By David Sims
David at firstcoffee d*t biz
The news as of the second cup of coffee this morning, and after that hellaciously loud Turkish Air Force jet flyover — one wonders why central Istanbul is a flight path for such events — we’re back to the music, which is Tim Hardin’s Tim Hardin 2 album:
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A recently-released study bears your attention:
The University of Pennsylvania’s Wharton School marketing professors Jagmohan Raju and John Zhang, and Wharton doctoral student Upender Subramanian, have found that the all-too common CRM practice of firing low-value customers “may actually decrease firm profits,” and that even “trying to increase the value of these customers may be counterproductive.”
The conventional wisdom is that low-value customers, the scofflaws who don’t spend all that much money on your services or products but who are always on the phone with questions and complaints, are net losses which, if they can’t be upgraded, should be axed.
Much CRM technology goes into identifying such slugs, and to prod them with better privileges, poke ‘em with discounts or other inducements to see if there’s a high-value customer butterfly hidden in there somewhere.
Raju and Zhang give us new buzzword, customer value-based management to describe this notion. Their customer analyses, to nobody’s surprise, show that usually it’s a small proportion of customers who are responsible for a large percentage of profits. And of course, slugs abound.
But Zhang, Raju and Subramanian decided to analyze CVM in the context of a competitive environment. They find that okay, if you don’t have much competition in your industry you can get away with firing bad customers. Anybody involved in the American hazelnut industry may stop reading now.
For the rest of you, who do operate in a competitive industry, “firing low-value customers can be counterproductive,” the study finds, since “companies that rid themselves of low-value customers, or take steps to turn low-value customers into high-value ones, leave themselves open to poaching by competitors.”
“What our analysis tells us is companies make money, in part, by confusing their competitors about their customers,” Raju said. “If you make your customer base transparent by firing your low-value customers, competitors will hit you hard because you will be left with customers of one type.”
Even throwing inducements at your slugs to change their sluglike behavior, such as teaching them to spend more or to use low-cost support channels, backfires, the Wharton researchers found: “If you make low-value customers more valuable, this can also be counterproductive because it also encourages your competitors to poach more intensely,” Raju said.
So what to do? “Improve the quality of your high-end customers at the same time that you keep your low-end customers, but find other, cheaper, ways to manage the low-value customers, such as encouraging them to use automated phone-response systems or the Internet or offering minimal discounts or other benefits,” said Raju.
Because, after all, they’re your slugs.
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The Michigan Educational Credit Union has selected Open Solutions Inc.’s The Complete Credit Union Solution, a relational core data processing platform for credit unions, to address its enterprise-wide data processing needs.
Open Solutions sells technology for financial service providers.
Based in Plymouth, Michigan, Michigan Educational Credit Union has approximately $500 million in assets, six branches and serves more than 50,000 members. A long-time client of COWWW Software, a business unit of Open Solutions Inc. and provider of an information archive and delivery system for financial institutions as well as Open Solutions’ CyberBranch core product, the credit union cited Open Solutions’ “commitment to technology” and the ability of TCCUS to meet its needs as the primary reasons for its expansion of its relationship.
The credit union has decided to run TCCUS out of Open Solutions’ service center in Cherry Hill, New Jersey.
“Our long-standing relationship with COWWW Software (which was acquired by Open Solutions in 2006), was also a significant factor in our selection process,” said Mark Pugliese, chief financial officer for MECU. Pugliese noted Open Solutions’ conversion experience with credit unions of all sizes as another deciding factor.
The Complete Credit Union Solution is built on an Oracle relational database designed to be an open architecture application, creating the flexibility service-oriented financial institutions like. It helps credit unions streamline both front and back office processes and creates a centralized view of members, employees and business partners.
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PacificNet, a vendor of gambling and mobile game technology, e- commerce, and Customer Relationship Management in China, has announced it will present at the 10th Annual ICR XChange Investor Conference January 16, 2008 at 1:00 P.M. Pacific Time at the St. Regis Monarch Beach Resort in Dana Point, California.
The presentation will be webcast live at: www.corporate-ir.net/ireye/conflobby.zhtml?ticker=W134444&item_id=1732783.
For more info on the conference, please see http://www.icrinc.com/web/icrxchange-us-about.php.
Victor Tong, President of PacificNet, said the vendor is “excited” about their gambling strategy and expanding gambling markets in Asia and Europe: “We hope that those not able to attend the conference will tune into our webcast to learn more about our company.”
In early December PacificNet announced that it had signed a definitive agreement to acquire 100 percent ownership of Octavian International Limited, a worldwide supplier of gambling technology. Octavian maintains worldwide headquarters in Guildford, United Kingdom.
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And the recognitions just keep rollin’ in for Sage Software: The CRM vendor has announced that consulting firm SellMoreNow.com has named ACT! by Sage 2008 and Sage SalesLogix as winners in its 2007 “Willy” Awards program.
ACT! by Sage 2008 (10.0) was chosen as Best On-Premises Small Office/Home Office Solution, and Sage SalesLogix v7.2 was honored as Best On-Premises Mid-Market CRM Solution.
“Sage Software is the only company to ever win a Willy award in two distinct market segments,” said Rich Bohn, SellMoreNow.com’s irrepressible president.
SellMoreNow.com Willy awards, inspired by dialogue from Arthur Miller’s play Death Of A Salesman — ten points if you know Willy’s last name — are presented to contact management and CRM products that “genuinely help salespeople take care of their customers and achieve their sales dreams,” according to Bohn.
Products honored received top scores in SellMoreNow.com product evaluations during 2007, measured against criteria including functional breadth and depth, ease of use, and customization capabilities, among others.
Huh? No, it’s not “Wonka.”