What's the CRM hurdle for manufacturers?
Posted May 27, 2002
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Given the difficult times, manufacturers have continued to turn the screws on their cost control efforts. Manufacturing floors are now measured in minute fractions of a penny, and money allocated for the scrutiny of expenses almost rivals the expense itself. Although this has saved millions, there still exists a big blind spot in manufacturing spend, one that can save tens of millions of dollars. It's in manufacturers' often-ignored area of marketing. How much do manufactures spend on marketing? Plenty. Manufacturers spend between 2 percent and 20 percent of their revenues on marketing with the bulk of it completely discretionary in nature. With such a wide variance in spend, we should expect to have tight controls over how the money is spent and a clear understanding of the result. Should, but don't. In a recent survey by Deloitte Consulting, less than 4 percent of all manufacturers believe they have control over their spend on marketing. In fact, we've found that most manufacturers determine their marketing budget not based on a portfolio of programs that require investment but rather based on last year's budget, regardless of effectiveness. So what should manufacturers do? Clearly, spending megabucks on CRM systems is not an option - and quite frankly, not the correct solution for solving the marketing spend problem. Manufacturers should perform a "back-to-basics" look at themselves from a marketing perspective. This includes the following steps: 1) Inventory all marketing programs. List, in one place, and with one total, how to get customers through investment. This includes everything from pricing discount programs, advertising campaigns, sales incentives, service options, etc. 2) Inventory all operational "enablers." Get a comprehensive layout of all of the information systems, people, and process that, over the years, have been assembled with great effort to support all programs. 3) Document a go-to-market strategy. Articulate, in a single set of unambiguous statements, how corporate intends to identify, acquire, and keep a selected group of well-targeted customers. 4) Get rid of what doesn't fit. If manufacturers compare what they're supposed to do (strategy) with what they are doing (programs) and capability to get it done (operations), it becomes clear very quickly what doesn't fit, and quite frankly, what can be immediately thrown out. We have a number of examples where organizations saved tens of millions of dollars by realizing that some of their advertising spend (created with the best intentions) was reaching their worst (and most unprofitable) customers. Or by finally calling into question the real payoff of that so-called "strategic pricing program" that over the past five years, has resulted in negative profitability and no market share. The good news with this approach is that savings can be accomplished not by spending more money over long periods of time with heroic efforts and hopeful results, but by stopping -- today -- what doesn't make sense.
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