With increasingly unpredictable costs for raw materials, energy, and even capital acquisition, manufacturing today is a volatile, roller coaster ride filled with peaks and valleys. Manufacturers face a vast array of complex challenges including intense competition, increasing costs, and accelerated product life cycles. It is true that to, some extent, technology investments in enterprise systems such as ERP, MRP, and CRM have helped to control operating costs and increase corporate agility.

However, as adoption of these capabilities has spread to the point of producing something akin to a parity of efficiency in manufacturing, they can dilute gains in competitive advantage. What is important to realize is that the resulting quantity and quality of data produced by ERP systems have set the stage for business intelligence applications that leverage such data to analyze and optimize business performance in areas other than the shop floor.

For example, consider what competitive advantages can be built around the notion of pricing. Using data to derive customer segmentation and optimization models can recommend prices that are much more profitable than those currently in market. This is a pricing science that can be easily (more…)

When a customer has a problem, concern, or question about their purchased product or service, they expect answers—quick answers—from their vendor. In the manufacturing world, this response is commonly referred to as customer service and it is informed by a variety of information portals. In addition, the initial point of contact for service with a customer is often determined by the customers themselves, depending on the urgency of the issue and the historical reliability of the vendor to react to customer inquiries.

These points of customer service contact can include telephone, the Internet, and even traditional face-to-face interactions. To this end, customer information portals in a company and communicated between departments within a company, in combination with customer service points of contact, are the foundation of Customer Relationship Management (CRM).

When it comes to CRM and customer contact, it is simply common sense (though less commonly realized) that customers not only want the quickest possible service response, but they want intelligent service. In customer service, perception plays a great psychological role in the way a customer feels about a response. For example, in some of the most automated CRM applications, and some service web methods, real time does not always (more…)

There is an increasingly popular business notion that it is getting harder and harder to find new business. To some degree this is true. To a larger degree, though, it’s not. What might be better stated is that it is getting more difficult to find new business using old marketing methods. Indeed, marketing in manufacturing today involves more than simply word-of-mouth reputation.

In order to compete on an ever-shrinking global stage, the recruitment and retention of customers must involve a business intelligence system that gathers its data from a variety of sources and a variety of portals of information flow. In a system that brings together people, procedures, and supporting programs, Customer Relationship Management (CRM) is the necessary business model for the 21^st Century.

CRM is often found as part and parcel of a larger enterprise resource planning software package (ERP). CRM goes beyond simply answering service calls and maintaining sales records; rather, it’s a customer-centric business philosophy that holds intelligence about the customer as key to building differentiation between competitors in the marketplace. As a business realizes that their operation creates and maintains customer relationships on several levels, the need for collecting and sharing customer data becomes (more…)

Growth pains. You hear about manufacturers who have them, and perhaps you even dream of the day your own company will actually experience them. While growth is certainly a good thing and should be the goal of all businesses, rapid growth can often bring many problems as well—problems that may, in the long run, result in a reversal of growth fortunes.

Perhaps, the biggest issue looming over rapid growth is the diminishment of customer service. When sales are up and profits strong, with margins widening little bit by little bit, quality customer maintenance is sometimes a notion that is considered far too late in the growth equation because it requires investment with a more ambiguous ROI than something like a new lathe or forklift.

However, without strategic Customer Relationship Management (CRM) that anticipates rapid growth (or even steady growth) scenarios effective and responsive customer support gets lost. CRM is designed to coordinate multiple channels of support for the customer in ensuring problems, questions, and feedback are continuously administered. When a customer needs help, a customer needs help quickly. Knowing customer profiles, history, and preferences is a best business practice that confirms for both the loyal and new customer that their supplier cares about them. And, of course, the idea of (more…)

When you’re a manufacturer or job shop and you start looking for an enterprise resource planning software solution (ERP), return on investment is certainly an important part of the criteria. Not only is the software needed for ERP something of a financial investment, but the labor and personnel time expense often considerable. There are many reasons why to invest in ERP, and most of them are good reasons: Better shop floor productivity efficiencies, better inventory management, improved front office administration, reliable quality control, and the list goes on and on.

However, one of the most important, yet least appreciated, reasons to employ ERP in a manufacturing or job shop setting involves the enhancement of the relationship maintained between the business and the customer. Referred to as Customer Relationship Management (CRM), the application is often part of the more robust ERP software solutions, and it is vital in today’s competitive global market environment.

In most instances, within the better ERP solutions, the expense of CRM is far outweighed by the manifold positive results found in the practice of building of long-lasting lifetime customer values. They are benefits that offer (more…)

When we talk about lifetime customer value (LCV), we’re always hoping for the best-case scenario. What we would prefer is to establish a customer early in their consumer life (business or domestic), and sustain loyal in that customer through the end of their consumer life. And, yes, this can be achieved. Many start drinking Coca Cola early in their life and never sway from the brand. There are found Ford truck buyers in the same family generation after generation. Certainly, many factors go into creating such product allegiance. Quality of product is important. So too, brand marketing that include advertising and public relations.

But, as any mom-and-pop business will tell you, it is the direct relationship with their customer that is all-important when it comes to long-term customer loyalty. “Knowing the customer” is the bottom-up approach practiced by the best of small operations—ones that know their customers well, even personally. While this practice is intuitive to small companies that life and work in the same community where their customers live, for national and international companies such intimacy comes a little bit harder. In other words, the bigger you are the less personal you get. This can be a problem, particularly with the wealth of historical customer-related data that is increasingly accumulated by growing manufacturing operations.

To handle the need for building LCV in the advanced industrial age, the business strategy of Customer Relationship Management (CRM) was developed to (more…)

The recruitment of a customer is one thing; the retention of that same customer is another. To regain a customer lost through poor service, product, or account management is, yet, another thing. In general terms, how we treat a customer is very much tied to how profitable that customer is for us in the long term. Insofar as this concerns the connectivity between vendors and their clients, Customer Relationship Management (CRM) is the strategic business and manufacturing practice today that can make or break the loyalty of a customer.

Most CRM in modern manufacturing businesses, large and small, is handled by dedicated software applications, or is a part of larger enterprise resource planning software systems (ERP). When a company does decide that it wants to implement a CRM strategy, it usually takes its direction based upon a conceptual need in customer relations—either general relationship operational management or production/sales force automation.

In either case, there are several specific approaches to CRM that are specific to the type of customer served and their needs as customers. Here are two of the dozens of approaches to CRM in manufacturing: (more…)