Sunday, March 27, 2016

STRATEGIC COST MANAGEMENT IN WINNING BACK CLIENTS.


The profession of cost management has taken many changes over the years and now the current decade and the coming one are the era of strategic cost management. As I have been writing exclusively for this segment today I will accentuate on the key areas of balanced score card. I have already in my previous articles have covered extensively on balanced score card I find it to be one of the best tools for an organization to scale into new heights.  Every year when the month of March comes up and annual review is being conducted the most important question being asked to sales or management team is that how many clients are being acquired.  The question should be how many clients acquired in the last 5 years are still with the organization. This s the place and point from where a cost accountant and his reports creates a difference in the management system.

I find that companies focus on client acquisition and less on customer retention or winning back the client. Churning of clients has become a key factor.  Low churning of clients is a key factor for the success of an origination which also leads to better balanced score.  Competition has lead to high number of churning and hence strategic cost management is very important for the cost control and reducing churning of customers.  In today’s market we can’t afford to take double cost hurt while a customer leaves or churns. Even if the companies focus on customer retention they go on a limited approach as cost is too high in getting back a client. Now applying strategic cost management I find that cost accountants can help to create and also design the mix of product for the customer winning back the customer. Only acquisition of customer will be of no help f there is a leakage in the system from where customers changes your products and services. Like a cost accountants who design a sales mix he can design a product-client winning back based product.

Most companies incur high cost while winning back clients as they try to establish the brands again. The company must understand that the client is already aware about your brand and he has just changed the product or service. Hence, no requirement of re-establishing the brand to the same client. This saves huge cost. Now you need to figure out why the client changed the product or service. If it’s due to price then placing discounts solves the problem. If it’s due to service then your operation needs a-check up regarding the servicing part. If the client has moved out due to both then one needs to design a separate product of service and price combination for the same. The recent technology, particularly more-sophisticated customer databases, allows companies to draw on information about how people used their service the first time around to craft more-successful win-back offers.


For example in case you belong to an Insurance or telecom industry switching over the client is often and this is the place where you need to get into price and service part so that the client comes back to you. You don’t need to incur high cost of brand establishment. A cost accountant helps to find how much you earned from the client compared to how many clients you acquired. Revenue per client is an important barometer to look into success of a product, its life cycle and in making decision regarding its sales mix and product mix designing. This mix will help the company to cuts down on churning and improve its services and product prices.  Every industries expands and then its falls back.  Its mainly due to the ignorance of client retention and revenue per client.  When an organization focuses on its 5 years old customers it gets a clear message to the industry and competitors that the organization is serious about its business, customers, products and services. A cost accountant helps to design this balance over the years since he knows the various angles of cost and how the benefit of reduction could enhance the sales. Service cost also comes down when efficient mix of the same is created.

1 comments:

Govind Dutt Tiwari

Thank you Indraneel,

Your blogs towards cost accounting and strategies are really fruitful. I eagerly waits for your email. I likes the way you relates these strategies to the current business environment and make me think again where I am lacking behind in the industry.

Regards
Govind

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