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A customer focus works in a down economy

In this down economy, don't sell your customer relations short. In fact, focusing on existing customers may be more important now than it is during good times.

Peppers & Rogers Group "When times are tough, customer-focused strategies can help a company retain and grow its business."

That's a statement we made two years ago when we published the white paper, "CRM in a Down Economy." We're more than two years into that down economy today, and the theory has proven true. In fact, we may have understated the value of customer initiatives in a down economy.

In bad economic times, the strategy of focusing on existing customers rather than on new customers can be even more valuable than during good times. For one thing, customer initiatives can be implemented in stages, generating quick, incremental ROI. A customer focus also builds trust between companies and their clients, which is a key enabler of long-term, profitable relationships.

We spoke with a sampling of our readers to see how things have been going -- specifically, whether customer strategies have helped them survive and thrive in these challenging times. The results are not scientific, but do shed some light on what some companies are doing.

Respondents clearly feel that their customer initiatives are delivering value today, and overall they are satisfied with those results. For instance, the CIO of a mid-sized foods company notes that, "Close linkage with our customers is a strategic priority, resulting in lower inventory costs, increased customer retention, higher barriers to entry and higher sales." A marketing executive from a Fortune 100 technology firm says, "Understanding what your customer needs to be successful is even more important in a tough economy than when things are going well. It's due to our CRM strategies that we are able to do a much better job of identifying the needs and the hurt points of our customers."

Priorities are different now

Our respondents are quick to point out that their investments are taking a different turn than they did a few years ago. For example, compared with previous broad implementations, 36% say they are pursuing smaller projects that demonstrate incremental ROI, supporting our theory above.

Similarly, 25% say they are focused on getting more from existing investments through steps such as additional training. And while 11% say the current economy is forcing them to scale back or delay planned investments, a larger group (16%) say they plan significant CRM investments in the next 12 months.

Asked to evaluate the statement, "CRM strategies are essential in a weak economy," an impressive 88% of respondents indicated they either agree (36%) or strongly agree (52%).

In difficult times, retaining existing customers and increasing individual share-of-customer takes priority over acquiring new ones. Greater cross-selling and up-selling ranked as the most important goals respondents are trying to achieve, with 18% placing them at the top of their priority list. Increased loyalty and reduced attrition ran second (15%), while increased share-of-customer was third in importance, with 14% of respondents including it in their list.

Clearly, the companies that responded to our survey understand that locking in valuable customer relationships is a strategic capability. And they also see that generating ROI from their customer initiatives can and should be done incrementally. If CRM is a journey and not a destination, then your initiatives should be constantly evolving, and you should reap continuous value and benefits from everything you do -- measurable in the short term as well as long term, and in enhanced revenue as well as cost reduction.

These are the themes in the new, updated version of our white paper, "CRM in a Down Economy...Revisited: Weathering the Economic Storm Through Customer Relationship Strategies."

To read more articles like this one, visit Peppers and Rogers Group's Web site at

All materials copyright 2003 Peppers and Rogers Group - 1:1 Marketing.

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