by Craig Yeack
What exactly is customer relationship management, or CRM, and why does it matter to a ready-mix producer? Perhaps no other acronym in the software industry has been as intentionally obscured by used-car-turned-software-salesmen. It’s important to know the truth about why you really do need CRM.
At the highest level, CRM is about increasing revenue and profitability by developing a customer-centered business culture. In its most extreme application, CRM uses every available piece of information about a given customer or prospect to exploit their needs to sell more product at a higher price. Although CRM has attracted questionable types to both its practice and products, it can be used for long-term, mutual benefit that is more consistent with the culture of our industry.
Believe it or not, our industry has had a form of CRM since the late 1980s, predating any of the organized, fancy systems from Silicon Valley that have made headlines and bazillions of dollars. Before the current concept of dispatch software, the humble batching computer running on a Pentium 286 had a full list of customers, contacts, and order history. The early systems such as “ACT!” released later in 1986 did less than we already had running in our ready mix plants!
Fast forward 40 years, and frankly we have dropped the ball. Our industry still does little else for tracking sales than “who” and “how much.” Let’s take a look at how this can be improved, starting with the basics. Following are five significant benefits of real-world CRM.
1) Build better customers. For any given customer and work type, it’s possible to know how long they keep our trucks, how many finish loads they order, how many times they change an order, how many orders they cancel, plus their dispute and payment histories. Each factor such as truck cost, days sales outstanding finance cost, etc. can be assigned a dollar value to establish a cost per cubic yard of doing business with that customer.
Armed with quantitative behavior information, your sales team can then build a better customer by helping the customer improve and cut their costs where they perform poorly compared to their competitors—and, importantly, cut your costs of working with them. Building a better customer also builds loyalty. You will improve your EBIDTA on any given job and the competent customers will act with enlightened self-interest. This means that regardless of a premium price they will route most, and perhaps all of their business to the producer with the best overall economic impact.
2) Drop the dead weight. What about the “rag-pickers” who jump ship for a dollar? When you know their operational and financial behavior for any given work type, the quoting process can be somewhat automated to a “take it or leave it” price. While it’s true that you need volume to reduce the fixed cost of operations per cubic yard, most producers would rather see competitors lose money on a bottom feeder that holds trucks, slow pays, and claims baseless back charges.
3) Calculate the cost of winning new customers. While most markets have a known, stable cadre of customers, there are new prospects. All of the above can be applied to prospects by comparison to a similar grouping of customers and work types, with caution for additional risk factors such as startups and transients. Further, if you choose to “buy” business from an important newcomer, you will know the exact cost to get a foot in the door.
4) Prepare for the future. Looking forward, you know the historical volumes of a customer adjusted for seasonality and work type; hence you also know when they are dropping below those levels. The sales team can then reach out and determine the root cause, which quite often is not about price. For instance, perhaps a particular driver has consistently annoyed one of the finishing crews, influencing the owner’s choice of producer. The information is of course all recorded in the CRM system and, armed with this knowledge, the sales team stands a much better chance of remediation.
Your CRM system should also be a repository for upcoming market opportunities, including leads from national sources such as Dodge Data as well as prospects from the local beat. Key customers can be alerted to bid on new jobs that they may have overlooked. Loyal customers who buy into mutual success can be rewarded by sharing market intelligence, deepening the strength of the long-term relationship.
5) Seal the deal. “Last look” is king! Opportunities with multiple qualified bidders inevitably request quotes from multiple producers. A CRM system can handle multiple quote requests for the same work, with customer-specific pricing. But far more important is the deep, sustainable relationship that CRM tools help build with customers to give a producer “last look” at a bid and the chance to adjust pricing.
If you are the dominant producer in a market with limited competition, you may question why you need CRM. The cheap, short-term answer is: You probably don’t. The forward-thinking answer is that you can still improve EBIDTA by building better customers. And, with your ear to the rail, you can guard against new entrants stealing your best sources of income. Better yet, you can tie a ribbon around the loss-making customers and send them over!
Our industry is unique. Successful producers build successful customers and vice versa. CRM is a key tool to transition your sales team from expediters and quote machines to something much more valuable to customers: Becoming a consultative partner for business success.
Craig Yeack has held leadership positions with both construction materials producers and software providers. He is co-founder of BCMI Corp. (the Bulk Construction Materials Initiative), which is dedicated to reinventing the construction materials business with modern mobile and cloud-based tools. His Tech Talk column—named best column by the Construction Media Alliance in 2018—focuses on concise, actionable ideas to improve financial performance for ready-mix producers. He can be reached at [email protected].