Payment Registration

What are the benefits of using Payment Registration?

Simplicity:

  • All processes are brought together on one page to efficiently handle registration of incoming documents.
  • Ability to accommodate various ways of doing payment registration.

Productivity:

  • Easy overview of open entries.
  • Easy sorting and filtering across open entries.
  • Less data entry.

Ease of Use:

  • In common scenarios, the user only has to mark entries and post, and then is done.
  • Totals to show that all registrations are made.
  • Users can define payment registration setup according to responsibilities and processes.

What do we see in Payment Registration?

  • All outstanding payments for all customers.
  • This is everything that customers need to pay.
  • You can also see positive as well as negative amounts.
  • Also, credit memos are included here.

What are the useful features?

  • You can easily search for customers using the Search Customers action.
  • You can easily filter on the certain customer. Right-click on a customer and click Filter to This Value (Att+f3).
  • You can sort on specific columns by clicking on the column.
  • You can also Search Documents based on different filters.

Setup

Go to Departments/Financial Management/Cash Management.

Open Payment Registration. If you are opening it for the first time, the system will populate the Payment Registration Setup page.


If not already specified, you will have to specify the journal template and batch you want to use for the payment registration and also the balancing account type, for example in which bank account would you like to balance the incoming payments? You can choose to use the account as default and also if you want the date received to be filled automatically.


So once this setup is done, we are already up and running and we can start using the payment registration function.

Post Payments

All we need to do is to go to specific line, for example in this case we select customer Selangorian Ltd. (Invoice 103002).

Suppose that the customer has already paid the invoice. So all we need to do is select the Payment Made checkbox.

You will notice that the system automatically fills in the Date Received, based on the Work Date and also the Amount Received is entered.


Post Lump Payments

Suppose multiple documents have been paid by a customer; that’s what we call lump payment.

In the following example we can see couple of documents from John Haddock Insurance Co., so we select the relevant documents that the customer paid.

Now instead of using Post Payments action, we can now use Post as Lump Payment action.

NOTE: Once the full payment has been posted, the relevant lines are removed from the Payment Registration window.


Result:

Go to customers.

Here we select customer John Haddock Insurance Co. (30000), for which we had posted the lump payment and open the Customer Ledger Entries.

Here you can see the payment line, no remaining amount anymore and in the fact box you can see that there are two applied entries.

When you check the applied entries, you can see the two invoices that we have posted to (remember during the lump payment the two invoices that we had selected). Basically, that how the payments have been posted.

Customer Ledger Entries


Applied Entries


Search Customers and Documents

It could be interesting to search for customers using the Search Customers action. So we can search for customer 10000 (The Cannon Group PLC) for example and go to the ledger entries to look for detailed information.


Once that we decide that this is the customer that we would like to use in the Payment Registration, you can also choose to start filtering on the customers.


You can also perform Sorting by clicking on the columns. For example, sort the records in the Payment Registration based on Due Date. By clicking on the column you can sort the records in ascending or descending order based on the column value (note the arrow key beside the column name when you sort).


You can Search Documents and apply various filters.


Let us enter a document number 101022 (sales order number). Let’s say, this is the reference that we see on the bank statement, that is provided by the customer.

Click Search and now we see that there indeed is a sales order.


Click Show to open the sale order. If we check the order, we see that there is no shipment or invoice. But let’s say based on an agreement the customer has paid in advance on this sales order.

Post Payments Manually Without a related Document

So let’s go back to payment registration window and click General Journal. This will allow us to directly enter advance that we received from the customer. So in this example, we received the Payment from Customer MEMA Ljubljana d.o.o. (38128456) for -1200/-.


We can now simply post the payment. This is now added as an open payment in the payment registration overview.

Create a Finance Charge Memo from the Payment Registration Page

If we sort on the Due Date, we can see that some invoices are overdue.

We can select the invoice, and now we can see that the payment is overdue and you can calculate interests.


So before posting the payment we can let the system create the Finance Charge Memo. So maybe the customer paid quiet late and based on the general conditions we will charge interest.

Click on Finance Charge Memo. Fill in the customer details, click Suggest Fin. Charge memo Lines. This will create the lines showing the amount (interest) the customer need to pay. Click Issue and Ok.


Now you can post the payment on the payment registration as the customer has paid.

As a result, you will see that a line has been added, because now a Finance Charge Memo is also due by the customer. So they have to pay the interest.

Organizational Strategy

The following topics are discussed under this section:

Goals of Organizational Strategy

  • Whatever strategy the corporation adopts to satisfy customers, grow, compete, organize itself and make money the supply chain has to operate in a manner that furthers those goals.
  • Four types of organizational strategy:
    • Customer focus and alignment
    • Forecast driven enterprise
    • Demand driven enterprise
    • Product type driven supply chain

Customer Focus and Alignment

  • When it comes to supply chains, its’s what’s good for the customers that counts and not what’s good for the nucleus company or even what seems to be good for the supply chain itself.
  • Supply chain management needs to be focused on giving the final customer the right product at the right time and place for the right price.
  • It’s about the balance of quality, price and availability (timing and place) that’s just right for the supply chain’s customer.
  • There are some basic premises that can help you get started in determining the appropriate balance:
    • Serving the end user customer is the primary driver of the supply chain decisions.
    • Organizations in the supply chain have to make a profit and stay in business to serve the customer.
  • Functional teams in the organization will provide their input and research on the optimal balance for the supply chain to meet customer needs.
  • Design engineers or better yet design teams from across the network design products that are right for the end customer and can be sold profitably.
  • Market research looks for the true, and not always obvious, needs in potential consumers that the supply chain can be engineered to satisfy profitably.
  • Logistics strategy begins with data about customer demands for availability of materials, components, service or finished products, depending upon the customer and then it looks for ways to move products in a cost effective way with acceptable risk.
  • Successfully managing for sustainability requires a strategic mindset, involving numerous personal and financial resources and a commitment from suppliers from first to lower tiers of the supply chain as well as consumers further up the supply chain.
  • Departments must cooperate with other departments in their organization and with their counterparts at suppliers.
  • This type of collaboration between supply chain partners necessitates breaking down cultural barriers and building a culture of trust to ensure that the focus is an end-to-end supply chain activities and not just discrete supply chain processes.
  • Creating and managing a sustainable supply chain requires an organization to be informed, exercise leadership and cooperate with all supply chain partners in achieving positive results on the triple bottom line.

Forecast Driven Enterprise

  • This strategy is one in which the nucleus firm, usually the manufacturer, utilizes a forecast an estimate of future demand as the basis of its organizational strategy.
  • It’s difficult to predict even the most stable demand – say, for a product like diapers.
  • The chain of demand begins at the far retail end of the supply chain and works its way back towards the source of raw materials used in marking the product. The traditional way of attempting to satisfy their demand is to forecast it.

(Definition) Safety Stock is a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply.

Demand Driven Enterprise

  • The bullwhip effect is driven by demand forecasts. The solution is to replace the forecasts with actual demand information.
  • In the demand driven chain, supply management is focused on customer demand.
  • Instead of manufacturers planning their operations based on factory capacity and asset utilization, the demand driven supply model operates on customer centric approach that allows demand to drive supply chain planning and execution moving the “push-pull frontier”, back up the chain at least to the factory.
  • Instead of producing to the forecast and sending finished products to inventory, the production process is based on sales information.
  • There is no fixed production schedule in a strictly demand driven supply chain.
  • Product is turned out only in response to actual orders “on demand”.
  • Note, however, that on the supplier side of the plant, forecasts still determine delivery of raw material. The art of forecasting remains crucial, even in a demand driven chain.

Pull system entails the following:

  • In production, the production of items only as demanded for use or to replace those taken for use.
  • In material control, the withdrawal of inventory as demanded by the using operations. Material is not issued until a signal comes from the user.
  • In distribution, a system for replenishing field warehouse inventories where replenishment decisions are made at the field warehouse itself, not at the central warehouse or plant.

When a supply chain works in response to forecasts it’s called a Push chain or push system and it entails the following:

  • In production, the production of items at required times based on a given schedule planned in advance.
  • In material control, the issuing of material according to given schedule or issuing material to a job order at its start time.
  • In distribution, a system for replenishing field warehouse inventories when replenishment decision making is centralized, usually at the manufacturing site or supply facility.
  • Everything in a push system is pushed downstream from one point to the next according to schedules based on the forecasts.
  • The challenge in changing from forecast driven (push) to demand driven (pull) system is in reducing inventory without also lowering customer satisfaction.
  • The decision to switch to a demand-pull process trades one type of risk for another:
    • In the forecast-push process, the risk is related to the buildup of inventory all along the chain. Not only does inventory cost money while it sits in a retail stock rooms, distribution center or production storage area, it runs the risk of becoming obsolete or irrelevant for a number of reasons. In a world of rapid innovation, inventory obsolescence is a very real threat.
    • In the demand-pull, make-to-order model, on the other hand, the risk is that orders will begin to come in above capacity and all along the chain there will be expensive activity to run the plant overtime, buy more and faster transportation or sweet-talk customers into waiting for their orders to be filled or substituting a different product.
  • Running short pf stock is also a risk in the forecast driven chain. Forecasts can be wrong in either direction. That’s why the safety-stock builds up at each point where orders come in.
  • One technique to prepare for uncertain demands is Kitting, which is preparing (making / purchasing) components in advanced, grouping them together in a Kit, and having them available to assemble or complete when and order is placed.
  • In reality, most organizations pursue a push-pull strategy and the point where push moves to pull is the key strategic decision.
  • Once that decision has been made, building a demand driven enterprise can require significant changes in sully chain processes. The following are some major steps:
    • Provide access to real demand data along the chain for greater visibility of the end customer.
      • The first requirement is to replace the forecasts with real data. The only supply chain partner with access to these data first hand is the retailer.
      • Visibility is a necessity for building a pull system and pioneers like Walmart have led the way in that regard.
      • With point of sale scanning and radio frequency identification (RFID) a retailer can alert its suppliers to customer activity instantaneously.
      • Instead of producing to monthly forecast, manufacturers with that kind of immediate signal from the front lines can plan one day’s production runs at the end of the preceding day. They produce just enough to replace the sold items.
    • Establish trust and promote collaboration among supply chain partners.
      • Collaboration is implied in the sharing of information.
      • In return of receiving real-time data that allow reduction of inventory, suppliers and distributors have to agree to change their processes in whatever ways may be necessary to make the new system function without disrupting customer service.
    • Increase agility of trade partners.
      • Because the inventory buffers with not exist or will be much reduced in this demand-driven supply chain, the trade partners need to develop agility-the ability to respond to the variability in the flow of orders based on sales.
      • When making to forecast, a plant can run a larger volume of each product to send to inventory. But when making to order, the plant may have to produce several different types of products in a day. There will be no room for long changeover times between runs of different products; therefore, equipment, processes, work center layouts, staffing, or siting or all these things may have to change to create the capacity required to handle the new system.

Product Type Driven

  • Company can have more than one supply chain, depending upon the types of products that are passing along the chain and other variables.

Functional Products

  • Functional products that change little from year to year have longer life cycles (perhaps more than two years), relatively low contribution margins, and little variety. Because demand for them is stable, they are fairly easy to forecast, with a margin of error of about 10%, very few stock out and no end-of-season mark downs.
  • The appropriate supply chain for these products should emphasize predictability and low cost with performance indicators such as the following points:
    • High average utilization rate in manufacturing.
    • Minimal inventory with high inventory turns.
    • Short lead time (consistent with low cost).
    • Suppliers chosen for cost and quality.
    • Product design that strives for maximum performance and minimal cost.
  • However, make-to-order functional products, such as replacement parts for customized equipment, usually have long lead time (six months to a year).

Innovative Products

  • Innovative products have unpredictable demand, relatively short life cycles (three months for seasonal clothing) and high contribution margins or 20 to 60 %.
  • They must have millions of variants in each category, an average stock out rate from 10 to 40 %, and end-of-season markdowns in the range of 10 to 25 % of regular price.
  • The margin of error on forecasts for innovative products is high -40 to 100 % but the lead time to make them to order may be as low as one day and generally is no more than two weeks.
  • The supply chain for innovative products should emphasize market responsiveness rather than physical efficiency, with performance indicators such as the following:
    • Excess buffer capacity and significant buffer (or safety) stock of parts or finished items.
    • Aggressive reduction or lead time.
    • Suppliers chosen for speed, flexibility, and quality (rather than cost).
    • Modular design that postpones differentiation as long as possible.
  • Innovative products, with their high margins and unpredictable demand, justify the extra expense for holding costs.
  • The idea that the same types of product can be either functional or innovative implies that one company might have more than one supply chain.
  • New information technology makes it possible to have multiple, dynamic chains that can accommodate different product and information flows.

  • Staples
    • These have steady, year-round demand and low margins, for example: white underwear.
    • It is advised to stock staples only in relative outlets in small quantities and transporting them in truckload quantities.
    • A full truck, is cost-effective for the shipper than a partially loaded vehicle.
  • Seasonal Products

These could include outdoor patio furniture, holiday décor, etc. for which the demand is more predictable since it is tied to the holiday or season.

  • Fashion Products

These are innovative items, with unpredictable demand. For example, Zara, the Spanish clothing manufacturer has two supply chains, one for staples and other for fashion clothing. To get the faster response time, Zara uses European suppliers for the fashion items. But for the more predictable demand items, it uses eastern European supplier that have poor response time (not a concern) and lower cost.

  • In addition to varying supply chain by product type there are several other variables to consider – store type and time in season or product cycle.

Supply Chain Management Objectives

Supply chain is more accurately viewed as a set of linked processes that take place in the extraction of materials for transformation into products or perhaps services for distribution to customers.

(Definition) Supply Chain Management is the design, planning, execution, control and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply chain demand, and measuring performance globally.

Other highlights:

  • Supply chain management is about creating net value.
  • There should be value creating activities in the supply chain that transcends the activities of particular entities in the chain.
  • Managing supply chain requires a balancing act among competing interests.

Value Chain and Mapping

Value Chain

A value chain is a string of collaborating players who work together to satisfy market demands for specific products or services.

(Definition) The value chain is made up of the functions within a company that add value to the goods or services that the organization sells to customers and for which it receives payment.

The intent of a value chain it to increase the value of a product or service as it passes through stages of development and distribution before reaching the end user.

Not all value chain activities are technically part of the supply chain. Those activities might include:

  • Engineering
  • Marketing
  • Finance
  • Accounting
  • Information Technology
  • Human Resource
  • Legal

Value Stream

(Definition) It is the process of creating, producing and delivering a good or service to the market. For a good, the value stream encompasses the raw material supplier, the manufacture and assembly of good, and the distribution network.

For a service, the value stream consists of supplier, support personnel and technology, the service “producer”, and the distribution channel.

The value stream may be controlled by a single business or a network of several businesses.

A value stream encompasses all the primary actions required to bring a product or service from concept to placing it in the hands of the end user. It also includes timing.

Value Stream Mapping
(Definition) Value stream mapping is drawing the current production process/flow and then attempting to draw the most effective production process/flow.

Mapping the stream aids in process improvement.

Key Objectives

There are five primary objectives that supply chain management can help a company or organization accomplish:

Objective 1: Add Value for Customers and Stakeholders

Supply chain management aims to create value through financial benefits, match the values of its various customers, and appeal to social value of its customers, stakeholders and community.

(Definition) Value is the worth of an item, good or service.

Adding value to a good or service is the responsibility of each entity and process in the supply chain.

(Definition) Value Added is the actual increase of utility from the view point of the customer as a part is transformed from raw material to finished inventory. It is the contribution made by an operation or a plant to the final usefulness and value of a product as seen by the customer.

The goal is to add value at each step in a service oriented value chain as well as in manufacturing oriented supply chain.

Utility may not be the only value, or worth, of a good or service from a customer’s point of view. Price, availability, and attractiveness are also values to consider.

Financial Benefits: Profit and Profit Margin

  • Adding value that customers desires promotes increased sales, which improves the bottom line.
  • In order to be successful and have longevity, any organization must have a positive cash flow.

* Triple Bottom Line (TBL):

  • Term coined by John Elkington 1994.
  • This refers to the concept that corporate success should also be measured in 3 dimensions:
    • Economic
    • Social
    • Environmental

Measuring Value One Stakeholder at a Time

  • When planning any new supply chain activity or monitoring continuing practices, it is important to identify all the stakeholder groups and determine the impact the activity will have on each one.

  • The primary stakeholder in any business is the business itself. A business must be profitable to survive and create value for any other stakeholder group.
  • Customers are also significant stakeholders in supply chain. Each business must create value for its customers as well as profits for itself. Moreover, the end result of each partner’s activities must optimize value for the supply chain as a whole.
  • There are also stakeholders that are external to the supply chain’s business partners and end customers. These include public or private investors, lenders, and communities and governments. To investors and lenders, supply chain value may be defined as capital growth, dividend income, or interest payments and eventual return on invested capital. Value as defined by these external partners must be considered when making business decisions.
  • Communities and local governments may also feel the impact of supply chain operations because they affect community members and their environment, both built and natural. The location of a retail outlet, warehouse, or other supply chain facility will have impact on the community where it is built and maintained. The community, and its political leadership, may judge this impact to be a positive value or a detriment.

Balancing Varied Stakeholder Values

Supply Chain Stakeholders Stakeholder Values
Firms in supply chain Profit margin, market share, revenues, expenses, image and reputation.
End customers Affordable, safe, attractive, useful products; affordable, timely, secure, easy, pleasant services; sustainable manufacturing practices.
Investors Return on Investment (Capital growth, dividend income), comprehensive and comprehensible communications.
Lenders Interest rate, long-term stability, return of principal.
Communities / Environment Tax based enhancement, sustainable manufacturing practices, environmental impact (safety, ethics, convenience, and natural resources), and growth of attractive jobs.
Governments Legality, regulation, overall impact on community members and environment.
Employees Job security, wages and benefits, opportunity, good working conditions, sustainable and safe manufacturing process.

Green, Sustainable Supply Chain Management

  • One value that is important to most of these groups is sustainable manufacturing process and practices, because it impacts so many around the globe.
  • Green Supply Chain Management (GSCM) has been brought to the forefront of most companies’ strategic goals in response to the demands from customers and stakeholders.
  • The objective of supply chain sustainability is to create, protect and grow long term environmental, social, and economic value for all stakeholders involved in bringing products and services to market.
  • Today GSCM requires supply chain managers to integrate environmental thinking into each step within the supply chain. That means that they must employ innovative environmental technologies to provide practical solutions to the environmental problems facing the global community.

(Definition) Green Supply Chain is a supply is a supply chain that considers environmental impacts on its operations and takes action along the supply chain to comply with environmental safety regulations and communicate this to customers and partners.

  • Sustainability figures significantly in supply chain management decisions for the following reasons:
    • Government and regulatory pressures.
    • Good environmental management and sustainability concerns.
    • Public opinion and power of consumer choice.
    • Potential for competitive advantage.
  • In addition to adding value, sustainable supply chain management can make good business sense, which can:
    • Drive growth
    • Reduce costs
  • Without forward looking environmental and social policies and supply chain practices, and organization’s reputation may suffer among investment analysts.
  • Supply chains must create three types of values:
    • Financial
    • Customer
    • Social

Financial Value

One method of increasing the financial value is to reduce costs.

Cut cost to yield net gain at the bottom line:

  • Cost cutting needs to aim for net gains at the bottom line.

(Definition) Inventory optimization software is a computer application having the capability of finding optimal inventory strategies and policies related to customer service and return on investment over several echelons of a supply chain.

  • Changes at any one point in the system will create changes elsewhere, therefore changes have to be viewed historically. Supply chain management necessitates cross-functional team work for the lateral chain. If a leaner supply chain can deliver the same customer satisfaction with a great profit, then cost cutting is justified.

It takes money to make money:

  • The end result should be net gain.
  • If an improvement in the supply chain brings in more revenue than the cost of investment, then it is justified.
  • Purchasing automated machinery to improve warehousing, upgrading hardware and software, training managers in team building and other investments may be necessary to build and maintain a competitive supply chain.
  • The ultimate aim must always be for creation of value at the customer’s end of the chain with sufficient profits to satisfy the needs of other stakeholders.
  • Typical measures of success in the use of invested money and assets more generally are:
    • Return on Investment (ROI)
    • Return on Assets (ROA)

(Definition) Return on Investment (ROI) is a relative measure if financial performance that provides a means for comparing various investments by calculating the profits returned during a specified time period.

(Definition) Return on Assets (ROA) is defined as net income for the previous 12 months divided by total assets.

Gains should be equally distributed:

  • Possibly the most common mistake in this regard is to send all cost savings all the way to the consumer’s end of the chain. If all efficiencies are plowed into retail price reductions, the supply chain itself will suffer from lack of financial sustenance.
  • Investors require a competitive return on loans and equity. The maintenance and upgrade to the chain’s infrastructure requires virtually continuous investment.
  • Employees have to be compensated at a competitive arte, trained in new processes and products, and more fundamentally, recognized for their contributions.
  • Teamwork among supply chain entities can create improved value for customers for a net financial gain that is equitably shared by all stake holders.

Customer Value

(Definition) Market Driven is responding to customer needs.

  • The ultimate goal of market-driven supply chain management must always be to deliver products and services that the customer values and of course will pay for.
  • Depending up the market being served, a supply chain may be managed so that it delivers one or more of these values to its end customers:
    • Quality of product or service
    • Affordability
    • Availability Service
    • Sustainability

Social Value

  • Generally a supply chain’s contribution to the society come from three factors:
    • Creating a positive good by delivering socially desirable and useful products or services.
    • Avoiding or reducing negative environmental side effects from extraction, processing and construction.
      (Definition) The Reverse Supply Chain moves items from the consumer back to the producer for repair or disposal.
    • Integrating sustainability into the supply chain.
  • The SCOR model has applicability in sustainable chain management.

Objective 2: Improve Customer Service

(Definition) Customer Service is the ability of a company to address the needs, inquiries and requests from customers.

OR

(Definition) Customer Service is a measure of the delivery of a product to the customer at the time specified.

Fundamental attributes of basic customer service:

  1. Availability is the ability to have the product when it is wanted by a customer.
  2. Operational Performance deals with the time needed to deliver a customer order.
  3. Customer Satisfaction takes into account customer perception, expectations and opinions based on the customer’s experience and knowledge.

Objective 3: Effectively Use System Wide Resources

  • Resources can be in form of employees, raw materials, equipment, etc.
  • Being effective means that supply chain gets the right product and the right amount to the right customer at the right time.

Objective 4: Efficiently Use System Wide Resources

(Definition) Efficiency is a measurement (usually expressed in percentage) of the actual output compared to the standard output expected. It measures how well something is performing relative to existing standards. Efficiency is inward-focused, in that a company looks internally to determine how a supply chain process can be done less expensively, in less time, and with fewer resources.

Efficiency is one of the measures of capacity in a supply chain environment.

Capacity is all about what can be accomplished by employing all the resources in the supply chain network that includes work centers, storage sites, people and equipment.

(Definition) Capacity has few meanings:

  1. The ability of a system to perform its expected function.
  2. The ability of a worker, machine, work center, plant or organization to produce output per time period.
  3. Required mental ability to enter into a contract.

When a supply chain is operating at high efficiency, it means that its utilizing its resources well to produce the level of output in a production plan within the time allowed.

Objective 5: Leverage Partner Strengths

(Definition) A Partnership in a supply chain is a relationship based on trust, shared risk and rewards aimed towards achieving a competitive advantage.

Well-chosen partners will benefit from a high level of mutual trust, respect of each other’s expertise and contributions and shared vision.

A strong and useful partnership will yield a combination of the following as it performs the functions needed by your organization:

  • Adding value to products, such as shorter time to market.
  • Improving market access, such as providing new market channels.
  • Building financial strength through increased income and shared costs.
  • Adding technological strength if there is internal expertise in use of more advanced software and systems.
  • Strengthening operations by lowering systems costs and cycle times.
  • Enhancing strategic growth to break through barriers to new industry and opportunities.
  • Improving organizational skills that facilitate shared learning and insights of both firms’ management and employees.

Supply chain management technologies and practices can help a company select the appropriate sales partners and support them by:

  • Providing timely and accurate information.
  • Helping them deal successfully with channel customers.
  • Aiding them in leveraging their strengths such as innovation, speed, high quality, low costs, etc.

Understanding the Wants & Needs of Each Segment

Understanding the wants and needs of each segment involves market research and gathering information from multiple sources, including customers themselves, which is called the Voice of Customer (VOC).

Market Research

The wants and needs of prospective and existing customer segments may require phone surveys, questionnaires, focus groups or combination of these approaches.

Sources of Customer Information

Market intelligence can be purchased from outside sources but can also be derived from data gathered from every customer transaction. Different sources can provide different elements of the complete picture of each customer segment:

  • Transaction Records
    • Transaction records can show purchase frequency and volume, information on customer complaints and feedback, and how purchases are financed by the customer segment.
  • Sales Representatives
    • Sales representatives can relay information about what various customer segments are asking for, what they’re not interested in, what concerns they have in making the purchase and why they may or may not be considering the competition.
    • In the business-to-business (B2B) world, sales representatives hold the key to educating the organization about the customer’s business and its unique needs.
  • Service Representatives
    • Service representatives can provide information about how products and services are being used currently and how specific customer segments would like to use them.
    • Their experiences can help gauge segment attitudes toward the company, its products, and how well it is managing customer service.
  • Distribution Points
    • Distribution points (for example retailers, the internet, or self-service kiosks) can provide information about customer segment values, purchasing habits, and preferences – information that can be valuable in understanding the values of customers in different contact channel segments.
  • Purchased Data
    • Purchased data from survey companies, database marketing companies, and service or finance bureaus can provide broad information about the customer pool.
    • Such data, as opposed to the other sources of data listed above, do not necessarily paint a picture of business’s own customers.
    • Purchased data may be more useful in acquiring new customers than in managing relationships with existing customers.

Voice of the Customer

  • We shouldn’t overlook customers themselves as a source of information.
  • Successful organizations recognize research as a way not only to understand existing customer segments better but to increase loyalty and create mutually beneficial relationships.
  • One way to involve the customer is by using the voice of the customer (VOC).
  • (Definition) Voice of the Customer (VOC) is defined as actual customer description in words for the functions and features customers’ desire for goods and services. In the strict definition, as relates to quality function deployment (QFD), the term customer indicates the external customer of the supplying entity.
  • In a broader context, the voice of customer is a research and measurement tool used in complex selling situations when it may not be easy to ask the right questions.
  • It can be used to understand why a customer has chosen a business or has chosen to leave the business.
  • It can be used to gauge satisfaction with after-sales service, order processing, billing, or delivery or to design new products or services.
  • VOC can help develop solutions to problems with existing products or services or assist in continual improvement.
  • It may be a response to a particular situation, but it is better used in a continual fashion as a way of keeping in touch with customers and their perceptions of the value they are receiving.
  • VOC allows customers to talk freely and identify topics for discussion rather than simply respond to topic chosen by the researcher.
  • VOC may help businesses uncover previously unstated customer expectations or needs.
  • The voice of customer can be captured in a variety of ways:
    • Through direct discussion or interviews with individual customers
    • Surveys and focus groups
    • Customer-developed specifications or customer design groups
    • Collation of customer comments from warranty records, field reports, or complaint logs.
    • This information can be collated by customer segment to help understand each segment’s wants and needs.
  • “A Voice of Customer (VOC) initiative should give voice to things that the firm would not normally hear. It should allow a firm to hear, straight from its customers, insightful things that do not surface through conventional marketing research.” – Author Jim Barnes.