Customer Relationship Management

Customer Actions Taken After Site Unresponsiveness

Action Percent
 Shopped elsewhere 74%
 Sent another e-mail 45
 Called a store representative 32
 Other 8
 Asked elsewhere, bought at store 3

Source: Apr. 2000 Jupiter Media Metrix

1
 Customer Relationship Management

Who provides CRM?

 Traditional giants such as IBM, Oracle and PeopleSoft

 Siebel Systems, which now has a 21% share of the CRM
market
 E.piphany
 e-mail specialist Kana Communications, NetGenesis
 instant chat provider LivePerson.com, Broadbase, Quintus and
Firepond
 plus many others.

2
 Customer Relationship Management

Acquisition cost

Quarter Average Customer

Acquisition Cost
 Q3 1999 $35
 Q4 1999 $71
 Q1 2000 $45**
 Q2 2000 $40

Source: Aug. 2000 Boston Consulting Group/shop.org

** Shift from expensive TV advertising to more economical online campaigns

3
 Customer Relationship Management

direct customer interaction

Jupiter reports that

 76% of respondents say e-mail is an indispensable part of
customer service.
 a listed phone number (65%) and
 a FAQ section (53%).
But those e-mails must be answered promptly.

4
Customer Relationship Management

 That's why IDC believes the worldwide market for CRM

products and services will explode to $125 billion by 2004,
from $34 billion last year.
 This summer, the Federal Trade Commission fined
Toysrus.com, Macys.com and five other online retailers $1.5
million for making promises they couldn't keep during the
1999 holiday season.

5
Customer Relationship Management

Expectations Results
 Within 1 hr 15% 8%
 1-6 hrs 40% 12%
 2hrs and I week 50% 51%
 More than 1 week 0% 29%

Source: Jun. 2000 Jupiter Media Metrix

6
 Customer Relationship Management

customer retention

 The average online marketer needs three purchases to break

even after acquiring a new customer, according to the survey.

7
Customer Relationship Management

Evolution of Information Requirements

Materials Requirements Planning

(MRP)

Manufacturing Resource Planning

(MRP II)

Enterprise Resource Planning

(ERP)

Supply Chain Management

(SCM)

Customer Relationship Management (CRM)

8
 Customer Relationship Management

Every Company’s Big Unknown ... Customer Value

bi ip
Full

ita sh
y
lit
of on
Potential
Pr lati
Re
Number of Relationships

Current
Current
Customer
Value

Current

Relationship Duration

9
 Customer Relationship Management

Customer Relationship Management Definition

Value ( $ )

nship
ela tio
he R
ue of t
al
he V
Duration of Customer Relationship
T

Targeting Acquisition Retention Expansion

• Who Do we target
• What segments are most
profitable
• What segments match our Value
Proposition
• What is the best segmentation
strategy for us / our industry
• What is the best channel for
each segment
• What is the acquisition cost for
a channel / segment
• Do certain channels deliver
certain types of customers
• Cost effective acquisition
• How can we improve
retention
• What is our average
customer relationship length
• How can we hold customer
for as long as possible
• What is the most cost
effective method of retention
• How many products does our
average customer buy
• How can we induce our
current base to buy more
products
• Who are the prime targets for
expansion
• What is the cost of expansion

Customer Relationship Management can be simply defined as everything involved with

managing the customer relationship.

10
Customer Relationship Management

Islands of Automation Need To Be Bridged

Over time, channels & operational systems are added to cater to changing customer
demands. The result…several functional groups are interacting with customers
independently.

Sales
Force

Customer
Service

Direct
Mail

We
b

$ Branche
s

11
 Customer Relationship Management

Why CRM?

 It costs six times more to sell to new customer than to sell

to an existing one.
 A typical dissatisfied customer will tell 8-10 people
 By increasing the customer retention rate by 5%, profits
could increase by by 85%
 Odds of selling to new customers = 15%, as compared to
those for existing customers (50%)
 70% of the complaining customers will remain loyal if
problem is solved
 90% of companies do not have the sales and service
integration to support e-commerce

12
 Customer Relationship Management

Importance of CRM

Scope Depth
Customer Management Process
Marketing Selling
Threads Servicing
Customer Interaction Channels

Are we making the

Customer Relationship right level and type
of marketing, sales,
Broadcast Strategies and service
investments in each
Mail of our customer
segments?
Field Personnel
Are we taking a
Customer Relationship holistic approach to
Agents/Distributors
Structure our customers
across processes
Call Center and channels?
Retail

Internet Customer Relationship Have we

implemented best
Performance practices and
technology in
process/channel?
Back Office Process/Systems

13
 Customer Relationship Management

Customer Relationship Management and Shareholder Value

Annual Cash Flow

Service/Usage Revenue

Acquisition
Cost

Duration of
Relationship
Cost of Service

 Customer Life Time Value (LTV) is defined by a customer’s Life Time worth
to the firm and is measured by the net present value (NPV) of the cash flows
generated over the Life Time of the relationship.

Successful Customer Relationship Management can generate positive shareholder value.

14
 Customer Relationship Management

The Benefits of Customer Relationship Management

 In addition to LTV of the customer, likelihood to recommend is another
important benefit of CRM.

High Ownership of Problems

Impact on Service Quality

Available at
Convenient Times Know. Product/Svcs.
Resolution Time
Likelihood to
Acquisition Retention Lift/upsell
Recommend
Courteous
Easy to Reach
Access to
# of Rings Live AgentsRight Tel. #
Low Know. About Account
Low High
Total Perceived Current Performance
Value

The customer value analysis should be performed for each segment individually. The
perceived importance of price and service drivers can differ significantly by segment.

15
 Customer Relationship Management

The Five Key Drivers of the Lifetime Value of a Customer

 Cost of Targeting;
 Cost of Acquisition;
 Service and Usage Revenue;
 Cost of service; and
 Duration of relationship.

Customer Relationship Management is about making every customer as valuable as

possible over the lifetime of the relationship

16
 Customer Relationship Management
Customer Relationship Management Process
Capture
Capture Customer
Customer Data
Data
and and Measure
Measure
Results
Results

Capture Customer
The
DataCustomer
and Measure
Results Store Data, Mine
Capture Customer
and Make
The CRM Data and Measure
Information
Results
Accessible
Dynamic

Take Action
Capture to
Customer
Enrich the Customer
Data and Measure
Relationship Capture
Results Build and Customer
Manage
Data and Measure
Customer Value
Results

 The building blocks of CRM allow an organization to manage this cycle and use the
knowledge on customers to enhance the Life Time value of the customer portfolio.
 No organization has perfect information on its customers. Knowledge of customers is
continuously enhanced through the CRM dynamic.

Customer Relationship Management is a ongoing, dynamic learning process for an organization

17
 Customer Relationship Management
Implementing CRM must be approached from an Integrated
Perspective Capture
Capture Customer
Customer Data
Data
and and Measure
Measure Capturing gigabytes of customer data
Results
Results in disparate operational systems that
are next to impossible to access may
render the data useless.
Taking action to improve the
Capture Customer
relationship without measuring the
results provides no evidence of
The
DataCustomer
and Measure CRM Store Data, Mine
Results
success or failure and limits the
opportunity for learning. without an Capture Customer
and Make
Data and Measure
information
Integrated Results
Accessible
A data warehouse full of data without
Approach the tools to extract knowledge is
nothing more than expensive
inventory.
Take Action
Capture to
Customer Sophisticated mining tools only
Enrich the Customer
Data and Measure produce results only as good as the
Relationship
Results Capture data they mine.
Build and Customer
Manage
Data and Measure
Customer Value
Results
Implementing new technologies without
the knowledge on how to enrich the Developing insights on how to improve the value of the
relationship is likely to yield a return below customer relationship without having the infrastructure to
the cost of the capital expenditure. take action has no impact on the bottom line. In addition,
there is no opportunity to test the ‘theoretical’ analysis.

All areas must be implemented, to some degree, to effectively manage the customer
relationship. When pieces are implemented in isolation, the benefits are less than
overwhelming.

18
 Customer Relationship Management

The Building Blocks of CRM

Data Data Knowledge Enabling
Capture Warehousing Management Technologies

Customer Touch
EIS Segmentation Call Centres
Point Integration

Market Customer Sales Process

OLAP
Research Profitability Automation

External
Data Cleansing Data Mining e-Business
Databases

Statistical
MetaData Modeling

Organization

People

Deployment and Support

The building blocks of CRM are the things that need to be in place for an effective Customer
Relationship management program

19
 Customer Relationship Management

Data Capture and Warehouse

 What Data do we capture on Customers?

Derived Data
Segments Profitability Life Time Value Intentions

Customer Customer Customer External

Behaviour Interactions Profile Data

Product / Service
Inbound Contact

Demographics /

demographics
Usage Profile

Firmgraphics

Preferences
Migration in

Information
Acquisition

Campaign
Outbound
Switching

Attitudes
Loyalty /

Census
Contact

History
Usage

Geo-
Product Portfolio Householding

Base Data
The Customer Data Model

20
Customer Relationship Management

Enabling Technologies

21
 Customer Relationship Management

The Enabling Technologies

 Call Centre
 Sales Force Automation
 e-Business

Techniques: Relationship marketing, automated packaging and pricing, knowledge-based selling

• Increase revenue from your customer base • Consultative selling
• Customer satisfaction measure • Responsiveness to market conditions

Sales Force Automation

Techniques: ACD, IVR, CTI Techniques: WEB based
• Automatic Call Distribution (ACD) application, e-mail processing

Electronic Business
• Incoming Call Queuing CRM
• Performance Statistics • Automated product and service
Call Centre

• Integrated Voice Response (IVR) Technologies information

• Automated Inquiry & Transactions • WEB based sales and support
• Automated screen “pop” on agent’s through standard menus and
screen automated help screens.
• Integration with company legacy • WEB based training
platforms • Reaching the global market
• Billing & Meter Reading
• Direct Access to Customer Data

22
 Customer Relationship Management

CRM Technologies on the Rise

 The implementation of CRM
technologies is projected to “The overall use of technology for selling is
accelerate over the next few years growing by more than 50% annually.”
– Gartner Group

“Sales Force Automation is the fastest

growing segment of the high-growth
$3,000 $2,744
(Dollars In Millions)

Client/server market, estimated to represent

$2,500 $3 billion in revenues by 1997.”
$1,960
$2,000 – Market Intelligence Research Corp.
$1,400
$1,500
$1,000
“Sales Force Automation will become a major
$1,000 driver behind enterprise-wide BPR
$500
(inexorably linked to development of the
customer-focused organization)”
$0
1996 1997 1998 1999 – META Group

CRM Revenue “Customer Management is a major initiative at

nearly 80% of Fortune 500 companies and
Source: IDC 1996 will grow to a $4.8 billion market by 1999.”
– Aberdeen Group,
Inc.

23
 Customer Relationship Management

Call Centres - Definition

Call centres are a key enabling arm of Customer Relationship Management. A well designed call centre will
integrate people, process, and technology to improve operational efficiency and maximize the value of the customer
relationship for both inbound and outbound contact.

Call Centre
Technologies

People Process
IVR ACD
♦ External customer ♦ Marketing / up-selling
♦ Internal customer ♦ Technical support
♦ Sales Force ♦ Product support
♦ Support team ♦ Service support
♦ Back-office ♦ 7 x 24 support
CTI
♦ Technical staff Information

• Customer data updates, purchase information • Customer history, billing, purchases, value, profile
• Leads tracking update, customer tracking updates • Product & service information, packages, prices
• Call statistics, inquiries, etc. • Marketing hints, reports, promotions

Data
Warehouse

24
 Customer Relationship Management

Call Centres - Architecture

Data
Warehous
e

• Customized Agent Desktop

Applications by Customer &
Call Type
• Automated Scripting of Call
Handling & Wrap-up
• Flexibility to Add New
Products, Services, and
Customer Service
Opportunities
• Scripted Cross-Selling
• Legacy Integration
• Billing & Meter Reading
• Direct Access

25
 Customer Relationship Management
There is a major transition to integrated delivery channels and to
provide “one face” to the customer.
Call Centre Call Centre of the Future
Old Rule New Rule
Paradigm Shifts
Multiple
Multipleproducts
products
Single
Singleproduct
product and
andcross
crossselling
selling

Backroom
Backroomoperation
operation Front
FrontOffice
Officeoperation
operation

Stand-alone
Stand-aloneoperation
operation Distribution
Distributionchannel
channel&&
&&information
information information
informationintegration
integration
Leading
Leadingedge
edgeand
and
Minimal
Minimaltechnology
technology integrated
integratedtechnology
technology

Reactive
Reactive Proactive
Proactive

Low
Lowskilled
skilledCSR’s
CSR’s Multi-skilled
Multi-skilledCSR’s
CSR’s

Tactical
Tactical Strategic
Strategic

Customer Inquiries Enhanced Customer Satisfaction

Cost of Business and Retention Revenue Growth
Lower Cost Distribution

26
 Customer Relationship Management

Sales Process Automation - Definition

 Sales Process Automation (SPA) is the approach for helping organizations dramatically improve their
sales and marketing effectiveness through the reengineering and automation of their sales and
marketing processes, with the ultimate goal of increasing revenues. SPA combines a working
knowledge of the market’s best ideas, technologies, and vendors with a practical, relentless focus on
implementation to deliver outstanding shareholder and customer value.

Basic Features
• Intranet - as an alternative sales channel
• Electronic catalog - On-line self served service
ordering
• Commission - Effective tracking of performances
and accurate commissioning
• Opportunity Management - tools such as
automated customer data analysis and pop-up
screens will assist in up-selling
• Competitor Data - effective analysis of competitive
data and automated access for sales force
• Contact Management - Effective tracking and
follow-up of leads
• Customer Data - Sales people will have a
complete analysis of the customer before their
eyes when attending to a customer. No wait, no
repeated questions, no frustrated customers
• News Service - Optional news sorting and reporting
will result in informed sales people
• Order Entry Quoting - On the spot quoting will not
give the client a chance to shop around and be
hunted
• Proposal Development - Automated document
creation based on corporate standards
• Pricing - Automated on-line prices based on
company rules
• Product - On-line and easily accessed
• Just-in-Time Training - Automated training, WEB
based training, and self training through information
sharing
• Electronic Kiosk - WEB page shopping.

27
 Customer Relationship Management

Sales Process Automation - Benefits

PERCEIVED BENEFITS OF SPA FIELD TECHNOLOGY
ImproveSales Effectiveness

IncreaseCustomer Satisfaction

IncreaseRevenues

ReduceSell Cycle

ImproveCommunications

ImproveManagementEffectiveness

TeamSelling

DecreaseCosts
ImproveMargins

ReduceAdministration

IncreaseSell Time

ImproveForecasts

CurrentInformation
% of Survey Responses (N=295)
0% 10% 20% 30% 40% 50% 60%© Insight
Source: 70% Technology Group

Improving sales force productivity and effectiveness by implementing field technology is a

key goal for many organizations

28
 Customer Relationship Management

e-Business - Definition
Business Partner
Integrating
more directly
with the
Business business
Processes
The Value processes of
Proposition Business Processes customers and
partners
of Business to Business
Electronic Tailoring
products and
Business Profiles &
services to
Preferences
Solutions customers
needs and
Business Partner values
Extending key business Business to Customer
applications to clients and
business partners
e-Business
e-Business is
is all
all about
about integrating
integrating the
the internal
internal and
and external
external processes
processes between
between business
business partners
partners and
and
customers.
customers.

29
 Customer Relationship Management

e-Business - Benefits

 On average, it costs about $5 - $50 per query to support via phone

 On average, it costs about $1 - $3 per query to support via E-mail
 On average, it cost less than $1 per query to support via WWW

Internet technology can improve the level of customer care, while reducing the cost of
maintaining the customer base.

30
Customer Relationship Management

e-Business - Architecture
Internet
A$X,XXX B$X,XXX 5. Product
and
1. Adaptive Fulfillment
World
Product Offer
Wide Web  Pick and pack
 Customer preferences  Integration/configuration
 Products and availability of third party products
 Pricing and promotions  Ship products or deliver services
 Adaptive selling  Inventory management
 Build/configure to order  Order tracking

2. Order Capture  Payment

and Validation 4. Order
information Management
 Order entry  Security
 Tax calculation  Link with  Link with third parties
 Validation 3. Payment finance  Create pick list
 Confirmation Processing  Consolidate orders

For
For both
both business-to-business
business-to-business and
and business-to-consumer
business-to-consumer sales,
sales, there
there are
are five
five key
key elements
elements to
to
e-Business — product offer, order capture and validation, payment processing,
e-Business — product offer, order capture and validation, payment processing, order order
management,
management, andand product
product fulfillment.
fulfillment.

31
 Customer Relationship Management

Conclusion
Customer Service
Call Centres Management Management
Customer Care Systems Systems Systems Billing System
Sales Force Automation
IVR
Enterprise
Management
Systems

Business Network
Data Warehouse Management Management OSS
Systems Systems

SAP, PeopleSoft, Oracle,

etc.

Customer Relationship Management is an integral part of successful convergence

32
Customer Relationship Management

The CRM Market

33
 Customer Relationship Management

CRM Marketplace - Fast Growth To-Date with a Bright Future

Worldwide Front-office Applications, 1998, US$b Worldwide Front-office Applications, 1998, US$b
Vendor Revenue (Software and Services) Vendor Revenue (Software and Services)

TES TEM CSS

20
in billions 16

12

8
$1.60
4
$2.00
0
1998 1999 2000 2001 2002 2003

The software and service revenue from

$0.60 CRM vendors will reach $19 billion by
2003 (0.6 probability).
= $4.2b up 45% 55-45
Service to Software
Source: GartnerGroup
:
34
 Customer Relationship Management

Explosive Market Growth

Application License Revenue in Billions

% Change
Customer
Management $1.46 53.9%
$5.33 265%
Industry Specific $2.02
39.5%
Human Resources $0.83 $5.49 172%
30.0%
Supply Chain $2.02 $1.83 120%
22.4%
$1.52 $3.70 83%
Manufacturing
18.5%
$2.53 66%
$1.83
Financials 6.0% $2.18 19%

1998 2001
Based on Forrester Research

35
Customer Relationship Management

The CRM Market - No Clear Market Leader

 60% of the $2.0B CRM software license market is controlled by 3
vendors
Siebel

Trilogy

Baan/Aurum

 60% of the Top 3 share is controlled by Siebel

 No vendor will have complete CRM functionality until 2003 (Gartner)
 The 1998 consulting market for CRM is estimated to be $4.0B (2:1)
 The consulting market for CRM is a large and growing high margin /
high revenue opportunity in contrast to the shrinking ERP market

36
Customer Relationship Management
Tier 1: CSS Applications for Tier 2: CSS Applications for Small to Midsize
Large Enterprises Enterprises or Divisions of Large Enterprises
Challengers Leaders Challengers Leaders

• Onyx
Siebel (6)
SCT Utilities (2)• Clarify •• Platinum Software/Clientele •
Ability to Execute

IMA • • Vantive
Broadway • Applix
& Seymour• (3) •Quintus
Pegasystems (8) • Remedy/Baystone
•
IBM/CorePoint (1) • Point Information •

• Oracle GWI (a) •

ERP
• Silknet (5)
ERP • CustomerSoft
Vendors • Astea • Chordiant (4) Vendors • SalesLogix
(7)
(b) • Royal Blue
As of 1/99 As of 1/99

Niche Players Visionaries Niche Players Visionaries

Completeness of Vision Completeness of Vision

(1) CorePoint is a subsidiary of IBM, consisting
of various IBM customer service application
assets
(2) SCT Utilities: Large utilities only
(3) Broadway & Seymour: Banks only
(4) Chordiant: Large call centers only
(5) Internet-centric
(6) Siebel now includes Scopus
(7) Major ERP vendors currently have noncompetitive feature/
function sets
(8) Pegasystems: Due to its broad product line, its direct CSS
applications license revenue and strategy is uncertain
(a) GWI: Lotus Notes platform
(b) Many mid-market ERP vendors express a vision of creating
full-featured CSS applications, but have not executed yet

37
 Customer Relationship Management

CRM Vendors
Vendor CRM Market Position
• Acknowledge leader
• Very integrator focused

TRILOGY • Leader in their niches

• Not integrator focused

• Excellent product
• Number 2, but struggling

® • Product continually delayed

• Intimidation capacity lessening

• Bold announcements
• Claim high strategic priority

38
 Customer Relationship Management

Siebel 99

 Siebel Sales Enterprise™

 Siebel Marketing Enterprise™
 Siebel Service Enterprise™
 Siebel Call Center™
 Siebel Field Service™
 Siebel Handheld™
 Siebel InterActive ™
 Siebel Product Configurator ™
 Siebel Sales ™

The Most Complete ERM Solution

39
 Customer Relationship Management

Siebel Industry Solutions

 Siebel Finance™
 Siebel Insurance™
 Siebel Communications™
 Siebel Consumer Goods™
 Siebel Pharma™
 Siebel Utilities™
 Siebel Public Sector™
 Siebel High Technology™

40
 Customer Relationship Management

Siebel 99 Product

 More than 600 Person Years of Engineering

 1100 Screens
 1300 Business Objects/Components
 110 Reports
 900 Database Tables
 144 Interface Tables

41