CRM Evolution

OUTLINE
1. The Whats & Whys of CRM

- Why the Hype Even Now? - CRM Challenges - Market Share vs. Wallet Share
2. Focus on Customers Pain Points: Molex Case Example 3. Customer Information File (CIF) is a MUST! 4. The Performance Dashboard
- Customer-Driven Metrics & Reward System
5. Management Process is Key: Case Examples

- GE Aircraft Engine Business Group - Enterprise Rent-a-Car - Square D: U. S. Subsidiary of Frances Schneider Electric
6. Summing Up
Lakshmi Mohan Customer Relationship Management 1
CRM Landscape in 2001.

# of times CRM mentioned in the media
only once in 1989 vs. 14,000 in 2000
Percentage of executives expecting to have CRM programs in place according to Bain & Companys Annual Survey of Management Tools
72% in 2001 vs. 35% in 2000 the fastest growing tool in the 8-year history of this survey
CRM Software Market, according to the Meta Group:

$46 B in 2003 vs. $20 B in 2001 Plus CRM Services: At least twice as large
Source: HBR, Feb 2002, p. 102
A Telling Headline.
PeopleSoft sells CRM software to a friendlier IRS
(Computerworld, August 23, 2001)
The deal, valued at more than $10 million, will provide the Internal Revenue Service with the full PeopleSoft 8 CRM suite to make it easier for taxpayers, professional tax preparers and the IRS itself to obtain tax records and other information online around the clock.
The package will enable the agency to create separate tax data Web portals for taxpayers and professional preparers as well as build a private portal for IRS employees. The first phase of the deployment will begin in summer 2002, with full implementation expected by 2004.
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The Benefits.
1. Moving data access online will reduce costs by pushing more customer enquiries to the Web instead of costly telephone interactions with live agents and call centers Get customers out of the call centers and into self-service
2. The decision to use CRM software is part of the agencys desire to modernize and become more customer-friendly. It will enable customers to access the information they want when they need it. I do find it humorous to hear IRS and CRM in the same sentence together. I think its important that the government is realizing that it may have a monopoly but it cant get away with acting like one.
The CRM Imperative

CRM became a Mantra
To boost revenues and profit margins Gain a competitive advantage in an increasingly deregulated and global market place
Allure of CRM is simple

Based on a powerful common sense premise Know Your Customers and Treat Them Uniquely Establish personal relationships with customers Create a loyal following of increasingly profitable customers
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Customer Relationship Management
Why Do CRM?
- Top 3 Rationales from August 2001 Study

1. 2. 3. Increase Customer Retention / Loyalty - 94% Respond to Competitive Pressures - 77% Competitive Advantage from Superior Customer Service - 73%
Source: Survey of 96 Global Firms by The Conference Board, Inc., New York, Aug. 2001
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Why Do CRM?
- A Quote from CEO of i2 Tech
With thin margins and fierce competition for the customers dollar, the efficiency of a companys internal business process does not guarantee success. Instead, the ability to react quickly to changes in the market place and to adapt quickly to customer needs provides the competitive advantage.
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Source: Times of India, June 27, 2003.
But CRM Challenges Business Practices

1. Most companies do not have the information about
customers to establish close relationships.

2. CRM requires companies to use the customer as
the lens to understand and define the marketplace

to manage the business with that customer orientation ... This is difficult since most companies are oriented towards products or finances or markets -
everything but the customer.

Big Challenge to Implement CRM

A radical cultural shift that reshapes a companys sales, marketing, and customer service Unfortunately, it doesnt occur magically once the software is booted up Too often, companies see CRM as software, when it is merely an enabler, a tool in their tool kit
The Big Hurdle: Change Management

87% of respondents in a recent survey conducted by online resource center, CRM Forum, pinned the failure of their CRM programs on the lack of adequate change management
Accentures Study (2001) - Over 400 Companies in 6 Industries

Revealed 21 CRM capabilities that had the highest impact on financial performance, of which:
# 1: Customer Service Single most important factor in customer retention # 2: Motivating and Rewarding Customer-Facing People Matters more than ever
After all, if busy customers can take care of most of their transactions electronically, it stands to reason that, when they take the trouble to seek out a personal interaction, they need a knowledgeable, informed and empowered individual. Logic tells you theres a natural relationship between customers who are happy and well-served and employees who are happy and well-served.
Source: CID Magazine, Aug. 15, 2000
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Putting CRM To Work ...

. . . Like ERP, CRM Systems can be a struggle to get up and running
Meta Group Study (March 2001)

55% - 75% of CRM projects fail to meet their stated objectives, often as a result of sales force automation problems and unaddressed cultural issues - sales people are often resistant to, and even fearful, of using CRM systems. Theyd make comments like I dont have time to enter the information Implementation Costs : Tens of Millions of $
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Some More Sobering Statistics

Gartner Study (2001) 70% of large-scale CRM projects costing more than $50 million and taking more than one year to implement - do NOT achieve project objectives Bains Annual Survey (2001) One in every 5 users reported that their CRM initiatives had not only failed to deliver profitable growth but had also damaged long-standing customer relationships.
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A June 2002 Survey of 23 Siebel Projects
61% had yet to achieve an acceptable ROI after two years

65% had customization problems 78% found it was not user-friendly 57% took longer than planned 55% over budget by a significant amount
Source: Nucleus Research, Inc., Wellesley, Mass.
Siebels Announcement in Oct 2002: Shifting to
- Simplify the large and complex CRM suite

- Make it easier to integrate - Get value in shorter time
Source: Siebel Worldwide User Week in October 2002

A More Pragmatic CRM Scenario

CIO Survey (May 2002)
-
64% are implementing CRM incrementally

49% projects targeted for completion in less than 12 months; 70% in 18 months
Implement in digestible chunks to derive ROI

Update on CRM
Up-and-Down CRM Software Sales (Gartner) - 28% increase between 1999 and 2000 - 25% drop in 2002 - 17% drop in 2003 Was CRM Another Over-hyped IT Investment? - Because most firms failed to reap the expected benefits 2004: CRM Spending Is Picking Up
Source: HBR, Nov. 2004
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What Has Changed?
- A New Realism About How To Deploy CRM 1. Focus CRM on Specific Pain Points
Relatively Narrow Scope; Modest Goals NOT Transform Entire Business! Waste to Create a Real-Time Enterprise
2. Get Data ONLY to Address Pain Points

3. Build on Success of Initial CRM Projects
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CRM: Why All the Hype Even Now?

Customers: Always been the Focus of Business
There is only one valid definition of a business purpose: to create a satisfied customer. (Peter Drucker, The Practice of Management, 1954)
Relationship: The New Focus

A customer becomes more profitable with time because: High acquisition cost exceeds gross margin initially Retention cost much lower Greater share of customer wallet boosts profits
Management: Focus on Maximizing Life-Time Value (LTV) of Customer Relationships

A big challenge to shift corporate thinking from delivering a product to serving a customer
Measure and manage customer profitability
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Become Customer-Centric
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What Is CRM ?
All About Knowing the Customer
Collecting, Analyzing and Acting To Maximize Life-Time Value of Customer Relationships
Key to CRM: Customer Information File (CIF)

One Unified View of Customer Information from ALL TOUCHPOINTS: Field Sales, Telesales, Storefront, Website, Customer Service, Loyalty Cards,.
Measure and Manage Customer Profitability Become Customer-Centric

The Three Phases of CRM

Acquire New Customers - Innovation - Convenience Enhance Profitability of Existing Customers - Cross-selling & Up-selling - One-stop Shop Retain Profitable Customers for Life - Listen & Respond - Achieve Customer Lock-On
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CRM Challenges
I dont know who my customers are
We dont have contact with customers because we sell via channels

Our internal systems dont provide a single unified view of our customers I dont know which customers are most valuable and deserve special attention I dont know why my customers defect
The Components of CRM

Sales force automation
Call center telephone sales
Customer service/call center management

Call centers managing aspects of customer contact
Marketing automation
Campaign management
E-commerce
Field sales Re tail Web -based self service Content management
Third - party brokers, distributors, agents
Field services and dispatch
Data analysis and business intelligence tools
Data warehouse and data cleansing tools

Customers Complaint - No Single Point of Contact

Do not have a 1to1 relationship with the company
Have to deal with several people
Management
The Customer Order Processing
Marketing
Customer Service Inside Sales Outside Sales
Sales Support
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Better Service, Lower Cost - FedEx Integrates Offline & Online Processes
Saw the Net as an opportunity A low-cost alternative to call centers Implemented Online Package Tracking System 5 years ago Improved Customer Service Reduced costs - froze recruitment for call centers Customer Self-Service Concept - Pervasive in Travel Industry - Hotels & Airlines give incentives to customers for online booking - Huge potential in B2B CRM
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Cross-Functional Nature of CRM - Requires Integration of Functional Silos

Web Silo Sales Silo Marketing Silo
Call Center Silo
Customer
Technical Support Silo Lakshmi Mohan Customer Relationship Management
Manufacturing Silo
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Coordinating Touchpoints - Requires Integration of Touchpoint Systems
Web
Telephone
Face-to-Face
Email
Mail
Enterprise
Fax
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Shift Corporate Thinking

From Delivering a Product To Serving a Customer
Mobils Speedpass
- a cylinder-shaped credit card, fits on a key chain - Customer swipes against the gas tank before filling up leaves when done - Saves time - Offers a new level of convenience to customers - More valuable to customers than R&D effort to make better fuel
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General Electric
- Provides Value-Add for Customers
Every employee will understand that success can only come from an inextricable link to the success of our customers. Completed 2000 Six Sigma Projects at the customer, for the customer last year - Took GE resources and applied them to our customers biggest needs using Six Sigma as a foundation. The focus has been totally inside our customer operations. Its not that we know all the answers but were totally committed to finding them; and committed to externalizing all our initiatives for the benefit of the customer. Over the long term, we believe this will differentiate GE in the eyes of the customer.
Jack Welch, Chairmans Letter in Annual Report, Feb 9, 2001 Lakshmi Mohan Customer Relationship Management 28
Acquisition vs. Retention of Customers

1. A customer becomes more profitable with time because:
- High acquisition cost exceeds gross margin initially - Retention cost much lower - Greater share of customer wallet If we dont keep the customer for several years, we dont make money: Lands End CEO
2. Loyal customers are more profitable:

1% increase in sales - To existing customers - profits up by 17% - To new customers - profits up by 3%
Source : Bain & Co. Study
Profit One Customer Generates Over Time

Credit Card $30 42 44 49 55 Auto Servicing 25 35 70 88 88
Year 1 2 3 4 5
Source: HBR, September-October 1990, pp.59-75
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The Profitability Squeeze

In recent work with over 15 major banks in the US, Canada, Latin America, Europe, and Australia, we have found that the top 20% of customers provide 120% to 150% of profits in many bank product lines.
On the other hand, the worst 50% of customers are currently unprofitable to serve, many do not even cover variable costs. For clients with low current value and low potential, the strategy should be to reduce costs of servicing them - use lower-cost channels, reduce credit risk, and , in some cases, fire them !
Two Dimensions of Competition

Customer Needs Satisfied
Customers Reached
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Market Share
Traditional Marketing
Diminishing Returns
Customers Reached
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Market Share vs. Wallet Share

1 to 1 Marketing - Increasing Returns
Customers Reached
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Market Share Focus . . .

. . . Can Hamper Growth
Consider Lego, the Danish toy company
- Dominant player in construction-toys - Market share in 1995 : 72% worldwide; 90% in Europe
BUT..
Children were spending more of their spare time with computers, video games and TV than with toys.
Lego was losing share of childrens spare-time activities.

Legos New Market Space

- Family Edutainment
- Convergence of toys, education, interactive technology, software, entertainment, computers and consumer electronics
- Have fun and exercise the mind

- Get an increasing share of customer spending as children become young adults and then parents - A new product line, Mindstorms, combines hundreds of Lego bricks with gears, motors, light and touch sensors, and a microprocessor, called the RCX for robotic command explorer, that allows users to build their own robots - Young adults and 30- to 40-year-olds use the interactive software too now account for half of Legos revenue
Defining the Market

- GE learns its importance
GEs long-standing management tenet : Must be #1 or #2 in the market place Otherwise, get out of the business Question : What is the marketplace ? Management teams began to define their markets more and more narrowly to assure that their business world fit the number one-or-two share definition. It took a mid-level Company management training class reporting to us in the spring of 1995 to point out without any shyness or sugar-coating that our cherished management idea had been taken to nonsensical levels. They told us we were missing opportunities, and limiting our growth horizons by shrinking our definition of the market in order to satisfy the requirement to be number one or two.
- CEOs Letter in Annual Report, February 2001
GE Redefines The Market

Each business has a 10%-or-less share in the market The # 1 or # 2 Definition
Increasingly Limited Market Size

New Definition Opened the vast opportunity for GEs products and services Our willingness to see it as the better idea was a major factor in our acceleration to double-digit revenue growth rates in the latter half of the 90s.
Customer Lock-In
Customer has no choice until an alternative comes along
Only one supplier with a monopoly stemming from a technology advantage until competitors catch up ! FedEx: Pioneered airbill bar coding in early 1970s for package tracking - Today, even the U. S. Postal Service has it. High switching costs because of customers investment in a suppliers product But, still vulnerable !
G.E. - Bought Oracles ERP package - But, selected Seibel for CRM despite difficulty of linking the two packages
Customer Lock-On
Customer is not captiveCustomer keeps competitors away
- Because of ongoing, superior value delivered by the supplier
FedEx : Shifted to new pastures when competitors caught up Used IT to become a one-stop shop for complete order fulfillment, including logistics and supply chain management Moving bytes, not just boxes Developed a free Web-based guide to international shipping for small and mid-size businesses
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FedEx Delivers Global Trade Manager

A B2B Customer-Facing Web Application
Project started in 1997, launched in August 2000 Helps shippers to prepare the appropriate import/export forms based on the commodity being shipped and the countries of origin/destination Alerts users to : restrictions on shipping certain commodities, if a country is under embargo, and special licensing requirements Determines government charges and fees, including import duty, value-added tax and excise duty, so they can estimate the total landed costs of their package Before: FedEx prepaid duties and taxes for its customers, then billed for reimbursement later, a process that added time and overhead costs
FedEx IT Budget in 2001: $ 1.5 Billion 5000-Person IT Group Worldwide

Source: eweek, Nov. 12, 2001 & Computerworld, March 12, 2002
A Comprehensive CRM System Is A BAD Idea!

Ends up creating an overblown system
Difficult to implement Will not yield payback CRM Done Right! Is It Strategic? Where Does It Hurt? Do We Need Perfect Data? Where Do We Go From Here?
Source: HBR, Nov. 2004
Case Example: Molex

- A Global Manufacturer of Electronics & Fiber-Optic Interconnection Systems
Strategic Pain Point: Order Pipeline

Large Customer Base
15,000 different sales opportunities worldwide at any given moment Used e-mail and spreadsheets to keep track of its pipeline
Data were often weeks out of date

Difficult to set sales priorities to pursue leads with the highest potential Hard to synchronize Molexs global efforts Several Molex locations could be working with same customer in different parts of the world without know it
Molexs CRM Path

2002: Pipeline Management - Visibility for all executives from the CEO on down to see the full range of sales opportunities in real time - Enabled measurement of the real value of these opportunities - Updated information 24 hours a day rather than just a few times a year Payback: 5% Increase in Revenue - Improved order management - More precise sales targets - Better global coordination of inventory and pricing between regions - Use of shared information by sales staff to identify opportunities earlier - Data can also be used to improve budget planning
Molexs CRM Path

Pipeline Management
Lead Management
Cross-Selling
Sales Forecasting
Budgeting
Supply Chain Management
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Micro-Marketing
Shift away from broad-brush national marketing to customized strategies tailored to a regional or local market, to an individual chain or store, or even to a single customer
Feasible only with micro-level information on markets and customers

Michael Dells Principle: De-Average

When youre trying to target profitable segments, averages obscure a lot, and aggregate financial statements are pretty meaningless. Our approach to segmentation is to take really big numbers and de-average them. Until you look inside and understand whats going on by business, by customer, by geography, you dont know anything.
Source: Harvard Business Review, March-April 1998.
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De-Averaging in Practice...
Performance measures in the P&L track - Margins - Average Selling Price - Selling Overheads By - Customer Segment - Product - Country
Dell Manages by Segmentation

Organized initially by Geography
In 97 : by Customer Segments - Totally autonomous
When a business unit grows, segment further to get more focus

- To identify unique opportunities and economics
- To develop people who are very attuned to their market segment.

- Its one way to handle growth. You cant possibly manage something well if its too big. Segmentation gives us better attention and focus.
Dell Manages by Segmentation

Benefits :
- Optimize products to meet customer needs - Segmentation lets you tailor your programs to the customers needs . . . each segment has its own issues . . . In education, for instance, how do you get tech support to a class-room when the teacher doesnt have a telephone ?
Cultural Challenge :
Some people still measure themselves by how many people work for them or the revenue they generate. At Dell, success means growing so fast that we take half your business away. Its a different mind-set.
CIF is a MUST! - But Not Easy ...

1. Customer data resides in a number of silos - Inconsistency makes integration into a single CIF difficult e.g. Customer Name One system : Jane K. Smith Another : Smith, J. K. 2. Who are the profitable customers ? - Need to know who buys X-dollars of Y-products over Z-duration 3. What are the needs of customers ? - Marketing and sales campaigns should be based on needs-based segmentation. For example: Consumer electronics companies tend to segment by age and income Does this relate to buying behavior ? Needs are different for customers who are comfortable with high-tech gadgets and those who are not.
Business Marketing (B2B) Should Know Their Customers Better

Direct Sales Model to Customers Limited Number of Customers (unlike B2C) CIF : Even More Critical YET . . . DATA-POOR about Customers MIS Reports limited to Revenues & Receivables No Information on Profitability or Product Mix Data on Quotations & Orders Lost . . . Are not even captured in MIS Systems
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Business Customer Forums at Dell

To ensure a free flow of information on a regular basis Platinum Councils of Dells largest customers every 6-9 months over 100 customers at the event - One for CIOs and another for technical types 40% of Michael Dells time spent with customers Keeps Dell in advisory role about future of technology Helps customers to anticipate future needs - Also helps Dell in demand forecasting Dell sends top technologists AND real engineers who dont get out to talk to customers - one Dell person to one customer
A STARTING POINT FOR A B2B CIF - For Each Customer ...

. . . Sales : This Year vs Last Year . . . Which Products? # of Orders ? . . . Receivables : This Year vs. Last Year . . . Last Order : How Much ? When ? . . . Quotations Submitted - When ? Value ? Products ? Orders Got ? - Orders Lost ? To Whom ? Why ? - Status of Pending Quotations . . . Who are the Influencers?
Why The Problem ?

External Data on Customers & Competitors is SOFT
- Most Valuable for CRM, BUT DATA IS DIFFICULT TO GET
- Market Research Data Vendors Emerged for Consumer Packaged Goods and Pharma because. Huge marketing budget Relatively easy to get data from retail store audits or scanner data
BIG PROBLEM FOR B2B: WHO IS THE CUSTOMER ?
FORD CISCO BOEING
Auto Dealers
Auto Buyers Air Travelers Investors
Airlines
MERRILL LYNCH
ANOTHER PROBLEM : WHO COLLECTS THE DATA ?
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The Performance Dashboard

- Must Be Customer-Driven
Financial results are the bottom-line measures of business performance. But: If we do whats right for the customers, our market share and our return on assets will take care of themselves (Xerox CEO)
Any cost that does not add value to consumers of the product has to be reduced (P & G CEO)
We did an audit of client experiences with process re-engineering . . . Lots of examples with 60% to 80% reduction in cycle time but only very modest effects at the business unit level because the changes did not matter to the customer. (McKinsey Study)
An Example : Xerox Copiers

Company Strength : Faster delivery than competitors BUT : That was NOT what customers cared about
Customers Concerns : - When would the copier arrive ? Typical Salespersons answer : 2 weeks - Would it be Installed on Schedule ? - In Working Order - Accurate Bill ?
GEs Concept of Span

- Measures the operational reliability for meeting a customer request the time window around the Customer Requested Delivery Date in which the delivery will happen - High Span Poor capability to meet customer need Objective Zero span - Squeeze the two sides of the delivery span - days early and days late - ever closer to the center - the exact day the customer desired RESULTS : Plastics Aircraft Engines Mortgage Insurance
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: 50 days span to 5 : 80 days span to 5 : 54 days span to 1

The GE Process
- In the CEOs Annual Letter ( Feb 2001 )
When the order is taken, that date becomes known to everyone, from the first person in the process receiving the castings, circuit boards or any other components from the supplier, all the way through to the service reps who stand next to the customer as the process is started up for the first time. Every single delivery to every single customer is measured and in the line of sight of everyone; and, everyone in the process knows he or she is affecting the business-wide measurement of span with every action taken. WHAT GETS MEASURED AND REWARDED GETS DONE !
The Problem Today

- Too much financial information . . . You almost drown in it - cant see what is important anymore . . . Not much help to employees on how to improve in their daily jobs - No measurement of drivers of revenues and costs such as : . . . Quality of service . . . Customer retention - Good information alone is NOT enough - it has to be USED ! - Easier to upgrade the quality of information than the management process for utilizing the high-quality information
Critical Success Factors are ...

The key areas where things must go right for the business to flourish
They should receive constant and careful attention from management - Determine the Key Indicators
Measure the performance of each indicator Determine the data needed for each indicator
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Dell: Customer Service is the New Battleground !

The Customer Experience Initiative : May 1998
Encourage every department to win part of the customer experience - sum of every customer contact, includes looking at company advertising, browsing the company Web site, purchasing a system and receiving follow-up support.
State-of-the-art CRM contains all customer inputs : - every customer call; every mouse click; every service call and its resolution - Dell rep can see everything when customer calls Use the Net to automate and customize service like Dell stream-lined and customized PC production - today, a third of Dells customerservice force dedicated to handling queries online
Three Performance Metrics

1. Order and Delivery - % of orders shipped by target date 2. Installation and Operation - % of customers calls to tech support requiring a part dispatch within 30 days of invoice date 3. Service - % of on-site service calls resolved by a Dell Service Partner within 24 hours Bonuses and profit-sharing tied to 15% improvement in performance
Market-based Performance Measures ...

MUST be linked to Reward Systems Measurement and reward systems are critical in developing a market-oriented business. Just as managers will emphasize those things that top managements statements of beliefs and values focus their attention on, they will also do those things for which they are evaluated and rewarded
Source : F. Webster, Rediscovering the Marketing Concept, Marketing Science Institute Working Paper, 1988.
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The Customer is THE Business at Cisco

70% of Ciscos employees have a very significant bonus multiplier tied to the annual customer satisfaction survey Status of Critical Accounts reviewed first at every staff meeting If you have an unhappy customer, they stay on the Critical Account List until the problem is fixed. Every night, Chambers (CEO) gets a personal update on the status of every critical account. Senior VP of Customer Advocacy reports to the CEO IT Reports to Customer Advocacy, previously Finance
How Wingspan Bank.com Does it

- Online Offshoot of Bank One Corp
Its not about having a better CD rate, Its about customer service !
Created an iBoard of Directors - Customers who offer advice on products and strategy Emphasis on Service is Pervasive Applicants for home equity loans get answer in 60 seconds Every employee has to listen to customer calls for atleast 1 1/2hours a month Customer Experience departments and Customer Advocacy teams to quickly address complaints and suggestions Top executive team reads at least 20 customer e-mails a day Invites Customer Feedback Our customers have a great desire to improve the bank, and we act on their ideas. - Software changed to allow users to access all their accounts at once, with single sign-on - Enable download of financial data to customers Quicken software
Three Components of the Management Process

1. Organizational Orientation
Makes customer retention a priority Gives employees wide latitude to treat customers differently
2.
Configuration (a term used by Prof. Day) *

Organization structure and accountabilities Metrics and incentives for building relationships
3.
Information about customers

In-depth, relevant information available through IT systems in all parts of the company
* George S. Day, Creating a Superior Customer-Relating Capability, MIT Sloan Management Review, Spring 2003
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Orientation
- Customer Retention is High Priority for EVERYONE
Not just a concern to be delegated to marketing or sales
Openness for sharing information about customers

no one function can be allowed to own the customer knowledge about customers has to be shared with other functions
Different Customers should be treated differently based on their long-run value.

IBM made it a company value to take on only the best customers and to do everything possible to cater to their needs.
Configuration: Aligning Metrics, Incentives & Structures

Case Example: GE Aircraft Engine Business Group
Problem: Discovered that its jet engine customers were not happy with the service component even though the Six-Sigma quality metrics showed the opposite.
Step 1:
In-depth study of what customers really wanted in terms of responsiveness reliability value added by the services help in improving their productivity
Step 2:
Changed the organization structure from functional departments such as sales, marketing and product support - Reorganized around customer-facing processes rather than functions - Corporate VP assigned to each of the top 50 customers, so they had a clear channel to the top of the organization
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Step 3: Created a value-add for the customers in the area they cared the most help to improve their productivity - Assigned GE leaders of their Six-Sigma quality program to customers site to work hand-in-hand on engine-service projects and parts inventory management - Learned that the Net was the best tool for personalizing the delivery of parts
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Step 4: Step 5: Implemented the Net connection Incorporated customer-service metrics into the employee evaluation criteria Instituted rewards for superior service
Step 6:
RESULT: Consistently high ratings on a range of customersatisfaction metrics
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Driving Home the Service Ethic

- Enterprise Rent-a-Car
A second generation family business
Founded in 1957 leasing cars Added car rental in 1963
1980: Fleet of 6,000 rental cars 1989: Expanded to 50,000 cars 2003: Largest US car rental company
- $ 6B Revenues; 500,000 Cars
Source:The Financial Times, June 3, 2003
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Strategy
Identified a neglected market
renting replacement cars to people involved in an accident, breakdown, etc.
Not an easy market to serve

day-to-day demand is unpredictable unlike airport rentals where most customers book well in advance agitated or distressed customers other parties involved in the process - insurance companies, body shops, mechanics
Lot more complicated than handing out keys at the airport

What Makes IT Work?

- Culture & Management Process
Dad (the founder) has always been passionate about customer service that rubbed off on all of us. Most of the management team came up through the business Mix of central control where it matters most and decentralized empowerment of Branches Each of the 5,000 Branches is a profit center Monthly financial statements for each Branch show all the numbers right down to what it costs to wash a car plus Customer Satisfaction scores The company is a confederation of these small businesses we view ourselves here (at Corporate) as a switching station for the best ideas
Textbook example of how to grow without losing that entrepreneurial edge

Decentralization Works Only If

Line Mangers have training and support to take decisions Recruit bright, entrepreneurial graduates straight out of college and funnel them through the training programme developed by Enterprise
Boundaries and incentives to encourage the right kinds of decisions are carefully designed
Every Branch gets a Customer Satisfaction Score which determines promotions, not financial performance
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The Goal of the Company

- Enterprise Service Quality Index (ESQI)
I went through a period of healthy paranoia in the early 1990s. We were a billion-dollar company, growing fast; profitability was good. But I was picking up background noise that suggested our customer service had started to slip. The ESQI was a breakthrough for us. Over the years we have refined it and refined it until we now ask only two questions: are you satisfied with our service? And would you come back Enterprise CEO
Customers who say they are completely satisfied with Enterprises service are three times more likely than others to come back
Rising ESQI scores give me more confidence in the future than our strong cash flow or gain in market share. ESQI does not mean we can ignore other things but it will keep us on track.
Square D Case Example

- Getting the Management Process Right First
Background:
A 100-year-old maker of electrical and industrial equipment Acquired by Frances Schneider Electric in 1991 Integration with Schneider completed in 1993 Goal: Double return on capital by 2000 Strategy: Become Customer-centric
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Changes in the Management Process

New Organization Structure:
Companys three BUs electrical distribution, industrial control and automation, and transformers reorganized around customer segments in four main markets - industrial, residential, construction and OEM Remaining functions reorganized to support these four Divisions
New Performance Measurement & Incentive Systems:

No longer based on # of units sold Targets: # of customers acquired; profit margins
Changes took 3 years and were championed straight from the CEOs office
Investment in IT
To Upgrade the Customer-Facing Processes
Order Management System
$ 75M in 1996 Enables Sales Engineers create proposals for Customers based on what the factory floor could deliver System implementation driven by top management: Took 3 years Active involvement of line managers for months at a time to understand software implementation issues
Customer Support Service

18 far-flung call centers were consolidated into one customer information center for North America in 2000
More High-TechTo Secure Customer Loyalty

Design Self-Repair Products
Patented a technology to build Web servers into their equipment to identify problems almost as they happen
Example
Monitor at a petrochemicals plant detects a power surge automatically kills the utility feed. Web server linking the equipment senses damage to any drives (even if a backup generator has taken over). Server emails Square D for replacement drives and contractor asking for an engineer to come to the plant the next day to install them. Next morning, a Square D manager comes to the plant to discuss the event with customer and ensure that contractors engineer has installed the replacement drives
First Wave of CRM - Why It Did Not Deliver ROI

Shelfware Problem: 42% of CRM Goes Unused
Vendor offeres a larger discount to buy software licenses which businesses do not need immediately
Buyers enticed with economies-of-scale rationale less expensive to buy now than to add on later
Unforeseen cost Maintenance -- Buyer must pay for shelfware too
Lakshmi Mohan
81
Are CRM Vendors to Blame?

CRM vendors were their own worst enemy when it came to CRM shelfware. First, they pushed users to all you can eat software contracts that would take years to implement. Sure, you get a bigger discount but the vendor walked away with all your money with no real incentive to help make it work The biggest problem was the way vendors originally convinced the market that CRM was a software project, not a business project. When companies spent millions on the first phase and couldnt find the benefits, they left the rest of the software on the shelf VP, Giga Information Group
Source: CRMDaily.com, March 7, 2003
Another Reason
Major Focus of First Wave: Operational CRM
Dealt with Automating Front-End Application e.g., Sales Force Automation, Call Center Integration
Generated tons of customer data

Only limited use made of the data
Operational CRM did not provide reporting capabilities, and if it did, it was 14 canned reports that were unintelligible and difficult to manipulate and customize.
Some Survey Findings

Estimated worldwide spend on new CRM licenses in 2005: Over $3 B
Total spend including maintenance, integration, and related hardware & software: Over $12 B
BUT, only 10% of business and IT executives in the survey strongly agreed that the business results they expected to achieve had been met or exceeded. Forrester Report Despite billions in CRM investment by the financial services industry, companies have done little to improve the customer experience. Fewer than 60% surveyed have broken down their stovepipes of product lines, and can communicate effectively the complete view of the customer across their organizations. BearingPoint Study
First Wave of CRM: Operational CRM

Automating marketing, sales and service processes Goal: Operational Efficiency Hands and Feet Doing the Day-to-Day Work But, if calls to the call center are limited to 3 minutes or less, would it result in more loyal, profitable customers? Or, does tracking deals with sales force automation actually lead to more effective selling?
Next Generation CRM: Analytical CRM

The Brains of the Operation
Converts Customer Data into Customer Intelligence

For Example: How profitable are your customers? How recently and frequently have they made purchases? Who are our best customers and how can we retain them? Use Customer Intelligence as a strategic initiative to understand and respond to high-value customers and reduce customer churn rates Without the analytics, what companies have is some pretty expensive Rolodexes. The Limited: Increased Cross Selling yielded ROI of 400% on ACRM
Analytical CRM
- Key to Becoming Customer Centric

Aberdeen Groups 2005 Survey Over 750 companies across several industries 74% of Best-in-Class Firms are focusing on Analytical CRM IDC Report CRM Analytics has fastest growth rate of any segment in analytics software: 12.9% CAGR Median ROI of 55% by firms who have successfully used Analytical CRM Customer Centricity has become a rallying cry today A product or price advantage can be duplicated but a strong customerdriven organization is NOT easy to replicate Analytical CRM injects the voice of the customer from the interactions at all touch points into the process for building and sustaining profitable customer relationships.
A Success Story: Dreyfus Corp.

Manages $165 B in mutual fund assets Objective:
Reduce churn Increase Wallet Share of current customers
Findings from Customer Analysis

Several red flags such as sudden increases or decreases in a customers contact with Dreyfus More transactions between a customers funds
Analytic Model for Proactive Marketing

Identified potentially restless customers Targeted them with tailored sales calls
Bottom-Line
Reduced Investment Redemption Rate from 20% annually to 7% 50% fall in customer attrition
Lakshmi Mohan
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Morgan Stanley Case Example - Did Analytical CRM FIRST!

Individual Investor Group
13,000 financial advisors, 450+ Branches, 3 M Customers

2001 Goal: Product-Centric to Customer-Centric Business Acquire Targeted Clients Increase Wallet-Share of Existing Clients Retain High-Value Clients CRM Strategy Lets get our analytical house in order before venturing into an operational CRM platform. Leveraged available data to build predictive models for refining its marketing efforts
Lakshmi Mohan
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Morgan Stanley Application Overview

Based on customer data in mainframe-based data silos Performs an Extract-Transform-Load (ETL) process monthly to load Customer Data Mart A sophisticated householding algorithm groups all data by address to create an individual customer ID Predictive modeling suggests the appropriate level of service and offerings to each client
How It Hangs Together!
Lakshmi Mohan
91
Business Value of Customer Analytics

Think about all the money youre saving not going after customers that the model says will have a very low response rate. The marketing campaign based on a predictive model of propensity to purchase is much different from how you ran it in the past when campaigns were based on selecting media for the targeted audience. Given the pressure our industry was under the past few years, Operational CRM wasnt at the top of our agenda.
If youre starting from scratch, do the analytical first . . . It is not as expensive. . . . You get information you really need to run the business. . . . Hence you get immediate payback. . . . Youre perfectly positioned when you do roll out Operational CRM.
Mazda (U.S.) Case Example

Departments are run as individual fiefdoms, each with data silos and different CRM programs, all uncoordinated Marketing dept. : Conducts direct mail and email campaigns Service dept. : Sends out coupons and reminders Parts dept. : Runs its own promotions Customer Affairs Office : Has its customer surveys We identified over 60 different programs that touched the customer in one form or another. There was a lot of overlap and duplication Started the CRM program in mid-2000 to bring some order to the customer contact information and eliminate the costly duplication of effort Determined to avoid the problems inherent in CRM projects that are too big to manage We are going into this with realistic expectations. Well take baby steps and build some successes and also gain some returns on the investment over the first year or two.
Mazdas CRM Implementation

Got buy-in from the top on down to handle the political challenge to get depts. to change their long-time habits Licensed CRM software from E.phipany System integrator, Wheelhouse Corp., installed CRM in 14 weeks. Savings from changes made in the first 6 months: $ 1 M/year
Big Payoff: Clean Integrated Database

Before: 4 separate databases for Marketing, Vehicles, Service & Warranty, Call Center Data Cleansing: A major effort For example: Marketing database was sorted by customer name while Vehicles database was sorted by vehicle identification #. Marketing database was also full of errors and duplicates
Source: Computerworld, Feb 18, 2002
Real Value Of Mazda CRM: Through Analytics
Build profiles of our car owners
Segment by Value Tiers Build Life-Time Value Indices and Loyalty Indices Develop Measures of Retention Risks
Ex: System can identify a loyal Mazda owner ( because she has purchased multiple Mazda cars) but is having service warranty problems. We can identify her as a retention risk and take proactive action right away to keep her as a loyal customer rather than let her fall off the radar screen Help the call center representatives to get a complete view of each callers history with Mazda computer screen will show what vehicle the customer currently owns, vehicles owned before, their service history, their previous contacts with Mazda and whether there is a current promotional offer that they are eligible for and that we can offer while they are on the phone.
Make the call center a more proactive channel rather than just a Consumer Affairs line.
Summing Up CRM is a Process

Identify High-Value Customers Build Customer Loyalty to grow Revenues Reduce Costs through Micromarketing Create a Customer-Focused Organization
IT can Help But There are Non-IT Hurdles

The Non-IT Hurdles
1. Getting the Right Data 2. Organizational Resistance 3. Performance Measurement and Reward Systems
Lakshmi Mohan
97
An Ad from a CRM Software Vendor

CUSTOMERS ARE AN INVESTMENT. MAXIMIZE YOUR RETURN. CRM lets you capitalize on every customer interaction across your enterprise.
provides real-time information on all aspects of your customer relationships integrates business processes seamlessly across your organization to determine the most profitable ways to manage customers
turns every point of customer contact into a profit opportunity

Which of the Claims Made in This Ad are True? Which are Not?

CRM Evolution

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CRM Evolution

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OUTLINE

1. The Whats & Whys of CRM

5. Management Process is Key: Case Examples

CRM Landscape in 2001.

CRM Software Market, according to the Meta Group:

The CRM Imperative

Allure of CRM is simple

Customer Relationship Management

- Top 3 Rationales from August 2001 Study

Customer Relationship Management

Source: Times of India, June 27, 2003.

Customer Relationship Management

But CRM Challenges Business Practices

customers to establish close relationships.

the lens to understand and define the marketplace

everything but the customer.

Big Challenge to Implement CRM

The Big Hurdle: Change Management

Accentures Study (2001) - Over 400 Companies in 6 Industries

Customer Relationship Management

Putting CRM To Work ...

Meta Group Study (March 2001)

Some More Sobering Statistics

Customer Relationship Management

A June 2002 Survey of 23 Siebel Projects

61% had yet to achieve an acceptable ROI after two years

Siebels Announcement in Oct 2002: Shifting to

- Simplify the large and complex CRM suite

Source: Siebel Worldwide User Week in October 2002

A More Pragmatic CRM Scenario

64% are implementing CRM incrementally

Implement in digestible chunks to derive ROI

Source: HBR, Nov. 2004

Customer Relationship Management

What Has Changed?

2. Get Data ONLY to Address Pain Points

Customer Relationship Management

CRM: Why All the Hype Even Now?

Relationship: The New Focus

Management: Focus on Maximizing Life-Time Value (LTV) of Customer Relationships

Customer Relationship Management

Key to CRM: Customer Information File (CIF)

Measure and Manage Customer Profitability Become Customer-Centric

The Three Phases of CRM

Customer Relationship Management

We dont have contact with customers because we sell via channels

The Components of CRM

Customer service/call center management

Third - party brokers, distributors, agents

Field services and dispatch

Data analysis and business intelligence tools

Data warehouse and data cleansing tools

Customers Complaint - No Single Point of Contact

Have to deal with several people

Customer Service Inside Sales Outside Sales

Customer Relationship Management

Customer Relationship Management

Cross-Functional Nature of CRM - Requires Integration of Functional Silos

Call Center Silo

Coordinating Touchpoints - Requires Integration of Touchpoint Systems

Customer Relationship Management

Shift Corporate Thinking