Why strategy before structure? CUSTOMER RELATIONSHIP MANAGEMENT: CONCEPTS AND TOOLS Chapter 17 Organizational issues and Customer Relationship Management Structure can both enable and disable strategic action 1 difficult to promote creativity in a rule-bound bureaucracy 1 bureaucracy is conducive to obtaining compliance to standardised business processes 1 struggle to become customer-centric in a functional organization where specialists report upwards within silos, but do not share customer insight i horizontally across silos. There is no single correct structure that is suitable for all organisations. Key strategic goals in CRM-driven organizations Structures need to cope with extreme turbulence Acquisition of carefully targeted customers or market segments The retention and development of strategically significant customers or market segments The continuous development and delivery of competitively superior value propositions to the selected customers Until 1970s, the business environment was relatively stable. Today: immense volatility 1 Deregulation 1 Global competition 1 New technologies providing new routes to market 1 New national market-economies 1 Highly demanding and well-educated ed customers s Structures need to be invented that allow organisations to sense and respond to change with great speed
Conventional management structures Functional structure 1. Functional organization structure 2. Geographic organization structure 3. Product, brand or category organization structure 4. Market or customer-based organization structure 5. Matrix organization structure Sales, marketing and service specialists report to a functional head Specialists: market analyst, market researcher, campaign manager, events manager, account manager, service engineer, and sales support specialist. Small to medium sized businesses with narrow product ranges tend to prefer the functional organization. The three core CRM - sales, marketing and service may or may not co-ordinate their efforts, and share their customer knowledge by depositing it in a common customer database Geographic structure CRM disadvantage of geographic organization One or more of marketing, selling and service functions organized on territorial lines 1 More common with selling and service than marketing When customers are geographically dispersed and value face-to-face contact with salespeople, there is a clear benefit in salespeople also being geographically dispersed. Where service needs to be delivered at remote locations, service may also be distributed geographically There may be many different customer types in a single geographic area. 1 A salesperson selling industrial chemicals might have to call on companies from several industries such as textiles, paint, or consumer goods manufacture. 1 The applications of the sold product may be diverse 1 Buying criteria of the customers may be quite different. Salesperson develops neither customer-, nor product-expertise ti
EMC delivers remote customer service Product, brand or category structure EMC sells information storage, systems, networks and services worldwide. EMC provides proactive and pre-emptive customer service. EMC systems are configured to identify problems. 1 If an EMC system detects an error or unexpected event, no matter how small, it will automatically call home to the support centre that is available 24/7. Staff immediately research the issue by dialling back into the system. Over 90% of service calls are resolved remotely This structure common in companies that produce a wide variety of products, especially when they have different marketing, sales or service requirements. 1 Examples: Procter and Gamble, Unilever Product or brand managers responsible for developing marketing strategy for their products Disadvantages of product/brand management Category management An expensive way to market offerings. In a worst-case scenario, different product managers might be calling on the same customer on the same day. 1 gives impression of a lack of coordination, and 1 disregard for the value of the customer s time. Customer may also experience varying levels of service from the different brand- or product-managers. Some companies have tried to co-ordinate ordinate their product-marketing efforts by appointing product group managers to an oversight role A response to brand and product management disadvantages Category manager works with customer and product/brand managers to create a category solution for customer 1 Many also enlist competitors Objective: improved value for customer and Objective: improved value for customer and category team
Category management at Kraft Market or customer-based organization structures Materials Quality Process Team Leader Plant Engineering Marketing Information R & D Category Business Director Brand Category Sales Director Consumer Promotion Category Planner Retail Sales Customer Category s Supply Chain Specialist Customer Business Space Management Specialist Sales Information Specialist PROCESS TEAMS CATEGORY TEAMS CUSTOMER TEAMS (dedicated to each (dedicated to each (dedicated to each product category) product category) major customer) Source: George, Michael, Anthony Freeling & David Court Reinventing the Marketing Organization McKinsey Quarterly, No 4, 1994 Common when companies serve different customers or customer groups with different requirements or buying practices 1 IBM has identified 14 different customer groups s: 1 Market managers, segment managers, account managers Role and responsibilities: 1 Develop expertise on market and customer requirements 1 Ensure organization creates and delivers the right value proposition Trend towards national, key or global account management Matrix structures Virtual and network structures Matrix structure often the preferred when a company has several different products lines serving several different customer groups. Matrix variations include 1 Market- or customer-based managers on one side, and product managers on the other 1 Channel managers on one side, and product managers on the other 1 Geography on one side and industry on the other Cross-functional teams may be prelude to matrix structure No longer a simple matter to know where an organization s boundary lies. The role of IT in a stable corporate environment is to allow senior management to control information and decision-making As environments become more turbulent, and as companies attempt to understand and forge network relationships, the role of IT has changed
Role of IT in more turbulent environments IT s influence on organizational design IT s role is to provide information that enables a company and its network members to: 1 Sense and respond rapidly to changes in the business environment 1 Collaborate to develop and deliver better customer value propositions 1 Enhance and share their learning about customers 1 Improve their individual and joint cost profiles IT is a substitute for a more formalized and centralized organization structure linking networked or virtual organizations. IT allows information to be shared right across an organization.. 1 vertically, horizontally and laterally. and outside an organization with network members. Structure is therefore no longer tied to traditional vertical reporting relationships IT therefore enables organizations to adopt decentralized and networked structures What can an IT-enabled organization do? Traditional personal contact patterns An IT-enabled organization is able to take any sales or service query from any customer in any channel and resolve it immediately. Among the preferred characteristics of such a design are: 1 A customer interface that is consistent across channels and easy to use whatever the technology or device 1 A first point of contact that takes responsibility for resolving the query 1 A back-end architecture that enables the contact point to obtain relevant customer and product information immediately 1. Controlled contact pattern 1 all contacts channelled through a single point of contact 2. Coordinated contact pattern 1 Departments or individuals have direct personal contacts with departments t or individuals id on the other side 1 One department or person co-ordinates contacts 3. Stratified contact pattern 1 individuals and departments on both sides manage their own contacts with their equivalents on the other side 1 Stratified contact pattern, where individuals and departments on both sides of the dyad manage their own contacts with their equivalents on the other side of the dyad
IT s influence on contact patterns Key Account Management (KAM) basics IT, particularly web-technologies technologies, enables many-to-many communications between contacts on the buyer s and seller s s sides There is a major trend towards key account management, national account management, regional account management and global account management KAM is a structure that facilitates the implementation of CRM at the level of the business unit A key account is an account that is strategically significant Are two ways to implement KAM. 1 A single dedicated person is responsible for managing the relationship, or 1 A key account team is assigned The team membership might be fully dedicated di d to a single key account, or may work on several accounts Drivers of KAM Benefits from KAM 1. Greater concentration of buying power 2. Globalisation 3. Vendor reduction programs 4. Customer expectations 1. Doing large amounts of business with a few customers offers considerable opportunities to improve efficiency and effectiveness 2. Selling at a relationship level produces disproportionately high volume, turnover and profit. 3. Repeat business can be considerably cheaper to win than new business 4. Long-term relationships enable the use of facilitating technologies such as extranet-enabled portals, EDI and shared databases 5. Familiarity and trust reduce the need for checking and make it easier to do business
Issues in key account management A model of KAM development Identifying key accounts Analyzing key accounts Selecting suitable strategies for key accounts Building operational capabilities i for managing key accounts ment ers olvem ustome of invo ith cu Level o w Comple ex Simple Synergistic - KAM Partnership - KAM Mid - KAM Early - KAM Pre - KAM Transactional Collaborative Nature of customer relationship Bow-tie structure for Early-KAM Diamond structure for Partnership-KAM R&D R&D Marketing Marketing Admin Admin Logistics Key Logistics Main Account Contact Mgr Key Act. Mgr Outbound logistics Inbound logistics Main contact Selling company Buying company Selling company Board Board Buying company
Virtual organization for Synergistic-KAM Team selling R&D Key Acc. Mgr Selling company Quality Joint board meetings Market research Main contact Buying company Form of selling associated with KAM Key account team might include specialists that can sense and respond to customer concerns over a variety of issues 1 engineers, logistics, research and development, sales. Team selling may cross organisational boundaries 1 Representatives from two or more partnering organisations can come together to pitch for new business or service an established customer. Partner Relationship Management systems facilitate such arrangements by making customer, project and product information available to all partners A matrix organisation Customer managers 1 2 3 4 Product managers A B C D E