Graybar's Problem and Its Effect on the Business Performance

Management Information System

Graybar's problem and its effect on the business performance

Graybar is one of the largest distributor of communications, networking and high-quality electrical products within the United States, as well as one of the largest employee-owned firms across the country. The company is listed in the Fortune 500 list, but despite these points of strengths, it encountered issues in the efficient management of its customer base.

The issues with customer management became more and more important at the firm, especially since the customers of the modern day era expect higher quality services at lower prices. In other words, it became a competitive necessity to better manage the customer base.

"Despite many years of success, Graybar could do better. For instance, it was not following best practices for analyzing and understanding its customers. These practices were becoming essential for wholesale distributors as well as for retail companies" (case).

Graybar understood the need to better manage the customer base in order to understand it at a deeper level and become able to serve its needs in a means that generates more corporate profitability. This effort became an imperative since the quality and efficiency of the operations was decreased and the growth potential was also threatened.

2. Analytical CRM at Graybar

Having understood the need for better quality management, the company set out to collect extensive data on its customers. It employed the feedback from their field agents and divided the customers into four categories, as follows:

Core customers, who are the customers which make regular, high volume purchases from the company and are the most profitable segment

Opportunistic customers, who make irregular purchases and are therefore less profitable

Marginal customers, who buy infrequently and low quantities, and who require low prices or high services, and end up losing the company money; and last

Service-drain customers, who are high volume buyers, but who require high levels of service, demand low prices and also have a high rate of product return (case).

Before Graybar had collected this data, it employed a general sales strategy, which was used with uniformity for all customers. After the usage of the new customer stratification model, the company became better able to understand the specific needs of its different customer segments. This, in turn, translated into an increased corporate ability to devise sales strategies which best responded to the needs of each individual sector. The company, as such, focused more of its resources on the more profitable customer segments and sought out to increase the profitability levels across the other customers sectors.

3. Further benefits of SAP Customer Value Intelligence

The sales representatives at Graybar spent large amounts of time on the process of data collection which would sit at the basis of a the new customer management approach. Still, the company encountered difficulties in efficiently processing the high volume of data so as to draw conclusive business recommendations.

In this order of ideas, the company solicited assistance from technical and developing specialists at SAP and used the SAP Business Objects Dashboards in order to create the SAP Customer Value Intelligence. This new software "provides recommendations on improving customer value. It uses real-time customer revenue, margins and behavior to stratify customers into each of the four categories described earlier" (case).