Pricing power is hard to come by in a competitive marketplace, and this is especially true in a recession. In order to defend profit margins, companies must find every way they can to add value. This means that besides providing their usual products or services, companies should make themselves more valuable to their customers by providing value-added customer service. Thorough use of CRM software can help.

CRM applications have the potential to do a great deal more than act as a passive storehouse of customer contact information. Focusing on the right data can provide insights into how customers use the companys product or service. Actively mining that data can use those insights to think along with customers and create a closer relationship.

The Challenge to Pricing Power

The message about pricing power is written in the numbers. The year-over-year change in the Consumer Price Index had slipped into negative territory by the end of 2008. Low inflation is a good thing, but deflation means a whole new set of challenges. In this environment, companies have to contend not only with falling unit volume, but with price reductions as well.

Customers, in turn, come to expect price concessions, and in many cases are forced by their own adverse circumstances to insist on them. One way to turn this cycle around is to take the focus off of pricing by providing more value for the money.

Six Ways CRM Applications Can Help

Companies can use their CRM software to compile and act on data which can make it easier and/or more cost-effective for customers to buy from them. CRM applications can help businesses:

1. Anticipate Order Schedule. Anticipating customer order schedules can save customers the time and trouble of reordering, while helping to lock in continued sales. Analyzing past buying patterns or even linking into customer inventory data are ways of doing this.
2. Provide Peer Group Comparisons. Companies pay handsomely for studies on peer group behavior. Providing free information on typical use of a companys products not only adds extra value, but it also suggests new uses to some customers which leads to additional sales.
3. Bill Direct to Bank. Getting authorization to bill directly to customer bank accounts saves those customers an accounting step, while expediting payments to the company.
4. Be Sensitive to Customer Financial Cycles. Customers who are sensitive to financial reporting cycles appreciate billing schedules that just miss the end of a period by a few days, as opposed to those which hasten the recognition of expenses.
5. Offer Discounts for Advance or Volume Orders. If customers are going to insist on discounts, a company can at least provide them in a way which locks in or increases sales.
6. Identify Cost-Saving Alternatives. Given that customers are going to require lower prices, it is better for margins to provide them via lower-cost alternatives, rather than suffering a hit on higher-cost items.

Whether pursuing new CRM software or seeking to get the most out of existing CRM applications, companies should think beyond assembling data they might find useful. Using CRM software in a way that is also useful to customers can create the added value necessary to defend profit margins.

Source

U.S. Bureau of Labor Statistics