Customer Relationship Management (CRM) Transforming the Way to Market, Sell and Service Agenda I. CRM definition and overview II. Getting started with CRM Initiatives 2 1
What is CRM? Customer Relationship Management is a philosophy and a way of doing business Sales Customer Marketing Service The Customer is the center of everything 3 Think of all the ways that your organization can interact with your customers. How does it work? E-mail Letter Telephone FAX Internet In Person How can everyone in your organization share this information at once? 4 2
Each organization creates its own mechanism for interacting with customers via each medium. How does it work? Sales Marketing Service The network of interaction is very complicated 5 How does it work? Then add other divisions or products and observe the incremental complexity. Sales Marketing Sales Service Marketing Service Soon, no one really knows how everything is linked 6 3
Is there a better way? What if all customer information was accessible via a single central repository? Customer Everyone could have access and update the data simultaneously 7 Is there a better way? Marketing Sales Service Customer interaction Channels Telephone E-mail Fax In Person Internet Letter Data is pervasive, related, and current 8 4
Why is CRM so Compelling? It s all about making your customer relationships more profitable. Faster and more knowledgeable service Knowledge of each customer as an individual Customer trends and tendencies Appear as one company to the customer Automation of complex processes Personalized self service Capitalize on every interaction 9 Loyal Customers = Profitability Annual Customer Profit By Year Annual Customer Profit Price Premium Referrals Cost Savings Revenue Growth Base Profit Acquisition Cost 1 2 3 4 5 6 7 8 Year Source: The Loyalty Effect Maximize customer life time value 10 5
Why Does Customer Loyalty Matter? It costs 6 times more to sell to a new customer than to sell to an existing one A company can boost profits by 85% by increasing annual customer retention by only 5% The odds of selling a product to a new customer is 15% while the odds of selling to an existing customer is 50% 70% of complaining customers will do business with the company again if the company quickly resolves the problem 1999 Source: E-business: Roadmap for Success; Kalakota, pg. 110 Customer loyalty means increased profits 11 Customer Value Calculation Not all customers are created equal 20% 20% 65% 20% 20% 25% 20% Expend your resources accordingly 12 6
A Shift in Mind Set Before Loyalty by default One size fits all Maximizing current revenue Defending profit streams Focusing on local competition Incentivize on volume Proprietary product set Undifferentiated brand No customer ownership Now Loyalty by choice Tailored to customer needs Building lifetime value Championing customer interest Competing at global standard Incentivize on value Best in class products Principled brand strategies Customer managed centrally 13 From Call Center to Customer Interaction Center Call Center Customer Interaction Center Single product Backroom operation Operation & information islands Minimal technology Reactive Low skilled CSR s Tactical Customer Inquiries Cost of Business Multiple products and cross selling Front Office operation Distribution channel integration Leading edge technology Proactive Multi-skilled CSR s Strategic Enhanced Customer Satisfaction and Retention Revenue Growth 14 7
And another thing It is also about competitive advantage Order Winner vs. Order Qualifier What has raised the bar? Intolerance of poor service Demand for personal attention and products Increase in access to knowledge Channel conflict Simultaneous focus on offence and defense 15 Some Features of CRM Customer life time value Customer segmentation Integrated knowledgebase Customer interaction history Integration to the Web site IVR and Web personalization Intelligent contact routing E-mail, voice, chat, fax, VOIP Sales Forecasting and analysis Telemarketing/Telesales Contact centers Order and configuration information Contact Management & profiles Workflow management & escalation Problem tracking and resolution Contract Management Legacy systems integration Mobile synchronization Work orders, dispatching Campaign\Opportunity Management Like e-business, CRM is integral to business today 16 8
Agenda I. CRM definition and overview II. Getting started with CRM Initiatives 17 Mixed Returns and Success from CRM CRM Success Revenue increases up to 51% Margin improvements of 2% Decreases in cost of sales up to 46% Reduction in the sales cycle of 25% Increases in customer satisfaction of over 20% OR High abandonment rates before implementation Minor or no business benefit in over 50% of actual implementations What can you do to achieve CRM success? 18 9
CSO Finding Toughest Challenges in Projects Managing Resistance Defining System Specifications Getting Users Productive Identifying Process Holes Determining ROI Setting Goals Cleansing Initial Data Getting Executive Support Getting Proper Funds Customizing Software Evaluating Tools People Planning/Process Technology 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 19 CSO Finding: Missing Factors in Failed Projects Analyze Processes First Get Executive Support Involve the Users Provide Adequate Training Get User Buy-in Pilot before Rollout Fund Adequately Take Phased Approach Provide Adequate Support Match Tech to Process 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% People Planning/Process Technology 20 10
The Customer-Focus Journey To address these issues, successful companies think in terms of a journey that addresses strategy, structure and mindset Internalize the Imperative to be customerfocused Create a CRM Strategy for targeting high value segments Design the CRM Structure required by the strategy Develop a CRM Mindset for your organization Create and manage a program prioritization and planning Roadmap Continual Evaluation and Renewal 21 The Complete CRM Picture Strategy Customer Segments Understanding the value of targeted segments and differentiate investments based on lifetime value Target Acquire Retain Expand Customer Life Cycle Structure/Operations A cohesive, integrated structure that leverages all customer interactions Mind Set Organization understands CRM and is incented to build strong customer relationships Successful companies have taken a holistic approach to CRM 22 11
CRM Strategy Investment Priorities Customer Segments Customer Segments Value Proposition Life Time Value Targeted Segments Customer Interaction Touch Points SEGMENTS Required CRM Target Acquire Retain Expand 23 Customer Life Cycle Set Direction for Investments in Customer Relationships Different Segments Warrant Different Levels of Investment Customer Segments Case Example Target Acquire Retain Customer Life Cycle Expand Strategy (%) 90 80 70 60 50 40 30 20 10 0 53% of Customers contribute only 3.5% of the Operating Profit % of Customer % of Operating Profit 38% of Transactors have a negative operating profit % of Customer % of Operating Profit 27% of Customers contribute 84% of the Operating Profit % of Customer % of Operating Profit Transactors Advice Seekers Loyalty Based Customer Segments Don t Spend More than the Segment is Worth! 24 12
Segment Investments Target Customer Segments Acquire Retain Expand Customer Life Cycle Strategy Customer Segmentation Customer Experience Products and Market Channel Capabilities Technology Weapons The CRM strategy articulates the amount and type of investment in each customer segment, and is driven from a customer-in view Create a CRM Strategy for targeting high value segments Design the CRM Structure required by the strategy Customer Worth 25 How do we interact with customers? Consistent Managed and coordinated Seamless across channels and functions Who owns the customer experience Leveraging customer intelligence to build customer relationships What is the our Touch Point Structure Aligned according to value Structure Planning Questions Customer Interaction Channels Where do we drive efficiency/effectiveness Push transactors to low cost channel Cross sell and up sell profitability Close business Customer Management Processes Marketing Selling Servicing Broadcast Media Mail Field Personnel Agents/Distributors Call Center Retail Internet Back Office Processes and Systems 26 13
Build Your Business Case and ROI Total Annual Recurring Benefits = $5,450,000 Tangible Benefits Reduced sales cycle times Improved ratio of sales closed Reduced acquisition costs of new sales Improved profitability by targeting product and market segment Improved ratio of commissions to sales Intangible Benefits Improved data access and reporting Increased Sales Force efficiency Improved market coverage to sales Aligned incentives and compensation Aligned sales structure to strategy One-Time Cost = $2,250,000 Annual Recurring Cost = $146,000 Technology Costs People Costs Program Roll-Out Costs IRR = 132% 1Qtr 2000 cash flow NPV= $7.8 million Payback Period = 1 year ROI = 17% 1qtr2001 27 Design the Organizational Structure and Attitude Culture Environment focused on customer satisfaction and collaboration Executives value CRM and make it a reality Organization Structure Mind Set Alignment of Measures and Incentives Key Performance Indicators Employee Incentives People Skills Skills to fulfill roles in relationship management 28 14
The Roadmap The Customer-Focus Journey Internalize the Imperative to be customerfocused Create a CRM Strategy Design the for targeting high required by the value segments strategy Develop a CRM Structure CRM Mindset for your organization Create and manage a program prioritization and planning Roadmap Build Structure Process Organization Technology Knowledge Continual Evaluation and Renewal Capability Provides Direction Toward Building the Structure 29 15