The Importance of Channel Optimization Towards Profitability
By Barton Goldenberg
All organizations at one time or another have dealt with happy and unhappy customers, profitable and unprofitable customers as well as ‘high maintenance’ and ‘low maintenance’ customers. What if an organization had a magic wand and could optimize the channel(s) that each of their customers uses such that each customer gets to use their preferred channel(s) while the organization get to maximize the profitability of each customer by encouraging them to use the optimal channel(s) based on the organization’s cost-to-serve the customer? Sound enticing? I hope so since beyond a doubt channel optimization is the most important area that impacts an organization’s profitability. Here is more detail on what is channel optimization and how it works.
A key component towards channel optimization – as noted in the diagram above – deals with achieving a balance between fulfilling each customer’s desired channel preferences versus achieving the organization’s desire to secure the lowest cost-to-serve channel option for each customer. Organizations will have to take the necessary steps to learn which channel(s) their customers prefer to use to engage with the organization (e.g., email, face-to-face meetings, telephone calls with Contact Center personnel, direct mail, dialogue on public or private Social Media channels, in-store face-to-face discussions, mobile apps, and your Website/eCommerce portal)? To secure this information, organizations need to perform analysis of their customers’ channel preferences today – as determined by their current purchase behavior with the organization
Regarding cost-to-serve, organizations need to ask these two questions: Does the organization know how much it costs to serve each customer via their preferred channel(s)? And is the organization making or losing money serving their customers via their preferred channel(s)? Determining cost-to-serve requires careful analysis of all relevant channel financials for existing and planned channels. While this can be a challenging exercise since many organizations do not track their metrics, channel optimization cannot be achieved without this input.
In my next blog post, I will discuss the challenges of finding the right balance between delivering desired customer channel preferences while simultaneously driving customers to the lowest cost-to-serve channel that is acceptable to them.
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Barton Goldenberg, is the founder and president of ISM Inc., customer-centric strategists/implementers serving best-in-class organizations globally. As a CRM leader for 30 years, he was among the first three inductees in the CRM Hall of Fame. Recognized as a leading “customer-focused” author, his latest book, The Definitive Guide to Social CRM, is hailed as the roadmap for Social CRM success. Barton is a popular speaker on “maximizing customer relationships to gain market insights, customers and profits”. He is a long-term columnist for CRM Magazine and speaker for CRMevolution and frequently quoted in the media.