Trends in the Demand Chain

Increased opportunities for customer interaction create new operational challenges for Sales, Marketing and Service  the Demand Chain. Organizations aiming for the same efficiency they previously achieved in the supply chain must look beyond technology...


Increased opportunities for customer interaction create new operational challenges for Sales, Marketing and Service — the Demand Chain. Organizations aiming for the same efficiency they previously achieved in the supply chain must look beyond technology to the true foundation of creating and managing demand: knowing the customer, and making operational choices and adjustments that balance the needs of the customer and the business.

The power of the customer is growing. Thanks in large part to the Internet, customers are smarter — or at least better informed — than ever before, dramatically shifting the balance of power. Increasingly, they are intolerant of poor service, constrained choices and inflexible pricing.

But information exists on a two-way street. Organizations are gathering more data about their customers than ever before, and some are learning to use it to assess customer value, change the offer and differentiate service.

The context for this evolving power struggle is the increased complexity of reaching the market. Interactions involve more channels than in the past, from stores and catalogues and the telephone to the Web, online B2C marketplaces, and wireless devices. Loyalty is harder to capture, and retain: In some segments, there is no issue more critical than customer churn.

Achieving customer intimacy and profiting from it presents major challenges. Key among them: turning data into actionable information; creating a unified customer profile; integrating processes across functional departments while simplifying those processes; and speaking with a consistent and informed voice across all sales, marketing and customer care channels.

Let's be realistic: A truly reversed marketplace — where customer preferences directly drive manufacturing, and the customer makes decisions based on perfect information — is a long way off. Economic value can be captured quickly, however, by companies that commit themselves to better understanding of customer needs and preferences, and tightly integrate that insight with corporate goals. Linking those two agendas — those of the customer and the enterprise — to improve the customer experience and expand customer value is a core task of effective demand chain management.

A Growing Focus on Demand

The value chain, a concept described almost 20 years ago by Harvard Business School's Michael Porter, is the network of interlinked activities that a business engages in to make and sell its goods and services. Some of those activities — the supply chain and operations — have been closely studied and re-engineered over the past 10 years. Dell Computer and Coca-Cola, among others, have used their supply chains as a strategic differentiator despite the commoditized nature of their products.

However, the demand chain — outbound logistics, sales, marketing, and customer service and support — has come under the same close scrutiny more recently. This sequence is understandable: sales processes are not as precise as procurement, customers are not inventory and insight into their behavior has not been easy to acquire. Demographic analysis and segmentation cannot address newer, dynamic variables such as multiplying customer choice and general customer impatience. Demand chain improvements have typically been single-threaded efforts — such as a call center initiative or implementation of a data warehouse — usually justified by internal cost reduction.

But the demand chain's moment has arrived, thanks to new tools, powerful networks and rapidly expanding customer expectations. The Internet has played a key role, empowering customers and creating new competitors and additional complexity. The challenge now is how to collaboratively manage the customer life cycle across a growing number of channels — wholesale and retail, Web and wireless, direct and indirect. A large products company such as Hewlett-Packard, for example, must synchronize tens of thousands of sales partners who generate a significant share of annual revenues.

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