Without good customer insight, cost cutting may fail or even worse put the business into a tail spin!

In difficult economic times, management must react by adjusting expenditure around what the business can afford; simply put ‘cutting costs’. The postal sector has high fixed costs and that is a structural weakness in times where financial flexibility is required. It also has high labour cost content and that cannot be adjusted quickly or easily without impacting service quality or key skills. If recognised, structural weakness can be managed over the longer term and turned to advantage. However, near-term, tuning the cost base to remain competitive or even viable needs care. Cost cutting must distinguish between “cost” and “investment”; the difference, should there be any doubt, is customer added value.

Cost can be cut without impacting the customer, whereas investment cannot. Without good customer insight it’s not so easy to identify, either directly or indirectly, which money adds customer value and which does not. A second-rate but common approach to cost cutting is to levy a fixed percentage reduction across the organisation. This sends all the wrong signals and misses the point. So, how to do better?

A good start is to check whether a business activity really works for customers; does the activity and its associated expense result in making life easier for customers, does it solve a problem, or does it build or improve the relationship between business and its customers? Does the activity really make it easy to access or use the service or to find the support that the customer needs? Does it help the customer’s business stand out in some distinct way? Does it offer some synergistic benefit, such as delivering more visibility and control over the customers’ own business processes? Will the activity bring an affordable offer to business and does it give good value for money? These checks can be used to identify activities having low value and candidates for cost cutting. However, achieving success, particularly in turbulent times, is more complex.

Achieving customer value is specific to the organisation and specific to the needs of customers at any particular time. The market is dynamic with added value opportunities coming from customers changing needs. A strong strategy or plan of resource allocation that embraces market change is essential, particularly when the organisation is in the middle of an economic crisis. Ultimately a strong strategy requires insight or knowledge of customer needs that fits the scope of the organisation’s strengths. Without such insight the risk is to cut the very investment required for future recovery and with it customer added value, rather than cutting costs; worse still that just might put the business into a tail spin.

Next time we look at improving customer insight and making more effective use of its findings.

Dennis Gilham: Biography

A Chartered Engineer and Fellow of the Chartered Institute of Marketing with over 30 years experience of delivering customer facing solutions in the postal sector. Dennis has held senior industry roles as Head of Corporate Partnerships, Group Business Line Director, Group Director of Product Marketing and Director of Research & Development. He has built a unique set of skills and knowledge in promoting new solutions for business customers of all sizes in mail, express and parcels.

Having worked with Posts worldwide, contributing to their business development through customer insight, marketing strategy and innovative solutions, Dennis now has the opportunity to help postal management in his capacity as Independent Strategy Advisor.

+44 (0)79 74 97 50 00

dg.concretconsult@talktalk.net

Source: Dennis Gilham

Tags: Cost-cutting, Customer insight, Gilham, Worldwide