Get more from less. BT Expedite. How to build a prioritised CRM strategy in five steps. White paper

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Get more from less How to build a prioritised CRM strategy in five steps BT Expedite White paper

Contents Executive summary...3 What is CRM and where is it going?...4 Get more from less: create a prioritised CRM strategy in five steps...5 Snapshot: the priority plan in action...6 Cross-channel CRM: the in-store challenge...7 ROI: made to measure...8 Conclusion...9 About BT Expedite...10 About the author...11 2

Executive summary You don t build a customer relationship with a 10% discount. Customer Relationship Management (CRM) is about delivering on a brand promise consistently no matter what the season, economic state, or channel. CRM should help boost the bottom line, despite the pressures of retailing. Typically 20% of a retailer s CRM activities will result in 80% of the profit CRM generates. The key to a successful CRM programme is focusing on this vital 20%. To do this, you need to create a prioritised CRM strategy with just three to five main CRM initiatives. And just as importantly, you need to be able to measure the impact of these initiatives. Understanding how to best allocate spend differentiates retail best in class CRM. Personalisation is a first step towards this but building up a picture of the customer in order to create personalised messages is challenging. In the UK, the process of realising a 360 degree view of the customer across all the channels is still in its infancy. With e-commerce, customer data capture is part of the check-out process and should provide key customer data. The missing pieces of the picture are most often due to a lack of in-store data capture. 3

What is CRM and where is it going? Building customer relationships is not about a loyalty voucher or discounts, it is about delighting your customers by consistently treating them to tailored communications that builds a need and a recurring buying pattern. CRM as a technology and as a marketing approach has been with us for several years. But retailers, whether small boutiques, large value fashion chains or department stores, constantly grapple with the same questions: n Who are my customers, and how do I recognise them online and in-store? n What causes inventory stockpiles? n Did my campaign really have a measurable sales impact? n How do I capture customer data and what about incompleteness of data? n Who am I buying for? How frequently do my customers visit and why? n Do I need to discount to entice customers? n How do I secure more supplier funding for customer events? n How can I acquire higher margin customers, and how can I keep them? For all these questions, there is one underlying factor that doesn t change the customer is king. Customers buy a brand and with it a promise that the brand delivers, whether good value products, excellent customer service, extensive ranging, convenience, or aspiration buying. CRM is about delivering on that brand promise consistently no matter what the season, economic state, or channel. Your business depends on meeting customers expectations and growing your sales, while keeping costs under control. CRM ties marketing costs to increased sales from demonstrably profitable customers and delivers customer insights, compelling and profitable direct marketing, and a measurable return on your relationship. And more recently, retailers are asking questions such as: n How do I get a multichannel view of my customer? n What is a multichannel CRM programme and how can I easily explain this at board level? n How does social networking impact CRM? 4

Get more from less: create a prioritised CRM strategy in five steps One thing is clear, sophistication does not mean profitability. When correctly aligning CRM strategy to company strategy, typically 20% of your CRM activities will result in close to 80% of the profit CRM generates. If you don t have a CRM priority plan, then a large chunk of your daily CRM-related work will not be focused on generating most of the ongoing revenue and profit that CRM creates. Success is achieved by focusing on a maximum of three to five main CRM initiatives. These should cover both strategic and operational. Having more than five initiatives significantly decreases your chance of success, so you have to prioritise. How to build a prioritised CRM strategy: Step 1: Be clear about your company strategy. Understand where CRM is responsible for delivering on this strategy or is an enabler for this strategy. Step 2: Know your beneficiaries and your sponsors. Ensure your early CRM programmes meet at least one of their priority needs. Step 3: Identify any key triggers for success. This might be a new brand launch date, a new e-commerce site, a new division, or a store opening in a new geography. It may also be a key complaint from customers that must be addressed. Key triggers are often highly visible factors and sometimes dictate a CRM priority. Step 4: Make yourself familiar with CRM best practice. Learn from others and then brainstorm all the CRM initiatives your business would like to achieve. Make sure your beneficiaries and sponsors are involved in this process. Include strategic as well as operational initiatives. Step 5: Group these initiatives into major headings and cross-reference with steps 1 to 3. Identify a maximum of five main initiatives and, within these, highlight those that will allow you to achieve a return on your overall investment within an acceptable timeframe (normally within six months is achievable for CRM). At this point, you will have identified key initiatives with those few, focused activities that will achieve a return on your investment. You should also be confident that the key needs of the sponsors and the business overall will have been met within a visible timeframe. 5

The prioritised CRM strategy in action A high street fashion retailer worked through these five steps and, in just a few weeks, defined its CRM strategy and programme for the next three Quarters, with complete buy-in from the top. The right people were lined up for the right steps, a set of best practices were discussed and all ideas brainstormed. At step five, an extracted version of the results looked like this: Key CRM 2009 Q1 Initiatives January February March 2009 Q1 April May June Strategic 1. Multichannel programme 2. Key Profiles Operational: 3. In-store Data Capture 4. Database Health check In-store data capture Programme definition Requirements definition Minimum Fields In-store Training Compliance Reward & Recognition Audit/Reports/KPI Database Health Check CRM Specialist Audit Report & Recommendations Tailored maintenance programme with services Ongoing Plan In-store data capture Head office set up Integration stage 1 Training Level 1 Testing Pilot Health Check Audit Finding with recommendations Agreed set procedures with allocated resource Execution Execution In-store data capture In-store Training Roll-out First reward & Recognition Publication first KPIs Define Stage 2 Health Check Clean bill of health Procedures initiated Automated integrity alerts Stage 2 Initiatives Brand Analysis Buyer Analysis Channel Analysis Franchise set up Social Networking initiative Multichannel Customer Integration cross channel Key Statistics Key Profiles Impact on ROI Multichannel Document key needs by channel Cost & Effort Integration requirements Execution Multichannel Programme initiation Key Profiles 5 Customer Profiles Beneficiaries Key Profiles Analysis Findings Reporting Cross Company buy in Execution Key Profiles Profiles as part of Business as Usual KPIs Key CRM metrics are typically Recency, Frequency, Monetary (RFM), Basket Analysis and other areas such as Attrition/Retention, Campaign Analysis, Acquisition and seasonal Cross-Shopping analysis. As seen in the above illustration, this retailer had four key initiatives, listed in the top left box. Initiative #2, building Key Profiles of its customers, is one of the most popular CRM needs in a business. To do this, the retailer needed a mix of basic and advanced analytics. The profiles enabled the business to gain a picture of its five main customer types, helping to more easily manage its buying, messaging and marketing. These profiles were measured by spend, visits, product and pricing preferences as well as social demographic data and there was a key understanding of these customer profiles across all of the retailer s channels. 6

Cross-channel CRM: the in-store challenge 2009 has seen UK retail performing valiantly in very tough conditions. Facing the realities of credit crunch Britain, the sector has found ever more inventive and cost effective ways of providing customers what they want, when and where they want it. Aberdeen 2 used three key performance criteria to distinguish Best-in-Class companies: n Year-over-year increase in average basket size: 19% n Year-over-year increase in customer retention rate: 16% n Year-over-year decrease in customer attrition rate: 5% Two of the top 5 Capabilities to achieving Best-in-Class retail CRM are: n Ability to capture CRM data at point of service n Ability to develop personalised promotions for all customers 2 Aberdeen Group, Cutting Edge Customer Loyalty, March 2009 Important interdependencies exist between the sales channels. A customer disappointed in one channel is 37% more likely to stop shopping with that brand again in any channel 1. Q: How do you get a multichannel view of your customers? In August 2009, BT in the UK and its US-based retail solutions partner, Epicor, commissioned research among major retailers to find out how the new imperatives of a credit-crunch economy and a growing multichannel customer base are being met. One notable North American differentiator stands out: the comprehensive use of CRM to knit sales channels together. We asked the question, Do you have a single view of your customer buying behaviour? 69% of US retailers said they did, whereas 62% of UK retailers said they did not. Customer data capture has always been the Achilles heel of CRM. The rise of e-commerce has seen resurgence in customer data capture. However, to gain a true multichannel picture of your customer, you need to overcome the challenge of data capture at the till. A: In-store capture of your customer information is key. Understanding your customers means capturing their purchases in all your channels and seeing the overall picture. Outside of the grocery sector, UK retailers are reluctant to request personal information in their stores. Online, the capture of such information is second nature. You also need to capture such information in store, so that you can get more out of your multichannel investments. Data capture should not be a barrier to good strong CRM it should be an enabler to building a tailored and profitable relationship with your customers. And of course, would go a long way to bridging the gap between the UK and US. In-store data capture has become quite sophisticated. It usually requires a loyalty card, but ingenious methods exist where a loyalty card is not necessary. Key data can be captured quickly at the PoS using simple prompts and minimum identification. However, the success of in-store data capture rests almost entirely on the confidence of the sales associate. Ensuring everyone in the business is aware of the CRM programme not only the benefits to the business but critically, the benefits to the customer can make or break your CRM initiative (and your relationship with your customers). Your employees need to be aware of the benefits and trained in how to communicate these benefits to customers. As with any key CRM initiative, in-store data capture must also be measured right down to the sales associate who captures the customer information (or fails to). 1 Garter Multichannel Study 7

ROI: made to measure Measuring your spend is important, but understanding how to allocate it best differentiates retail best in class CRM. The success of any CRM initiative is how it benefits the company either qualitatively or quantitatively. Initiatives with measurable results are easier to prove to your business. * Incremental profit is the profit that is generated above and beyond what your customer would normally spend minus costs. It is measured by monitoring control group(s) and calculating their spend in the promotion period vs the group that has been targeted. The benefits of a targeted campaign The marketing director of a Sportswear Retailer in a highly competitive market wanted to prove without doubt that his marketing spend in CRM actually generated incremental sales. He had an 80,000 budget and offered a 10% discount for two days on any merchandise. His target: all customers in the database. By measuring the response he proved an incremental net profit of 45,000. This is a good story for two reasons: 1. He generated profit 2. He proved it was incremental*. However, his shotgun approach meant that he targeted all customers with the same offer, regardless of the customer interest. The top 30% of customers in the database responded to his communication and accounted for 187,000 in revenue and 38,000 in cost. Had the marketing director only mailed this group, he would have seen an incremental profit of 60,000 not 45,000. And if he had reapplied his remaining budget on better targeted offers, with the same typical type of response, he could have generated 170,000 in incremental profit significantly more than the original 45,000. Mailed Top 30% Reapplied Investment 80,000 28,000 80,000 Sales Revenue 267,000 187,000 528,000 Net Profit 45,000 60,000 170,000 Make your marketing budget really work by understanding which customers react best to which types of campaigns. Testing profitable testing is the key. Best-in-Class retailers are currently 1.8 times more likely than Laggards to develop customer behaviour-based promotions that ultimately drive improved loyalty and are 70% more likely than their peers to develop multi-tier rewards plans for their most profitable customers. Aberdeen Group, Cutting Edge Customer Loyalty, March 2009 8

Conclusion Achieving a successful CRM programme can be challenging, not least because of current economic factors, increasingly savvy customers and data capture issues. However, these challenges can be overcome by staying focused on a tight plan and measuring this plan. Doing so will ensure positive bottom line impact, CRM buy-in across the business and most importantly, customer loyalty across the channels. 9

About BT Expedite BT Expedite is the retail solutions division of BT we have a fanatical focus on retail, providing multichannel solutions to more than 60 of Europe s leading retailers. Our solution set spans every area of retailing; planning, sourcing, merchandising, store solutions, sales analytics and CRM, plus network infrastructure, hardware, training and professional service expertise. Our one-stop shop, single contract approach takes the strain and complexity out of delivering the infrastructure you need to drive your business forwards and enables you to focus on the competitive differentiators that make the difference to you and your customers. CRM for retailers Developing a 360-degree customer-centric view requires real purchase detail from all of your selling channels and is an important first step to understanding your customer. With this knowledge, you can swiftly and easily develop campaigns that show measurable results through the use of control groups, and clearly demonstrate the ROI of your CRM approach. The key to success is choosing a CRM solution designed for retail. Only retail-hardened CRM can track all the valuable data intrinsic to your retail business, for example: n category and style of merchandise n colour, size and other dimensions n customer margin by merchandise category n the sales assistant or call centre agent who made the sale n seasonality/trends n web, catalogue, call centre sales and store sales n above and below the line campaign tracking n impact of markdown, discount, sale periods on customer activity n a customer s return history n what else was bought in the same transaction or around that time Equally as important is the customer interaction at the point of service; whether that s in your store, on your Website or over the phone. Our retail CRM solution is designed to work on mobile hand-held devices, EPoS, kiosks and through Web services embedded into your ecommerce or call centre sites. So you can ensure your sales associates/agents and your Website capture customer preferences and use relevant CRM information to speed your customer s transaction and deliver great customer service. 10

About the author Tanya Bowen has worked with more than 75 retailers in the UK and North America over the past 15 years, focusing on CRM return on investment and customer appreciation. Today Tanya spends much of her time working with retailers to develop tailored and overarching CRM programmes that mirror each retailer s business strategy. Retail-specific CRM technology is a critical first step to ensuring early and consistent CRM programme success. However, Tanya and her team are strong advocates of people skills and believe no amount of technology can substitute for a solid CRM programme and the desire to execute it whether you are the CEO, a sales associate at the store, or an e-commerce marketing manager. If you would like to discuss CRM strategies with Tanya, please email tanya.bowen@bt.com. 11

Offices worldwide The telecommunications services described in this publication are subject to availability and may be modified from time to time. Services and equipment are provided subject to British Telecommunications plc s respective standard conditions of contract. Nothing in this publication forms any part of any contract. British Telecommunications plc 2009. Registered office: 81 Newgate Street, London EC1A 7AJ Registered in England No: 1800000 Produced by BT Group Designed by Westhill.co.uk Printed in England by Communisis PHME 58803