CRM: at their service

For generations, the personalities associated with senior sales and finance roles could hardly have been more diverse. One was seen as a flamboyant deal-maker and people motivator, trusted to develop business relationships and forgiven for having a less-than-perfect focus on administrative niceties. The other was risk-averse, concerned with mundane tasks such as managing transactions, overseeing compliance and containing costs.

When they did come face-to-face, it was usually only for very specific tasks, such as monitoring revenue targets, analysing compensation plans or enforcing credit controls.

Like most stereotypes, these perceptions are over-simplistic and now look outdated. Financial directors are becoming more closely involved with sales, and other ‘front-office’ functions of marketing and customer service.

Since the late 1990s, customer relationship management (CRM) – focused on acquiring, retaining and leveraging key customers – has become a central tenet of most private sector organisations. It is also gaining ground in the public sector as the government focuses on improving the quality of service delivered to citizens and business. As organisations grapple with the deep-seated changes that CRM often brings, many are looking to the finance function to provide expertise.

Much of the emphasis in the first wave of CRM adoption was on process automation – implementing systems in the sales function to capture customer data and better manage leads, for example, or building contact centres to improve customer service and rationalise support overhead.

But at heart, CRM is a highly analytical and nuanced business philosophy. It’s not just about acquiring and retaining customers – it’s about keeping the most profitable or strategic clients. Similarly, customer service is not about investing to provide the best possible support – it’s about providing adequate levels of support and keeping customers happy, while satisfying the bottom line.

These qualifiers challenge many established practices. Sales people, for example, are often compensated on the basis of revenue generation, when the ultimate business need is to focus on specific revenue sources that improve profitability or market share.

In theory at least, finance is uniquely positioned to meet these challenges. Supported by technology and the emergence of more fluid, flexible organisational structures, senior finance managers bring expertise in two areas. As well as driving efforts to cut costs and improve process efficiency, finance also has the analytical capability to deliver value in sales, marketing or service and support.

Customer profitability analysis is a prime example. Although revenue has long been the key criteria for judging sales performance and customer value, profitability analysis provides a more accurate long-term picture. It is not always easy to determine. It’s one thing to allocate costs to specific revenue in a low-volume, high-value sales environment, it’s another to do that with fast-moving consumer items.

The principle, however, is simple. A customer acquired through the cheapest form of marketing activity, who repeats orders, never returns goods and always pays on time, will generate far more profit than a customer who spends the same amount of money, but demands excessive customer support and requires more attention from credit control.

To an extent, the finance function has sometimes tended to hinder rather than help in this kind of analysis. Traditional financial disciplines, such as activity-based costing (ABC), should give customer-facing managers a new perspective on value by allocating detailed costs – including costs usually lumped together as overheads – to specific activities.

But many finance professionals have been guilty of over-complicating ABC, particularly where they advocate standalone exercises that consume vast amounts of resource and get bogged down in minutiae. For most companies, the more pragmatic the analysis, the better. It means some finance professionals may have to get more comfortable with cutting corners.

Profitability analysis also gives a better understanding of how much resource companies can afford to allocate to their key accounts post-sale. There’s a delicate balancing act to be struck between exceeding customer expectations and under-servicing them, particularly when it comes to ensuring high-value customers continue to generate strong margins. This makes profitibility analysis an ongoing exercise.

While the finance function can bring much-needed analytical skills to these areas, it will also need to rethink some of its own assumptions. Take, for example, the accountant’s perspective on call centres and other service operations, which have traditionally been regarded as a net cost to the business. Because of that perception, individual and departmental performance has tended to be measured on the basis of operational statistics, such as call duration or volume of calls – metrics that are primarily focused on cost reduction.

While those indicators are entirely valid, they take little regard of the impact that better service has on retention of key customers, and of the opportunities to up-sell and cross-sell that come from regular communication. That’s a far more complex equation, which may have significant strategic implications.

Finally, as these disciplines overlap, so the technology that supports them will become more of a preoccupation for the finance function. Much of the value of salesforce automation software, for example, lies in the management information it generates, both in terms of customer information and operational performance. Improving the flow of data between these systems and back-office functions is becoming a business priority, and probably one of the largest challenges organisations face in their CRM rollouts.

Potentially, the finance function could find itself armed with a whole new class of data that will tighten its control over cash, help it improve budgeting and forecasting, and increase its overall grip on business performance.

To get that data, it will need to ensure it is at the heart of the business process decisions that are taken as CRM projects evolve.

Keith Rodgers and David Longworth are directors of Webster Buchanan Research

A white paper Finance and Customer Relationship Management, with case studies, is available for download free from

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