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PV Technologies Inc Customer Relationship Management (CRM-Marketing) Case Solution
PVT has got into this situation through a combination of a number of factors. There are certain indications to the fact that the PV Technologies had become complacent through due to its positive relations with the customer – Solenergy. The previous track record of selling to this company had created the impression with PV Technologies that they are going to gain this contract from their client and didn’t pay attention to the pricing element of their proposal.
It would be unjust to ascribe the entire outcome of this situation of PV Technology’s management and salesperson because it can be reasonably expected that purchase criteria of a client, with whom a company has done repeat business, will remain unchanged. Greg Morgan and Solenergy as a whole has become highly price sensitive for this particular purchase decision. Part of the reason for becoming price sensitive for this purchase decision can be ascribed to the fact that this is a large procurement decision and involves very high level of commitment by the company.
Competitor intelligence is a regular part of business in those industries where competitive rivalry is high. PV Technologies was highly engrossed in the idea of being a market leader in the industry, which led the company to become oblivious to competitor intelligence. The price differential between PV Technologies and its competitors has become too large for potential customers to ignore the price difference on account of promise of quality alone.
Greg Morgan’s decisions were generally focused on the functional elements and quality of inverter, however, for this procurement, he chose to take price differential into account, as well. Even though, Morgan had anticipated the price differential to be there, but he had not anticipated that it would be so huge.
Following questions are answered in this case study solution:
How did PVT get into this situation?
How have changes in buyer behavior, industry dynamics or other factors led to the situation faced by management?
Is the situation merely a temporary “brush fire” or is it symptomatic of an important issue for PVT?
2. What do you see as the significant, positive aspects of how PVT is managing its Business / Customers that would be useful in dealing with this situation?
3. What specific actions would you recommend that management take to address the situation?4.
What are the major risks associated with the recommendations that you propose?
How would you propose that management mitigate risks that you’ve identified? Explain fully.
PV Technologies Inc Customer Relationship Management CRM Marketing Case Analysis
1. (i) After all, the worst that could happen with lower quality of inverters is that there would be a downtime in service provision while the supplier will carry out maintenance of the equipment. It must be mentioned that there was no noticeable difference maintenance element of the contract offered by PV Technologies and its customers.
1. (ii). Change in buyer behaviour, change in industry dynamics and management style, all played a role in the situation faced by the management of PV Technologies. The most important role can be ascribed to change in buyer behaviour because previous Morgan and other decision makers at Solenergy had always given preference to quality of the inverters for their purchase decisions. This didn’t turn out to be true for this instance of purchase decision because Morgan chose to attach greater priority to price differential for selecting the vendor for its inverters. Had the purchase criteria by Solenergy not changed, PV Technologies wouldn’t have faced the challenge depicted in the case.
Part of the reason for occurrence of this change in behaviour of PV Technology’s customer is caused by the change in industry dynamics. The number of competitors of PV Technology has increased during the previous few years, which has given far greater choice to the customer for selection of a vendor. Even though, the products of these customers lag behind those of PVT, but they do make their offer attractive by cutting back prices, thus, reducing the chances of selection of PVT. Management style at PV Technologies is not customer centric, which has distanced itself from market happenings. The company wasn’t able to make its offer competitive enough to continue winning contracts from its loyal customers.
iii. It would be grossly incorrect to describe the situation as a ‘brush fire’ for such definition would not bring to light the lacking within the sales team and management of PVT. This situation is a symptom of deeper changes taking place in the market place for which PV Technologies is not ready due to its habit of staying within its comfort zone. It is an important finding from the case that competitors of PVT has been on their toes to make their product and service offering competitive enough for its suppliers.
Meanwhile, PVT has been complacent by preconceived notions of its product excellence. It is true that PVT technology is superior in its product offering, but there is a limit to the ‘quality premium’ which can be paid by the buyer in a competitive industry like this. The situation is a symptom of strategic drift by PV Technology of becoming oblivious to the changes taking place in the external environment. This leads to a dichotomy between the trend in the external environment and management of the company. The need is to use these symptoms to identify the problems and to resolve those problems through strategic measures.
2. The significant and positive aspect of the manner in which PVT has maintained its relations with its customer and has been managing its sales is the implementation of the concept of key account management. By following key account management concept, each client is assigned an account manager, who is responsible for all relations with specific client. In addition to carrying out sales and managing the services provided on a daily basis, the account manager provides advice and information on market trends and best practices globally.
These include preparing performance indicators (KPIs) and service level agreements (SLA) to ensure that customer needs are met in accordance with the commitments. The head of sales organizes a meeting twice a year to ensure operational solve all the problems in a professional manner and to provide a forum to discuss new ideas that will improve the delivery of services. The same approach would also be useful in dealing with the current challenging situation by the company of potential sales.
The second aspect of the manner in which the company has managed relations with its b2b customers is the implementation of the concepts of customer orientation. Customer orientation is an important element of the concept of business management. Customer orientation entails that the company maintains a marketing orientation and adequately understands with the dependence of the company on its customers as the heart of business decisions. The reasons for lack of customer focus are often located in the corporate culture, structure, and in less effective or non-transparent processes of the company. Under the management style with which PVT is management, the ability to meet customer expectations is considered as a key competitive advantage and a seemingly endless variety of management theories and marketing theories are implemented to meet this end.
3. The course of action which should be followed by PV Technologies to deal with the current situation is multi-level. Firstly, the business should implement the concept of customer life cycle in addition to customer orientation. Implementation of the concept of customer life cycle is complex and should be approached with multiple angles. The value of the customer life cycle, also known as CLV (Customer Lifetime Value), examines the investments a business is willing to make to gain customers (loyalty, sales promotion, customer service, etc.) CLV takes into account both the present and future monetary value of its customers. It corresponds to the current value (expressed in your local currency) of the expected future income of the customer.
This method of calculating CLV is highly recommended for PVT real problem, because it is part of a global perspective (customers) and it is difficult to use for calculating the value of customer life cycle on micro levels such as a marketing plan. In addition, the calculation models of CLV often find their roots in direct marketing activities.
To calculate the value of the customer life cycle, it is also possible from micro levels and even individual initiatives of marketing and sales. Contrary to popular belief unfortunately shared by many, this approach can also be used to calculate and predict the impact of activities associated with the brand strategy.
Another concept to be implemented at PV Technologies is marketing investment. This implies return on marketing investment (ROMI). ROMI is the incremental return on every dollar spent on additional activities targeting the client. By adopting this model, a financial parameter can be used to make predictions and determine the effectiveness of marketing and sales programs. To gain competitive edge in this market, PVT must have well developed program ROMI. If data from ROMI programs offer a great way to track and calculate analytically the evolution of the value of the customer life cycle, there are still many obstacles to overcome. These obtacles are discussed in the next section.
The third recommendation for PVT is to implement cultural change. The implementation of these programs requires cultural change within the company and this evolution takes time. And even if the company use programs like ROMI, these often need to be extrapolated, for example, investments in high-risk customers. PV can also use its CRM programs to calculate the CLV at the global level, and often on a micro level. An alternative to CLV model for PV Technology is utilizing the measure of customer capital.
The concept of customer capital is based on three key parameters: the "capital value" (objective perception of a brand by the customer from a realistic point of view "give"), the famous "brand equity" and "capital faithfulness" (which measures customer loyalty). PV Technology ranks high in perception of the brand by customers. To optimize the "customer capital", PV Technology should improve and combine the various components (also termed as drivers) of these three parameters. For example, PV Technology can increase the "capital value" by giving more to the customer by offering lifetime warranties, etc.
Customer segmentation plays an important role in b2b markets. Segmenting of customers by the company must be performed in the context of potential long-term customers. Finally, the importance of "rebranding" (brand switching) and even developing a sub-brand should be evaluated by the company. To appeal to low quality-low price market, the company should be ready to target this market. This model is very future-oriented because it focuses explicitly on the client-centered approach. The managers at PV Technologies should realize that brand equity is one of the three underlying (and arguably the most important) parameter of the "customer capital".
There are several ways to calculate CLV. They all have their advantages and disadvantages and, especially, vary greatly depending on the type of business and industry (e.g. retail chains and service companies like b2b businesses). All the models mentioned in this article or not, have their roots in a specific context which may limit their use in certain environments. Choosing the best method of calculating the CLV depends on the tools used by PV Technology, calculating investment sales, and genuine involvement of the company in the customer-centric approach.
4. (i) There are several risks associated, as well, with the set of recommendations made in the previous section. Calculation of CLV for a business requires involvement of managers and personnel from different hierarchical levels and needs coordination in between them. If such coordination does not exist, then the business is likely to remain unaffected by the implementation of CLV.
Also, involving customers of the company in the product development and innovation process can cause the customer service and sales to become alienated with the production and research teams of its own organization. Customer service representative are seen as external personnel by the production and research staff and their demands are perceived as being unreasonable.
Another risk for the business is that a conflict of loyalty may arise between line managers and project managers on the allocation of resources and projects can be difficult to control if the teams have considerable independence. Costs may be increased if more managers (project managers) are created through the use of project teams.
4. (ii) There are several methods of overcoming the risks which have been discussed above. The risks about investing in product innovation at the risk of lost investments by involving its customers in the new product development process. More and more companies are looking for methods and tools to customers already at an early stage in the innovation process to integrate. This is especially true for the most innovative customers as so-called "lead users" to integrate and to jointly develop innovative product and service concepts. The ‘lead user’ for PV Technologies can be Solenergy. PV Technology can even employ web portals for "virtual customer integration".
The second way of overcoming the aforementioned risks is to form a matrix organization. A matrix organization is a type of organization in which individuals or sub-sections with similar skills are pooled for distribution of tasks. This organization is part of a set of practices that have been implemented to assist in the management of projects which require close coordination with customers and within various functions in the company. Employees at PV Technology can be grouped according to the business lines (with their supervisor). Their work would be to coordinate the implementation of a specific project involving several trades.
The advantages of following a matrix structure for PVT as compared to a functional organization is that individuals can be selected based on project needs.
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