Irish Businesses Must ‘Even the Odds’ During Recession

In Tough Times, Survival Depends on Personalised Marketing

Dublin, Ireland, 18. Feb. 2009 -  Irish businesses need to provide compelling customer experiences and dynamic pricing if they are to survive the economic downturn, a global expert in customer intelligence and profit optimisation told Irish businesses today. According to SAS Ireland, companies that combine better customer experience management capabilities with a customer centric approach will gain a decisive competitive advantage in the current climate. Steve Pinchuk, SAS’ Global VP of Profit Optimisation Systems, who was in Dublin today, said that up to 50% of any business’ customer base will actively explore switching supplier as the recession takes hold over the next 12–18 months. “What will your clients do if your competitors decide to lower pricing in order to maintain or even steal market share?” asked Mr. Pinchuk. “Companies that fear going out of business will do just about anything to maintain their hold.”

According to Pinchuk, who is responsible for the direction of SAS’s global solutions and systems that optimise profits, “Many Irish companies are unprepared for the avalanche of customer desertions that inevitably occurs during a recession as greater numbers of customers question prices, value and service. Businesses must focus on customer retention and pricing as a priority because acquiring a new customer can cost 6–7 times more than retaining an existing customer.”

SAS maintains that, over the coming months, companies in every sector of the economy will be forced to redefine their customer strategies and will need to deliver a more personalised service with prices based on knowledge of individual customer requirements and patterns of behaviour. Pinchuk notes that, as the 4-P’s of marketing - product, price, place and promotion - become increasingly tactical, more companies are embracing the 3-I’s – customer insight, interaction and improvement – as the key to growing long-term profitable customers. This change in focus becomes critical during a downturn as businesses who boost customer retention rates by as little as 5% see increases in profits ranging from 5% to a staggering 95%.

            “No matter how good a company feels their prices and personalised marketing approach are, there is always room for improvement. During the boom years, many companies became complacent and less customer focussed. These businesses must now take pre-emptive action to consolidate their product offering and invest in crafting more relevant prices and customer experiences to improve loyalty. To do that effectively, you need deploy predictive analytics to obtain information and insights about your customers – what they do, like, need etc – so you can in effect predict from their purchasing trends future needs and, of course, be there with that new offering.”

 “Companies are doing a good job gathering customer data but are falling short at creating proprietary predictive insight from it. You cannot manage the customer experience if you don’t know what your customer is likely to buy next or if they are likely to switch to a competitor. Looking around the curve and predicting future outcomes is where the value of customer insight lies.”

            “In today’s environment, price is key. SAS gives you the flexibility to build and change pricing and product bundles to develop and sustain a personalised approach for customers. This means you have customer-focused product and pricing management, which results in longer, more profitable customer engagements. We help companies match the price with the value to the customer - customer centric pricing. For example, the price you are willing to pay for a hotel room when you are travelling on vacation might be very different compared to travelling on business to the same city.”

Pinchuk maintains that, as part of any solution, Irish businesses must adopt more analytical approaches to pricing and marketing initiatives in order to help them understand customer behaviour, preferences and buying patterns. This can only be done through automated and tailored marketing campaigns and pricing that enable businesses to provide enhanced customer focus to individual customers.

            “In most companies, revenue management, pricing, customer relationship management and distribution stand alone as separate islands or departments with separate managers and, in many cases, separate goals, databases, analytical processes and skill levels.”

Revenue management (RM) can be used to determine a customer’s sensitivity to price versus service and their price elasticity across the continuum between these two polar attributes. Customer relationship management can be used to gather and analyse a customer’s historical value, and RM can use that to forecast demand and target customers as individuals as opposed to mass market segments.

Pinchuk advocates, as a first step in this long journey, the adoption of a profit optimisation system using RM and pricing theories and tools to integrate these areas with customer intelligence and marketing. The ability to understand the tactical, strategic and lifetime values of customers using predictive analytics will allow companies to determine who to spend scarce marketing resources on and what prices are optimal.

            “Eventually, a single system must combine all the data from these separate areas, under the leadership of revenue management and pricing experts, to create a new central profit command centre. All these islands and their data should be aggregated, integrated, planned, tracked, analysed and controlled from one interface by a dedicated profit optimisation team. This integration of all the demand influencing areas of a company will not happen quickly. However, it is a goal that will bring considerable additional profits to companies and provide dedicated and standardised command, control, communication and intelligence (C3I).”

            “Does anyone doubt that companies that use predictive analytics and have the best understanding of their customers and their future behaviour will outperform their competitors in these uncertain economic times?” asked Pinchuk.

            “Companies who invest in their future today are those that can come out of this recession with an improved market share and customer loyalty while maintaining as much profitability as possible through the use of dynamic and customer centric pricing. SAS is one of the only companies that has solutions in all of these areas.”

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