Deliver Corporate Strategy through Credit Management

By O'Sullivan, Mike | Business Credit, June 1992 | Go to article overview

Deliver Corporate Strategy through Credit Management


O'Sullivan, Mike, Business Credit


There are times when it is painfully obvious that a company's strategy is not working. Sometimes they go on television to try reassure customers. Another ploy is to form a "customer care" department.

The trouble is that customer care department often do more harm than good. This is because they are hurriedly conceived, half-baked, and staffed by untrained personnel.

Recently, I came across an agreement form by the customer care department of a national freight company. There were only six lines on the form relating to the customer. Of these, the customer contact and company names were misspelled, and the number of the street was incorrect.

After a mistake, the quality of communication with customer is vital to retaining goodwill and future business. The mere fact that there is communication is not good enough. Compelling reasons to get it right are:

* Up to 90 percent of disappointed

customer do not complain or return.

* It costs five times as much to win a new

customer as it does to sell to an existing

one.

Customer care should not be the duty of one department. Every individual in the company should get involved.

What is needed o is a monitoring program which focuses on the crucial issue of providing customer needs. The credit department, with experience in handling customers and their money, is in the best position to take the lead.

The most successful customer monitoring programs have several features in common:

Design - the design is simple and direct and focuses on listening to customers.

Practice - the program is action biased; act now, not later.

Perceptions - getting it right is paramount, as opposed to sluffing off customers with a second rate answer.

Long Term - integrating customers into the company at all levels of contact binds the business partnership.

Quality - the program acts as a quality control mechanism, delivering customer messages to the individual who can help most and whose work the customer may be questioning, shifting the quality responsibility onto that individual.

Motivation - customer complaints and advice are means of making improvements rather than the basis for punishment-the only losers are the competition.

Clarity - the reasons why the program is necessary are discussed with all company personnel, who are asked to contribute to the program make-up.

Support - the program has the full backing of the board, which discusses its progress as part of its regular company review.

Such programs pinpoint ineffective company practices at an early stage in their development and also pinpoint the means by which these practices can be eradicated.

Customer care departments are mistakes in management thinking caused by the need to do something rather than nothing (when to do nothing would have been better) and the inability to grasp the real issues. The credit department deals with the real issues every day, and is in the best position to take the lead to monitor the company's response to customer needs. The credit department can help to deliver corporate strategy.

Marketing and Credit Management Strategy

For those of you, especially marketing and financial board members, who think of the credit department as a backroom extension to your accounts, the following may be something of an eye-opener.

For a start, is is a sobering thought that according to a recent estimate, 25 percent of assets of U.S. companies is tied up in trade debts. Or put another way, customers control 25 percent of your assets, the most flexible asset--cash. For U.S. companies in the United Kingdom, this figure is one-third of company assets. This is a good enough reason to get to know who these customers really are, what they are up to, and what they want.

Lending money these days is not for the faint hearted.

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