What Leaders Need to Know for 2009

While beginning New Year’s resolutions during this recession, business executives need to be particularly resolute.

When the economy is shrinking (as I suspect it will continue to until the latter half of 2009, when I expect a big comeback), it is especially important to focus on customers and profitability — the core of what marketing is about. So, company leaders, let’s use this marketing column to review your “must-knows” from marketing efforts for 2009.

If you’re a CEO, then the list represents the things you must know about your customers to guide your management team. If you’re the marketing leader, consider this list a report card that keeps your CEO in step with marketing’s bottom line impact for everyone.

Because marketing is fundamentally about customers — getting more of the good ones, keeping the good ones you have and, over time, serving existing customers in more ways — these “must-knows” connect the dots between customers and dollars. Here are four fundamental things to know about your company’s customer base:

• Understand your newest customers. It is easy to track overall numbers of new customers, but do you know why these customers have come to you? Make sure there is a clear and consistent definition of a “new” customer versus a lapsed one, for example. My experience across many clients is that, because new customers come to the company from any of several paths – online, walk-ins, referrals, call centers, etc. – they get classified in different ways. That leads to flawed data and can result in poor decisions down the road.

• How many customers are leaving, and why? Once you have established a sound base for tracking new customers, you can put that data next to the volume and value of lost customers. Your leadership needs to develop and share a reconciliation of your customer inbox with the customer outbox to understand customers as a core company asset. (Compare this analysis to a Sources and Uses of Funds statement, which tracks cash in and out of the company.) This insight will not only help you diagnose problems, but it might also provide the yardstick you need to rally the troops for change.

• Which customers are staying put, and why? Customer loyalty can be a great thing. To foster more of it, your team will need a consensus on quantifying. What is the purchase cycle for your products or services? (You will need to know the point at which certain customers are choosing between repurchasing from you versus buying an alternative.) Understanding why some customers are loyal and others are not will require research; resources for that research typically pay for themselves many times over and should be part of the ongoing customer budget.

• Are you making money from all your customers? By building a discipline around customers as the key company asset, you can cause costly customer groups to shrink and the most profitable ones to grow. However, it takes the CEO’s insistence on tracking the business according to customer profitability for this to stick.

So who does all this work? What I have listed is typically the realm of a chief marketing officer. In companies without a CMO, customer accountability might be spread among a head of marketing, head of sales, call center manager, interactive manager, general managers and others.

When accountabilities are dispersed, the CEO will need to establish a customer team to organize the effort. The customer team should have authority to examine all relevant data, knock down barriers and report the unvarnished truth to the CEO. Then you can charge the team with resolving problems and making needed changes.

Once you have established the right processes for understanding customers and a language for asking questions about customer growth, you can turn your attention during 2009 to establishing a truly customer-focused organization.

If that happens, then you can congratulate yourself on adjusting to lean times by making your company better — rather than regret the inadvertent loss of company value from indiscriminate belt-tightening.

(Jim Karrh is senior vice president of Advantage Communications Inc. in Little Rock. E-mail him at [email protected].)