Survey Reveals Renewed Corporate Focus on Customers

Oct. 1, 2004
Grizzard Performance Group, an enterprise within Grizzard Communications Group, a direct marketing firm, recently announced the results of an independent

Grizzard Performance Group, an enterprise within Grizzard Communications Group, a direct marketing firm, recently announced the results of an independent survey conducted with senior-level marketing executives in large and mid-cap companies. The survey, commissioned in May and June of 2004, found that nearly twice as many executives across all industries and company size say they are devoting more resources to customer retention over customer acquisition (58 percent to 30 percent).

This survey clearly communicates a shift in corporate America. The results of a similar senior-level marketing executive survey in 2002 revealed companies were devoting more resources to acquisition over retention by a margin of almost two to one.

What is also revealed in this new survey is that companies are distinguishing customers by value and allocating marketing budgets to customers based on that unique value. Seventy percent of Fortune 1000 companies say they are doing this, while 74 percent of mid-cap companies use this strategy. Further, of the companies in the survey that remain devoted to customer acquisition over retention, 67 percent reveal that they, too, are distinguishing customers by the value of the interaction they receive from customers.

The troubling news is that the findings also reveal that companies are inaccurately defining customer value. The No. 1 customer valuation criterion companies rely on is annualized gross sales, followed by number of unique orders. Customer profitability (annualized or lifetime) ranks a distant third as a valuation criterion when it should be the primary focus for companies seeking to optimize corporate resources.

According to Michael King, group vice president of the Grizzard Performance Group, "This misguided notion that greater sales equals greater value clearly shows that we're still struggling in the wake of corporate sale's takeover of the marketing function when the bottom fell out four years ago. But as our study revealed that the sales acquisition binge has subsided, these findings also prove that corporate marketing is gaining control, once again, and moving companies in the right direction."

Further survey findings reveal that:

• Companies in the South and West are almost twice as likely to favor retention over acquisition as companies in Northeast and Midwest.

• High-tech companies are almost three times as likely to devote more resources to retention, followed by manufacturing and service firms.

• Service firms were found to be more than five times as likely to distinguish and base budget around customers providing different value to their company, followed by high-tech companies and manufacturing.

• The smaller the company, the more likely the company was devoting more resources to retention than acquisition. However, the larger the company, the more likely it was distinguishing customers based on value. (While many may surmise that the resources needed to distinguish customer value places it out of reach of the SME market, it hinges more on comprehension than funding.)

• When asked to define customer profitability, the majority of companies (39 percent) cited annualized profit, followed by an increasing profitability trend (24 percent). Lifetime value (historical or predictive) ranked a distant third at 16 percent, proving further that corporate marketers, in general, need help in properly defining and analyzing customer value.

• Almost eight out of 10 executives (76 percent) feel that things are positive and going in the right direction in corporate America.

King sums up the findings, "The fog of maximizing market share has begun to dissipate, and revealed that corporate marketers in 2004 are clearly focused on customer valuation as the smarter way to maximize profits. This not only validates the need for customer profitability management [CPM] in optimizing the return on human and fiscal corporate resources, but proves that, overall, marketers are taking positive steps for employees, shareholders and the global competitiveness of corporate America."

By integrating customer data analysis with qualitative customer findings, CPM delivers a 360-degree view of customer value providing corporate management the insight needed to more optimally allocate resources against one of the most important corporate assets customers. CPM answers marketers' requests for a business strategy to manage customers and optimize long-term value that customer relationship management (CRM) has often failed to deliver.

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