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 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.

The fact is that we have become adept at adding channels by which to reach the customer, but much less effective at using those channels to fulfill the customer expectations they create — or to provide the efficiencies for which they were initially created. The motivation to add a channel is more likely to have been cost of sales and distribution rather than improvement of the customer experience.

New Channels, New Capabilities

A single-threaded, or piecemeal, approach to the demand chain risks the creation of islands of data, uncoordinated processes and incompatible technologies. Given the level of competition most enterprises now face, they must plan to integrate data and processes, and synchronize sales, marketing and service channels.

Early sales force automation (SFA) solutions focused on productivity tools for the direct sales force or call center, linking direct and indirect sales partners required a cost-effective communications network external to the enterprise. That network is now available, making it possible for sales partners to collaborate on quotes using product, pricing and availability data provided by the enterprise resource planning (ERP) system. The same collaboration can be extended to corporate and outsourced service teams, creating a single view of the support provided to any given customer.

Indirect channels have never been more important: the Yankee Group estimates that in the high technology sector these customer touch points are responsible for between 60 and 70 percent of sales. In retail commerce, Forrester Research reports that customers who transact via more than one channel also buy more.

Synchronizing the demand chain means developing new capabilities, including:

  • Real-time Data Access: Capturing customer data during interactions; immediate access to order and service history; and the ability to personalize responses to increase sales and provide better service

  • Synchronized Marketing: Better coordination of marketing campaigns and assets across departments, divisions and agencies; coordination with IT on analytics, including return on investment (ROI) and customer profitability; and coordination of customer interactions with sales and customer service

  • Partner Relationship Management: Collective targeting of customers; coordinated definition of marketing opportunities; and the ability to assess partner performance

For companies managing a variety of channels to the market, a vital question to answer is, Who owns the customer relationship? Is it the marketing function, which may lack the analytical capabilities it needs to quickly design and manage campaigns? Is it a complex set of sales channels comprising direct sales as well as value-added resellers or franchises? Or does your business most frequently interact with the customer through support functions? The best answer is the enterprise and its functional components. Understanding the customer holistically requires data to be shared not only within the enterprise but in many cases with enterprise partners. Of course, sharing data is also likely to require extending workflow across organizational boundaries, and many customer relationship management (CRM) implementations to date have left significant process gaps between zones of automation.

Without effective business processes, data management and analytics, organizations lack visibility into hidden opportunities that could contribute new revenue. They undersell to target customers and fail to identify potential new segments. Without effective process integration, efficiency is likely to suffer and customer satisfaction will not reach the high levels required for loyalty.

Set the Strategy. Then Focus on Operations.

The promise of CRM keeps it on today's corporate agenda, but the early perception that CRM is a set of technology applications is fading fast. Repeatedly, organizations have experienced under-performance or downright failure when demand chain improvement relies too heavily on technology without first addressing operational improvement and go-to-market realities. Software vendors themselves, recognizing this realistic shift in the market, are switching to solutions that address business process integration within focused vertical markets.

As we have noted, the insight required to succeed in this demanding environment depends on data; so, too, does customer-centric process definition and redesign. With a multiplicity of customer types and behaviors, today's organizations are beginning to develop key customer personas and relationship scenarios to support revenue goals and cost-reduction targets, and to prioritize the tasks that will most effectively place the customer at the center of the business. Scenario-driven processes also simplify decisions on whether and when to invest in the technologies underlying CRM.

Building a customer-focused demand chain is not rapidly achievable any more than it is a single, static goal or a technology solution. It is a sea change that requires CEO sponsorship, since the CEO is — or should be — a company's chief strategist, and winning customer loyalty is, above all, a strategic exercise. It requires a multi-year program to inculcate a customer-centric attitude throughout the organization, supported not only by processes but also by organizational structure and employee rewards.

Having said all that, a synchronized demand chain is not an all-or-nothing proposition. Data management and customer insight, channel and process synchronization, and integration of the underlying technologies can be broken down into modular, achievable tasks. For example:

  • A CRM Readiness Assessment, CRM Results Audit, or a CRM Road Map project to identify areas of potential improvement that will provide the best return

  • A Sales and General Administration cost-reduction program to identify cross-organization and cross-channel synergies

  • A data integrity project as a first step toward creating and maintaining an enterprise customer database

  • A sales process assessment to identify new opportunities to communicate with customers

  • A customer experience audit of all touch points to assess opportunities in employee automation, collaboration automation, and self-service automation

  • Marketing process automation to manage, measure and justify campaigns

These and other opportunities can be identified and implemented within an overall program of customer strategy and CRM implementation that is guided by consistent principles:

  • Identify the customer, the customer's needs and the preferred way to satisfy those needs

  • Understand the user, the user's needs and the user's operational context

  • Identify enterprise goals and a plan to achieve them that integrates customer and user goals and behavior

    These principles move us away from an easy assumption that technology alone can deliver better sales revenue, marketing effectiveness and customer service. Technology investments are more likely to pay off if enterprises first align their people and their processes with customer needs through a series of incremental demand chain investments, justifying and prioritizing each increment by improved efficiency and higher customer profitability.

    About the Author: Stan Martin is CEO of Adroit Consulting (www.adroitconsulting.com). Prior Adroit Consulting, Stan was president and COO of InstallShield Software Corp. Before InstallShield, he was COO of Whittman-Hart Inc. Stan's early career included senior management positions at Ernst & Young, LLP; Seimens-Nixdorf AG and IBM.

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