Keeping Global Leadership in Focus

Transcription

1 Featured Customer: adidas-salomon Identifying Return on Investment from mysap CRM Solutions volume two number 10 dec 2003 Keeping Global Leadership in Focus adidas realizes 26% IRR on its mysap CRM investment G lobally recognized adidas-salomon (adidas) touts a memorable heritage and a brand name that has stood for excellence in sports equipment for nearly a century. The company s founder, Adolf ( Adi ) Dassler, began crafting shoes in His vision: provide every athlete with the best footwear for his or her individual sport. At the 1928 Amsterdam Olympics, German athletes first displayed his shoes to the world. At the 1936 Olympics in Berlin, American Jesse Owens won four gold medals in Dassler s shoes. From the 1950s through the 1970s, adidas boldly led the global athletic shoe market. In the late 1970s, rising competitors Nike and Reebok overtook the budding U.S. market, offering fashion-oriented alternatives to the emerging women s and under-25 youth markets. Powered by U.S. sales, adidas challengers soon headed the pack and drove the global market. adidas saw its market share decline, a trend that persisted through the 1980s and unseated the company from its top spot. In the early 1990s, the competition also captured portions of the European market, pushing adidas to a financial loss. During the mid-1990s, adidas launched several initiatives to spark recovery and regain the number one position. In one such move, adidas ranked retailers, its primary customer group, according to their value to the firm. This allowed adidas to better deploy resources to varying levels of retail accounts. As part of this plan, in 1995 adidas created the Compact Service group, an inside sales team charged with building profitable relationships with small retailers. These initiatives helped stem decline and propel adidas to the number two athletic shoe manufacturer in the world. adidas makes its move With momentum in hand, in 2001 adidas initiated a new plan to capture significant earnings growth, increase market share and re-capture the top global spot. Once again, retailer relationships would be vital to success, and Customer Relationship Management (CRM) emerged as the answer. The plan was to provide Compact Service sales agents with rich customer profiles on small- to mid-sized retailers, complete with recent order and interaction history. By using CRM to focus on this key retailer group, adidas sought to strengthen market share and support the journey back to number one. To enable the initiative, adidas implemented mysap CRM Customer Interaction Center (CIC) in January adidas selected Area Central, which includes Germany, Austria and Switzerland, as the first region for implementation, serving as a pilot for further potential rollout across Europe. To date, adidas has achieved an Internal Rate of Return (IRR) of 26% from its mysap CRM investment, fueled by a net operating benefit of 822,000 on an investment of 706,000. Contents adidas At a Glance 2 Changing the Rules: A Strategic Shift Toward the Customer 3 Technology Needs and Clear Choices Emerge 5 The adidas SAP IT Landscape 5 Sales: Targeted, Productive 6 The Value of Customer- Focused Service 6 The ROI of CRM 8 The adidas Future: Leading the Pack and Beyond 9 The 8 Point Takeaway 10 The CRM ROI Review is published by Peppers & Rogers Group, 20 Glover Ave., Norwalk, CT For more information, please call SAP, or visit customersuccess/roi.asp Please refer to material no For our summary of this ROI Review, please refer to material no

2 a d i d a s adidas Corporate Overview F ounded by Bavarian shoe designer Adi Dassler, adidas is one of the world s most recognized brands. From the 1950s through the 1970s, adidas drove the world s athletic shoe market with its product originality. During that time,adidas grew exponentially from a small,german,family-owned business into a multi-billion dollar, global sporting goods enterprise. Building its brand on passion for sport, adidas prides itself on an unrelenting work ethic, its strong international roots, and its active management style that helped establish several decades of industry leadership. In fact, it wasn t until the late 1970s that competitors Nike and Reebok began to unseat adidas as the world s top athletic goods provider. Armed with a goal to re-establish adidas as the leading global sports brand, adidas-salomon has spent the last decade fighting its way back to pre-eminence. The company s tradition of product excellence will play a key role in getting there. adidas is well known throughout the world for its product range that extends from basketball, soccer, fitness and training shoes to bags and equipment. It is currently the number two sporting goods manufacturer in the world. adidas-salomon achieved a 7% increase in sales from 2001 and was the best performing stock on Germany s DAX in 2002, with a mere 2% decline even as the index slumped 44%. In 2002, the company garnered 6.5 billion in revenue. The adidas brand alone comprised 78% of sales in 2002, with a handful of other brands completing the mix. The company s products are sold in over 160 countries, with Europe and North America accounting for 49% and 30% of business respectively in adidas distributes 90% of its products through retailers, while 8% is sold via its own retail outlets. In addition to its headquarters in Herzogenaurach, Germany, adidas owns 114 global subsidiaries. The company manufactures athletic gear under other brand names, such as Salomon skis, snowboards and inline-skates, TaylorMade golf clubs and Mavic bike components. adidas holds approximately 700 patents and other industrial property rights. adidas AT A GLANCE Founded: 1948 Based: Herzogenaurach, Germany SAP Installed Solutions: SAP R/3, mysap CRM Number of mysap CRM Users: 160 Shareholders: 45,422,500 shares outstanding at year-end 2002 Employees: 14,716 (2002) Sales: 6.5 billion (2002); 1-year sales growth adidas-salomon group: 7% Operations: adidas has 114 global subsidiaries in addition to its headquarters in Herzogenaurach, Germany. Business and products: adidas is known for its athletic shoes, including football, running, basketball and tennis. The company also manufactures athletic apparel and gear such as Salomon skis, snowboards and in-line skates, TaylorMade golf clubs and Mavic bike components. Key executives interviewed at adidas: Gerben Otter, Chief Information Officer Michael Rupp, Managing Director Area Central Alain Brouhard, VP, Commercial Operations, EMEA Hans Ruprecht, Sales Director, Customer Service Thorsten Ganzlin, Head of Compact Service Klaus Vogl, Head of Architecture, Global IT Dave Webb, CRM Program Manager Klaus Bogner, Application Development and Services Manager, Global IT Raphael Lefort, Business Development Director Gregor Koelchen, Corporate IT Senior Controller 2 Copyright 2003 SAP AG. All rights reserved.

3 Driven by a desire to help all athletes committed to performance, adidas manufactures equipment for what some consider fringe sports. Changing the Rules: A Strategic Shift Toward the Customer T he development of CRM at adidas traces its roots to the mid-1990s.at that time, the executive team enacted three initiatives aimed at renovating the declining business. First, the manufacturing base was moved to Asia to capture cost advantages. Second, the marketing budget was significantly increased to strengthen global brand. The third initiative involved building relationships with retailers, the primary customer group for adidas. Company executives believed this would provide a distinct advantage in terms of allocating internal resources toward key customer groups and improving sales. Insight into value drives change To accomplish its goal, adidas separated its vast customer base of retailers into three basic groups distinguished by their value to the enterprise: major accounts, large retailers and small- to mid-sized retailers. The company then developed different treatment strategies tailored to each group. The strategies varied in terms of defined support levels, sales focus and value-added service provisions. This level of differentiation also allowed adidas to more efficiently allocate resources to individual retailers. For instance, explains Hans Ruprecht, Sales Director, RO I RUNDOWN Compact Service sales agents use mysap CRM CIC to make targeted product recommendations to customers, resulting in 257,000 in revenue contribution through Customer Service, With this more efficient structure, certain field sales agents could be reallocated to spend more time cultivating larger accounts by providing them with more individualized service attention. In 1995, the Compact Service group was created as an inside customer sales team charged with serving the needs of the small retailer group. Today, Compact Service maintains that focus, striving to meet the product and information requirements of approximately 3,700 retail customers. Agents provide three forms of support: collecting orders during quarterly pre-order phases; proactively calling retailers at the end of a pre-order phase if orders have not been placed; and advising retailers at adidas-sponsored product presentations in regional showrooms. Using customer needsbased strategies and CRM with our best accounts is key to increasing both profitability and growth. Raphael Lefort Director of Business Development Customers take center stage; Compact Service rises up During the late 1990s, the Compact Service group grew steadily in importance. So much so that the group emerged as an important focus of a new, enterprise-wide strategy in During that year, management launched an aggressive growth strategy with a clear purpose in mind: to win back the number one global market position. To get there, adidas targeted a significant increase in earnings growth in the coming years. A renewed focus on small retailers made Compact Service a important player in achieving that earnings target. adidas believed that deeper and more cost effective customer relationships with these retailers would provide a distinct advantage. While its 3

4 a d i d a s T H E R O A D B A C K T O GLOBAL LEADERSHIP present Strategic Goal Attain first class market position Shift focus to customers Achieve profitable and sustainable growth via customer orientation Initiatives and Focus adidas has more of a product orientation than a customer orientation adidas develops a broader international group Move from collecting orders to serving customers Establish Compact Service (1995) Create 24 hours immediate order service Identify and prioritize customer-focused strategic initiatives Enhance Compact Service with mysap CRM adidas is squarely focused on regaining the rank of number one athletic goods manufacturer in the world, a position it previously held for several decades. To help achieve that goal, adidas established the roadmap above, with the defining characteristic being the initiatives designed to enable key strategic objectives. To date, adidas has hit its targets, including the recent rollout and utilization of mysap CRM within the Compact Service group. major competitors neglected or had third parties maintain their relationships with small retailers, adidas changed the rules by focusing on this group. The improvement of these relationships is critical to our future growth, affirms Ruprecht. Small retailers are our heritage and our vehicle to secure broad accessibility of our brand toward the consumer, adds Alain Brouhard, Vice President of Commercial Operations, EMEA. In 2001, a CRM strategy for unlocking the revenue potential of these small retailers was formulated. The plan was to ramp up the relationship-building capabilities of the Compact Service group. The inside sales agents were to be provided with robust customer profiles on individual retailers. Profiles would contain a product purchase history, a recent order history and service information. Each customer data point would be designed to assist agents in maximizing the revenue potential of each interaction. A second part of the CRM strategy was to automate the new, customer-focused processes in order to capture costsaving efficiencies without sacrificing customer intimacy. We set out to lower our cost to serve these retailers while capably meeting their needs, says Thorsten Ganzlin, Head of Compact Service at adidas. Striking the balance between capturing efficiencies and incorporating customer-focused processes to meet customer needs is paramount, adds Michael Rupp, Managing Director Area Central. Focusing only on the improvement of efficiency is not enough, he says. The key factor is the quality of the most important customer relationships. 4 Copyright 2003 SAP AG. All rights reserved.

5 Having users involved on the project team was critical because it helped IT make sure it was delivering what the users needed. Dave Webb, CRM Program Manager Technology Needs and Clear Choices Emerge a d i d a s A chieving these CRM goals within the Compact Service required new technology. With the existing legacy system, Compact Service agents could not engage in any of the customer-focused tasks set out in the CRM strategy.access to customer purchase history, order history or recent service history was limited. Without a real-time understanding of a customer s interactions, explains Ganzlin, agents could not conduct the most effective sales conversations and sales per retailer would have dropped rapidly. Agents also had to manually generate thousands of invitations to retailers for showroom product presentations, and were unable to centrally track responses. Inefficiency was proving costly and revenue opportunities were being lost. From vendor selection to rapid rollout adidas chose mysap CRM and specifically the Customer Interaction Center (CIC) solution to tackle these challenges and execute its CRM strategy. mysap CRM was the optimal choice since it would connect to the company s existing R/3 Enterprise Resource Planning (ERP) system. We chose mysap CRM because it easily met the requirements of our retailer strategy and could be integrated into R/3, says Gerben Otter, Chief Information Officer (CIO). The implementation began in January After just 10 weeks, the mysap CRM Compact Service pilot went live in Area Central. Klaus Bogner, Application Services and Development, Global IT, attributes the success of the rapid rollout to the diversity of the project team. Business and IT stakeholders were represented on the project team, which eliminated unforeseen gaps and problems, says Bogner. While the core team consisted of representation primarily from Area Central, it also included representatives from the UK and Iberia to provide input. Inclusion of these members was strategic since they would be intimately familiar with mysap CRM when the larger European rollout occurred. The final component to the project team was the mysap CRM users. Having users involved on the project team was critical, adds Dave Webb, CRM Program Manager, because it helped IT make sure it was delivering precisely what the users needed. THE adidas SAP IT LANDSCAPE! Computer Telephony System Technology Integration Server CRM mysapcrm 3.C M I D D L E W A R E Customer and transactional information Link for reporting ERP SAP R/3 (AFS) Within the Compact Service group at adidas, inside sales is the focus. This means building more profitable relationships with small- to mid-sized retailers. The rollout of mysap CRM and its integration with the existing SAP R/3, data warehouse and CTI technologies have played a critical role in empowering Compact Service agents to carry out its mission. Quick access to relevant and up-to-date customer data on individual retailers has allowed the inside sales agents to make targeted cross-sell and up-sell recommendations while capturing cost-saving efficiency gains. Data Warehouse 5

6 a d i d a s Sales: Targeted, Productive a didas pilot implementation of mysap CRM CIC has already generated slightly over 1 million in benefits. The availability of more detailed and integrated customer data, combined with the elimination of manual processes, has helped Compact Service profitably contribute to adidas enterprise-wide growth goals. Before mysap CRM, the Compact Service legacy system could not efficiently or adequately support the department s order taking and service activities. Over the years, an increasing number of customers had been transferred from field sales to the Compact Service group, making it difficult for agents to efficiently manage workflow. Agents had to write long texts to capture a customer interaction and manually process customer orders. Also, retailer interactions and order histories were not automatically linked, prohibiting a 360-degree view of the customer. mysap CRM has eliminated these obstacles. CIC automatically creates individual customer profiles that connect interaction records to customer orders. Agents can now view information about a customer s ordering patterns and history in a single profile, making it easy to up-sell and cross-sell relevant products during the pre-order phase. THE VALUE OF CUSTOMER-FOCUSED SERVICE C ustomer service centers or call centers are often the prime targets for CRM applications. Yet, using CRM in the customer service center does more than just automate processes. The customer service function or department that is most often on the customer contact front lines can play a significant role in contributing to the business improvement process for all functions. In order for the function and the people in these roles to have greater impact, businesses need to make customer responsiveness a genuine and primary goal. This is where applying customer-based concepts internally can have an even greater impact on external customer strategies. The customer service function should be a collaborative team working to address customers needs. Hans Ruprecht, adidas Sales Director and Head of Customer Service believes, CRM is not just an IT tool in the customer service center, but a comprehensive philosophy. Our customer service representatives are motivated to understand the spirit of the customers. Ruprecht emphasizes that his employees share a collective vision of surprising and delighting the customer. Managing a team of 150 representatives centralized at the company s headquarters in Herzogenaurach, Germany, Ruprecht oversees customer service operations for Area Central, adidas regional classification for Germany, Austria and Switzerland. Ruprecht makes it a point to empower reps to operate with a customer focus. With the implementation of mysap CRM, for example, we made sure to institute comprehensive training that focused not just on the technical aspects, but on understanding how a customer-focused philosophy can benefit them and adidas as a whole. Ruprecht also developed innovative ways of involving representatives in the learning relationship with customers. Each rep is on a customer extranet with a picture and small CV. Retailers have access to this information and know with whom they are speaking, giving a face of adidas to the customer. Ruprecht notes that this type of involvement allows reps to feel more critical to the company s customer focus and enables them to participate in a valuable way. The importance of developing a customer-focused culture is evident in the department s low turnover rates. We have high stability in personnel in the customer service area, which helps us continue to know our customers personally, claims Ruprecht. And, in turn, our customers know and depend on us. To ensure this level of personal focus continues over time, the customer service department created an employee philosophy and guidelines to guide individual employee decisions. 6 Copyright 2003 SAP AG. All rights reserved.

7 adidas-salomon strives to be the global leader in the sporting goods industry with sports brands built on a passion for competition and a sporting lifestyle. The result has been improved sales competence with key small retailer customers. Many retailers benefit greatly from a Compact Service agent s support to determine the accurate quantity for the upcoming season, says Ruprecht. For example, we know how many soccer balls a retailer pre-ordered for the World Cup 2002, so we can recommend an accurate quantity for the European Championship as well. Color codes on the CIC customer profile screen indicate the direction of a customer s ordering trend at the product line level. Agents can drill down on this information to motivate a customer to increase the order. If a retail customer has been purchasing less, the agent can interact with the customer to find out why and make targeted cross-sell or up-sell recommendations based on that feedback as well as previous purchases. If the customer trend is going up, the agent can adjust recommendations accordingly to keep purchase levels high. RO I RUNDOWN More efficient workflow in Compact Service enabled by mysap CRM allowed adidas to capture 758,000 in cost reductions through Providing a unified face to the customer In addition to collecting pre-orders from retailers, Compact Service agents organize and execute adidas showroom presentations, held bi-annually in different regions throughout Germany. The objective is to present the upcoming season s collections and offer retailers advice about placing orders. It also allows retailers to meet their Compact Service agent, giving the retailer a face from adidas. Agents send invitations to more than 2,500 retailers and approximately 1,000 attend each year. Prior to mysap CRM, invitations were not personalized and each retailer could choose the time and location to attend. While it gave retailers flexibility, it presented numerous disadvantages to the Compact Service team. Retailers were not required to respond to the invitation, so the number of attendees was unpredictable. Capacities could not be planned accordingly and agents were unable to prepare for individual sales conversations, resulting in potential lost revenue. Additionally, the administration of the invitation process was tedious and costly. Three different Excel lists had to be produced to ensure communication within the team. Today, attendee lists are stored in a central customer database and linked to mysap CRM. Agents can sort lists according to various criteria, such as location or sales amount. Each retailer receives a personalized invitation to one particular showroom and must respond to confirm attendance. Invitation responses are recorded in the customer s profile, which is linked to the central database. Now that agents know the specific retailers planning to attend each show, Compact Service agents can arrange and prepare for individualized, face-to-face talks held at the show. This is accomplished by using information stored in the retailer s profile, including past order history, return patterns and current product needs. We must all be in the development of good customer service and increased customer focus. This will make our company the best it can be. Hans Ruprecht Sales Director, Customer Service 7

8 a d i d a s The ROI of CRM a didas CRM investment has already paid measurable dividends. To date, adidas has achieved a 26% Internal Rate of Return (IRR) on its investment in mysap CRM CIC. The IRR is based on a net operating benefit of INVESTMENT BREAKDOWN 15% 6% 5% 74% Licenses 5% Training 6% The cost categories of adidas investment in mysap CRM include licenses, hardware and software, training and consulting. Hardware/Software 15% Consulting 74% 822,000 on a technology investment of approximately 706,000. The overall investment includes software, hardware,license fees,consulting services and training.benefit areas include: Cost savings from automation of manual processes Detailed and up-to-date customer profiles on individual retailers have improved workflow in Compact Service. Using mysap CRM CIC, agents can build deeper relationships with retailers while maintaining a high call volume and order close rate. Through 2003, efficiencies contributed over 758,000 to the total benefit calculation. Increased revenue from Compact Service Compact Service was successful in contributing approximately 257,000 to the bottom line through adidas can use mysap CRM CIC to make relevant cross-sell and up-sell recommendations that increase sales. Accurate purchase histories from Compact Service help revenue by allowing adidas to adjust production volume to more accurately reflect anticipated demand. THE ROI OF CRM * Through 2003, adidas achieved a 26% Internal Rate of Return on its investment in mysap CRM. Initial Year Year Total Direct Investment Total Initial Cost ( ) -706, ,108 Attributable Costs Operating Costs ( ) -64, , ,204 Attributable Benefits Cost Reductions ( ) 252, , ,250 Improved Contribution 75, , ,2798 Net Change in Cash Flow after CRM ( ) -442, , ,217 ROI Calculation: IRR calculated 1 Year Post Implementation 26% 8 Copyright 2003 SAP AG. All rights reserved. *See ROI methodology on p 11.

9 Small and medium retailers are our heritage and our vehicle to secure broad accessibility of our brand toward the consumer. Alain Brouhard, VP, Commercial Operations, EMEA The adidas Future: Leading the Pack and Beyond B ased on the success of the Area Central CRM pilot, adidas plans to rollout mysap CRM s CIC component throughout Europe and the U.S. in the next 18 months. In 2004, the company also plans to deploy a mobile sales solution and web order management capability. Future CRM plans include ongoing development of initiatives and tools to cultivate major accounts, increase sales efficiency and further improve overall customer service levels. One such initiative is digital merchandising, says Brouhard, which will provide retailers, particularly those of the Compact Service group, with a three-dimensional image of all aspects of a product. Collaboration to bring mutual profitability Another important future initiative at adidas is the Partnership through Profitability program. For manufacturers like adidas, getting to know end consumers better often involves developing deeper relationships with channel partners. To generate consumer demand beyond the powers of brand awareness, manufacturers in many industries re-evaluate their strategies with channel partners. adidas recently launched its Partnership through Profitability program to cultivate rich relationships with retailers capable of influencing the end consumer. We are in the process of piloting this program and demonstrating how crucial it is for retailers to see the benefit of sharing consumer data with us so we can help them better manage their business, says Raphael Lefort, Director of Business Development. The program s goal is to help retailers with issues such as space and inventory management to improve their profitability. Dedicated teams spend a significant amount of time identifying a retail customer s needs from a product, tools and communication perspective. Using customer needs-based strategies and CRM with our best accounts is key to increasing both profitability and growth, says Lefort. For example, adidas gathers feedback from retailers to help define and solidify the product line for the upcoming season. These types of customer information give us the insight we need to profitably manage our business, adds Brouhard. The result is robust relationships with valuable and more satisfied retail customers as well as a more powerful, integrated face to the end consumers of adidas products. Customer-driven global leadership Initiatives such as the Partnership through Profitability program and the Area Central pilot are already seeing marked success. Nevertheless, they represent just the beginning of adidas CRM journey. Customer focus is steadily becoming an enterprise-wide credo at adidas, says Ruprecht. We must all be in the development of good customer service and increased customer focus. This will make our company the best it can be. Backed by its rich history of product excellence, adidas newfound focus on CRM will help the widely recognized manufacturer achieve its ultimate goal of once again sitting atop the global athletic merchandise marketplace. 9 The Essential Business Case To achieve CRM success, companies must look at the initiative as a business issue in addition to a technology issue. This requires establishing clear objectives upfront and setting incremental change management goals. It also means drawing up a comprehensive business case to keep IT implementations and process improvements close to established business objectives. Prior to its mysap CRM implementation, adidas developed a business case detailing assumptions, scope, budget and project deliverables. Having the business case and requirements was critical to the success and efficiency of our rollout, says Klaus Bogner, Application Development and Services, Global IT. The scope of the project, recalls CRM Program Manager Dave Webb, was to increase the efficiency of both our customer service and Compact Sales groups. adidas developed metrics around productivity enhancements that would define success and serve as a learning platform for future potential rollouts of mysap CRM. Next steps include tracking implementation benefits on an ongoing basis to ensure business case objectives are continuously met. 9

10 a d i d a s The 8 Point Takeaway With a strong customer focus enabled by mysap CRM, adidas is well on its way to achieving its goal of regaining the lead global position it once held. The CRM initiative began as a pilot program in the Area Central region of Europe, which includes Germany, Switzerland and Austria. The plan: to bring customer insight to the Compact Service group, an inside sales team focusing on building profitable relationships with small- to mid-sized retailers. To date, the adidas investment in mysap CRM has paid off with ROI successes as well as long-term lessons, illustrated by The 8 Point Takeaway below. 1. Pursue the unexpected While competitors typically neglect their relationships with small retailers, adidas recognizes revenue opportunity. The adidas Compact Service group is using mysap CRM CIC to build profitable relationships with this important retail customer group. The result: Through 2003, adidas achieved a 26% Internal Rate of Return (IRR) on its mysap CRM investment. 2. Build a business case Prior to implementation, adidas developed a business case outlining project scope, budget and deliverables targets, as well as quantitative and qualitative objectives. Intense planning kept the implementation closely tied to established business objectives. Moreover, the business case helped keep the implementation on time. The mysap CRM CIC solution was up and running within the Compact Service group in only 10 weeks. 3. Balance efficiency and customer focus A key phase of the adidas CRM plan was to capitalize on cost-cutting efficiencies without sacrificing customer intimacy. Technology-driven efficiencies cut over 758,000 in costs within the Compact Service group in At the same time, complete customer profiles helped adidas capture ROI from increased customer intimacy with retailers. 4. Pilot first adidas took incremental steps in its CRM technology plan in order to compile takeaways for further potential rollout. It began with a pilot in the Compact Service group of Area Central. Based on the pilot s success, adidas plans to rollout mysap CRM s CIC component throughout Europe and the U.S. in the next 18 months. 5. Focus on valuable customers Faced with formidable competition, adidas increased its focus on its most valuable customer group, retailers. adidas separated its retailers into three groups according to their value to the firm. This differentiation allows adidas to allocate the optimum resources to the right retailer at the right time, reducing waste and cutting cost. 6. Maximize every interaction Prior to mysap CRM, the Compact Service inside sales team did not capitalize on additional revenue opportunities while fielding orders. Today, inside sales agents use mysap CRM CIC to make targeted product recommendations to individual retailers, resulting in over 257,000 in cross-sell and up-sell revenue through Build channel relationships To generate consumer demand beyond brand awareness, manufacturers in many industries re-evaluate their strategies with channel partners. adidas uses CRM strategies with its most valuable retailers to cultivate partnerships capable of influencing the end consumer. The result is robust relationships with valuable and more satisfied retailers and a more integrated face to end consumers. 8. Consult the end user The adidas CRM project team included end users of the mysap CRM CIC solution. This kept the implementation focused on empowering users in order to drive achieved return on investment, the key indicator of success. 10 Copyright 2003 SAP AG. All rights reserved.

11 About the ROI Review The ROI Review, published by Peppers and Rogers Group, is a periodic report detailing the implementation of enterprisewide, client-server applications, specifically the mysap CRM customer-centric solution. ROI Methodology To assess the overall financial impact of the mysap CRM implementation, Peppers and Rogers Group used two core methodologies: First, a ValueMap, a proprietary tool to Peppers and Rogers Group, was deployed to pinpoint the financial impact of specific elements of the CRM implementation on unique customer segments and treatment types. The ValueMap takes a bottom-up approach to determine both current and prospective results. The methodology of the ValueMap is to identify customer segments and touchpoints affected by the mysap CRM project and their related financial objectives. Then identify the specific functionality enhancements as well as key metrics impacted by each enhancement. At that point, assess the post-implementation levels of the metrics and model the positive impact of the changes in cost savings or contribution enhancements. Then calculate total attributable gains plus the direct investment costs and changes in any other overhead (staffing, agency fees, etc.). The Return on Investment (ROI) calculation included the cost of both external and internal implementation work as well as incremental hardware. Second, in addition to ValueMap calculations, Internal Rate of Return (IRR) was used to determine the final ROI of the implementation. IRR was the chosen ROI methodology because it is the most conservative and explicit approach. Also, it is not dependent on estimating the appropriate hurdle rate (discount rate or opportunity cost of money) to be applied. The IRR methodology is applied to net cash flows generated over the relevant time horizon measured in accordance with the Cash Flow Return on Investment (CFROI). This methodology has the advantage of eliminating the impact of company specific taxation circumstances and policies, as well as national corporate taxation conditions in the various countries in which the ROI Review studies take place. Peppers & Rogers Group Peppers & Rogers Group is a management consulting firm recognized as the world s leading authority on customerbased business strategy. It is dedicated to helping companies compete and win by identifying differences within the customer base and using that insight to maximize the value of each and every customer relationship. Led by 1to1 Magazine, Peppers & Rogers Group s independent media division reaches 250,000 CRM decision-makers weekly with a broad array of print, interactive and custom publications. Peppers & Rogers Group is a Carlson Marketing Group company headquartered in Norwalk, Conn. Authors A Senior Consultant at Peppers & Rogers Group, Joseph Daly has spent 20 years in the field, holding senior executive positions and consulting leading organizations in the financial services, consumer goods and broadcast media industries across Europe and South Africa. Joseph holds a Honors Degree in Business Studies from the University of Limerick and a M.B.A. from Wits University. As Executive Editor of Marketing and Client Deliverables, Christopher Helm has spent three years bringing Peppers & Rogers Group s thought leadership to readers around the globe. Chris holds a B.A. in Political Science from John Carroll University, a M.A. in History from Youngstown State University, and is a doctoral candidate at the Graduate School and University Center of the City University of New York. As Senior Business Writer at Peppers & Rogers Group, author Laura Cococcia has over eight years experience as a marketing communications professional in both the corporate and non-profit settings. Prior to her editorial role, Laura worked with various Fortune 500 companies as a consultant on the development of CRM strategies and implementation. Laura holds a B.A. in English from The College of the Holy Cross and is pursuing her M.S. in Strategic Management at Manhattanville College. a d i d a s 11

12 For more information on The ROI Review please call SAP or visit Please refer to material no For our summary of this ROI Review, please refer to material no