How to stop problems in customer relationships from escalating and impacting project margins
Magnus Gustafsson, Partner at PBI
Customer experience impacts profitability. To ensure project profitability and customer satisfaction the supplier must keep an eye on how customer experience is developing and make sure minor problems do not escalate. By applying machine learning customer experience risks can be identified early and acted upon before things get out of hand.
Customer experience impacts profitability, this has been shown in research and most practitioners know it from experience. After all, it makes perfect sense for a customer to take precautions if they start to doubt the supplier’s capability or commitment to deliver a good solution. If, for example, the customer were to doubt the supplier’s understanding of their business and the civil designs then it would be reasonable for the customer to take a critical eye to the supplier’s design process, demand extra revisions and so on. Such precautions taken by the customer can easily show up as additional administrative work and arguments about change orders that in the end lower the project margin. It is therefore important for the supplier to manage customer experience. As a supplier you do not want to become a liability in the eyes of your customer.
Managing the customer experience is about the details and the big picture at the same time. If the customer has a positive view of the supplier’s ability to keep schedules then one delay will not cause the customer to demand additional reporting. However, if the customer already is a bit worried about the supplier’s timeliness then one little delay can cause big problems in the project as the customer starts to question all timetables. The situation can escalate. If the customer doubts the supplier’s understanding of the customer’s business then the customer will take a critical eye to the supplier’s engineering, installation and commissioning process. In fact the customer will focus on every stage that they feel can influence the economic performance of the asset (e.g. plant or ship) they have ordered.
It is therefore important to keep an eye on how the customer experiences the individual things happening in the project. To make sure the situation does not escalate because of some minor problem it is particularly important to focus on how individual events contribute to the overall customer experience that continuously evolves. This way the customer relationship can be kept on a constructive path that is profitable for both parties.
At PBI we have developed a concept for managing customer experience called aiCROL. The concept identifies customer experience risks that can escalate and impact on sales and profits, opportunities that can be turned into productive collaboration, and actions needed to avoid the risks and act on the opportunities. The concept is based on our 15-year experience of customer experience-monitoring in project business and industrial b2b relations using the CROL(r) concept. aiCROL applies an algorithm that has been trained on our customer experience database. It reflects the typical dynamics of project business in the marine, energy, mining and process industry sector. aiCROL identifies customer experience risks both on project and portfolio level by analysing the customer experience of an individual project and comparing it to the overall pattern.
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