Customer Portfolio Management: Taking CRM to

the Next Level

Overview

• Most companies claim to be customer-centric, but are not in reality

• Traditional CRM fell short of promise, because of process automation at the tactical / departmental levels

• Customer Portfolio Management – a strategic approach to deploying CRM

Customers: Assets or Marketplace?

• Customers are revenue producing assets• Not an undifferentiated marketplace• Do you know your customer segments?• What metrics do you use to measure

customer relationships?• Few companies measure CR according to

its strategic goals• Fewer companies measure CR in terms of

cost and capital to acquire and retain them

The Transition from Market Share to Customer Share

• “The best 20 percent of customers account for 150 percent of total profits. The worst 20 percent typically lose money equal to 75 percent of profits.” - Geoffrey Colvin (Angel Customers & Demon Customers)

• Companies must focus more on identifying and preserving valuable customers instead of retaining and growing market share

• Acquisition of AT&T Wireless by Cingular• The real motive was AT&T’s customers• Each AT&T customer was worth $1,860 to Cingular

Do You Have Any Unprofitable Customers?

• bottom 20 percent of a company’s customers account for losses of up to 75 percent of total profits

• cost of customer acquisition is much more expensive than the cost of selling to the existing base.

• Classify customers based on key metrics such as – Needs, profitability, cost to serve, buying trends, and

strategic value

AGF – Investment Management Company

• Facing a mature market, not much room for growth

• Used analytics to find that• 29% of customers were responsible for all

asset growth• Yet, only 50% of them were receiving

adequate support• Was able to design programs that used

resources more appropriately

Knowing the customer

• Use CRM tools to develop metrics

• Classify customers into groups

Customer portfolio

What next?

• Profit laggards – Identify cause of nonprofitability and control costs

• Revenue laggards – Valuable opportunity to readjust packaging and positioning of products

• Unprofitable customers – What makes them unprofitable? – Any Plan of Action to make them profitable

What to do with them?

More specific suggestions

Peoplesoft

• PeopleSoft’s CRM 8.9 supports customer portfolio management