V.B.4 Multiple and Diverse Customer Management
Most businesses have more than one external customer, each with their own needs/expectations for the product or service being purchased (see Chapter 16, Section 2). To meet the needs/expectations of its customers, an organization must first understand its own business. This begins with knowing what it takes, including costs, to produce the product or provide the service being offered. Next, the organization needs to determine the needs and expectations of specific customers or customer segments. This can be done by studying the industry, for example, by forming focus groups in which industry representatives express their needs. An organization should be aware that customers purchasing the same product might have very different needs.
As an example, the supplier of bookkeeping computer software could have customers from the medical device manufacturing industry, nonprofit foundations, and educational institutions. Each of these types of customers will obviously have different requirements, even though certain features of the software product might perform well in most industry categories. The medical device manufacturers would have special product traceability requirements to consider. The not-for-profit foundation needs complete security over sources of contributions. Educational institutions require features to manage their costs and delayed revenue related to student loans.
In addition to different product requirements, customers might have varying delivery requirements. Some customers might need truckloads of product but are flexible with delivery lead times, whereas others might want small volumes of material delivered just in time. A supplier must weigh these types of logistical problems and consider the additional costs that could be incurred in either case. Other customers might require the same product, but at different stages of completion. For example, one customer might prefer to purchase material that is less finished, lower in purity, and so on, because these materials meet its needs at the best value. When selling partially finished product, suppliers might find it necessary to modify their pricing structure to prevent others from buying and finishing the product and becoming strong competitors.
Organizations need to evaluate each potential sales opportunity to make an informed decision as to whether it is worthwhile business to pursue. Specifically, they should ask, “Does this potential customer fit well with our existing service processes and capabilities?” Once management has decided on which areas to focus, customers can be ranked so that research efforts can anticipate the needs of key customers. Generally, key customers are those that generate the most profits or have a high potential for generating profits, and/or are high-visibility organizations. The value of a customer should be projected over the long term because business with a customer can lead to other business with that customer or to a referral of a new customer.
Many times, potential or real conflicts arise between organizations and their customers. Having multiple customers who compete with one another can also present special challenges for a supplier. Conflicts can result when delivery schedules overlap or when material or other resources are in short supply.
Consider this example: A supplier of products to more than one automotive customer may find it has to take special precautions. For each such customer it has to carefully train its people and segregate product during processing in order to maintain the level of security imposed by each competing customer.
Establishing a relationship based on trust is critical to avoiding or resolving conflict with a customer. A customer must know that confidential or proprietary information is safeguarded from competitors. A supplier should have procedures for protecting proprietary information, such as by limiting access to drawings and specifications and restricting competitors’ access to a customer’s product. An organization without these provisions faces legal liability from patent or copyright infringement or violations of a contract with the customer.
Quality Management BOK Reference
V Customer-Focused Organizations
V.B Customer Relationship Management
V.B.4 Multiple and diverse customer management
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