With the current downturn being described by economists as the worst recession in over 60 years, having a clear understanding of current market conditions and making customers happy have become more important than ever.
Jeremy Sim, Asia-Pacific product manager for supply chain intelligence at SAS, noted that understanding the customer is the essence of supply chain management. "Once you can forecast demands accurately, you can optimize your production and supplies," Sim said in an e-mail. "In fact, some organizations through improved segmentation, are realizing it is their after-sales service that brings in the profits."
Vu-Thanh Nguyen, research analyst at Access Markets International Partners (AMI-Partners), said it is easier to sell more to your current customers than to a new one.
"If your current customers are happy with you, they will come back, and sometimes with their friends as well. If you make them dissatisfied, they will spread the word, and you may never know what is going to hit you," Nguyen said.
Gerald Tan, business director at SPSS Singapore, added that with customers tightening their belts, competition among manufacturers has intensified. "Companies, therefore, cannot rely only on product differentiation to sustain customers' interest, but they need to maintain their relationship with choice-spoilt customers by enhancing customer care," Tan said in an e-mail interview.
Furthermore, studies have shown that customer acquisition can cost five to 12 times more than retention, and that improving the customer retention rate by just 5 percent can increase an organization's profitability from 25 to 100 percent, he said.
"In recognizing the higher returns that customer retention brings, organizations are putting greater emphasis on enhancing customer relationship with their existing clientele so as to reduce customer churn," he added.
Michael Warrilow, managing director of analyst firm Hydrasight, said it is becoming essential that manufacturers service and support customers via multiple channels, often during a single transaction, so as to maintain or improve customer satisfaction.
"Organizations are looking to a range of measures to achieve this, for example, through self-service, chat and auto-responders," Warrilow said. "This hasn't actually changed as a result of the economic downturn, but has become increasingly important as a differentiator for those organizations that do it well."
According to Tan, datamining applications that create attrition models can help manufacturers identify customers who are most likely to defect. "This predictive intelligence is automatically captured and deployed across the enterprise, so that the relevant departments can develop and roll out timely strategies to keep their valuable customers from leaving," he said.
In addition, predictive modeling helps the company to minimize costs by directing campaigns to prospective customers who are most likely to respond, and boost profits by focusing on the prospects who are likely to be profitable customers.
"Adding this predictive element makes customer relationship management (CRM) significantly more productive and profitable, helping to safeguard an organization's existing market share and attracting the right customers who add value to the bottom line," Tan said.
See things the way they are now
Traditionally, manufacturers have looked to business intelligence (BI) applications to better understand what has already passed. However, the current "unforgiving" economic climate has pushed them to realize that they need to preempt probable cost-draining situations such as oversupply, instead of reacting to business problems after they have occurred, he said.
Tan added: "Predictive analytics enable manufacturers to take a pro-active step in examining what is likely to happen, and to make more timely decisions and take incisive action to rectify potential business problems such as production downtime and product defects before they hurt the company's bottom line."
Said Sim: "Past economic issues provide insights to our current predicament as long as we can co-relate the multitude of variables on hand. A good analytics tool goes beyond giving you a view of the past and present. It tells you what can happen…so you can make better decisions today."
Saj Kumar, vice president of SAP Asia's discrete manufacturing industry solutions group, said new BI tools analyze the current situation by looking at what is happening in real time as opposed to the traditional use of BI that reviews the past.
So if a manufacturer wants to reduce costs, for example, real-time BI analyses can highlight the company's areas of spending. With this information, the company can put the necessary processes in place, Kumar explained.
"The second aspect is...on the revenue side, you have to look at how you bring in money," he said. For this, Kumar added that real-time BI can help companies immediately determine which products continue to bring in revenues that drive profits for them. With this information, they can devise marketing strategies such as product bundling to drive overall demand of their goods.