1. The What‟s & Why‟s of CRM
- Why the Hype Even Now? - CRM Challenges - Market Share vs. Wallet Share

2. Focus on Customer‟s “Pain Points”: Molex Case Example 3. Customer Information File (CIF) is a MUST! 4. The Performance Dashboard
- Customer-Driven Metrics & Reward System

5. Management Process is Key: Case Examples
- GE Aircraft Engine Business Group - Enterprise Rent-a-Car - Square D: U. S. Subsidiary of France‟s Schneider Electric

6. Summing Up
Lakshmi Mohan Customer Relationship Management 1

CRM Landscape in 2001….
 # of times CRM mentioned in the media
 only once in 1989 vs. 14,000 in 2000

 Percentage of executives expecting to have CRM programs in place according to Bain & Company’s Annual Survey of Management Tools
 72% in 2001 vs. 35% in 2000  the fastest growing tool in the 8-year history of this survey

 CRM Software Market, according to the Meta Group:
 $46 B in 2003 vs. $20 B in 2001  Plus CRM Services: At least twice as large
Source: HBR, Feb 2002, p. 102
Lakshmi Mohan Customer Relationship Management 2

A Telling Headline….
PeopleSoft sells CRM software to a friendlier IRS
(Computerworld, August 23, 2001)

The deal, valued at more than $10 million, will provide the Internal Revenue Service with the full PeopleSoft 8 CRM suite to make it easier for taxpayers, professional tax preparers and the IRS itself to obtain tax records and other information online around the clock.
The package will enable the agency to create separate tax data Web portals for taxpayers and professional preparers as well as build a private portal for IRS employees. The first phase of the deployment will begin in summer 2002, with full implementation expected by 2004.
Customer Relationship Management 3

Lakshmi Mohan

It will enable customers to access the information they want when they need it.The Benefits…. Lakshmi Mohan Customer Relationship Management 4 . The decision to use CRM software is part of the agency’s desire to modernize and become more customer-friendly. 1. Moving data access online will reduce costs by pushing more customer enquiries to the Web instead of costly telephone interactions with live agents and call centers Get customers out of the call centers and into self-service 2. I do find it humorous to hear ‘IRS’ and ‘CRM’ in the same sentence together. I think it’s important that the government is realizing that it may have a monopoly but it can’t get away with acting like one.

The CRM Imperative • CRM became a Mantra • To boost revenues and profit margins • Gain a competitive advantage in an increasingly deregulated and global market place • Allure of CRM is simple • Based on a powerful common sense premise … Know Your Customers and Treat Them Uniquely • Establish personal relationships with customers • Create a loyal following of increasingly profitable customers Lakshmi Mohan Customer Relationship Management 5 .

77% Competitive Advantage from Superior Customer Service .94% Respond to Competitive Pressures . Inc. Increase Customer Retention / Loyalty .Top 3 Rationales from August 2001 Study 1. 2.Why Do CRM? . 2001 Lakshmi Mohan Customer Relationship Management 6 . 3. Aug. New York.73% Source: Survey of 96 Global Firms by The Conference Board..

Instead. 2003. the efficiency of a company’s internal business process does not guarantee success. Lakshmi Mohan Source: Times of India.A Quote from CEO of i2 Tech With thin margins and fierce competition for the customer’s dollar. Customer Relationship Management 7 . June 27.Why Do CRM? . the ability to react quickly to changes in the market place and to adapt quickly to customer needs provides the competitive advantage.

Lakshmi Mohan Customer Relationship Management 8 . Most companies do not have the information about customers to establish close relationships.But CRM Challenges Business Practices 1. 2.. This is difficult since most companies are oriented towards products or finances or markets - everything but the customer. CRM requires companies to use the “customer” as the lens to understand and define the marketplace … to manage the business with that customer orientation ..

pinned the failure of their CRM programs on the lack of adequate change management Lakshmi Mohan Customer Relationship Management 9 . and customer service – Unfortunately. a tool in their tool kit The Big Hurdle: Change Management – 87% of respondents in a recent survey conducted by online resource center. when it is merely an enabler.Big Challenge to Implement CRM – A radical cultural shift that reshapes a company’s sales. marketing. companies see CRM as software. CRM Forum. it doesn’t occur magically once the software is booted up – Too often.

of which: # 1: Customer Service Single most important factor in customer retention # 2: Motivating and Rewarding Customer-Facing People Matters more than ever After all. if busy customers can take care of most of their transactions electronically. informed and empowered individual. Logic tells you there’s a natural relationship between customers who are happy and well-served and employees who are happy and well-served.Accenture’s Study (2001) . Source: CID Magazine. when they take the trouble to seek out a personal interaction. 2000 Lakshmi Mohan Customer Relationship Management 10 . 15. Aug. they need a knowledgeable.Over 400 Companies in 6 Industries Revealed 21 CRM capabilities that had the highest impact on financial performance. it stands to reason that.

Like ERP.75% of CRM projects fail to meet their stated objectives. CRM Systems can be a struggle to get up and running Meta Group Study (March 2001) – 55% . . ..Putting CRM To Work . They’d make comments like “I don’t have time to enter the information” Implementation Costs : Tens of Millions of $ Customer Relationship Management 11 – Lakshmi Mohan ..sales people are often resistant to. often as a result of sales force automation problems and “unaddressed cultural issues” . of using CRM systems. . and even fearful.

do NOT achieve project objectives Bain‟s Annual Survey (2001)  One in every 5 users reported that their CRM initiatives had not only failed to deliver profitable growth but had also damaged long-standing customer relationships.Some More Sobering Statistics Gartner Study (2001)  70% of large-scale CRM projects – costing more than $50 million and taking more than one year to implement . Lakshmi Mohan Customer Relationship Management 12 .

Lakshmi Mohan Customer Relationship Management 13 . Wellesley. Inc. Mass.A June 2002 Survey of 23 Siebel Projects … … 61% had yet to achieve an acceptable ROI after two years … 65% had customization problems … 78% found it was not user-friendly … 57% took longer than planned … 55% over budget by a significant amount Source: Nucleus Research..

Get value in shorter time Source: Siebel Worldwide User Week in October 2002 Lakshmi Mohan Customer Relationship Management 14 .Siebel’s Announcement in Oct 2002: Shifting to … .Simplify the large and complex CRM suite .Make it easier to integrate .

70% in 18 months  Implement in “digestible chunks” to derive ROI Lakshmi Mohan Customer Relationship Management 15 .A More Pragmatic CRM Scenario CIO Survey (May 2002) - 64% are implementing CRM incrementally 49% projects targeted for completion in less than 12 months.

2004 Lakshmi Mohan Customer Relationship Management 16 .28% increase between 1999 and 2000 . Nov.Update on CRM “Up-and-Down” CRM Software Sales (Gartner) .Because most firms failed to reap the expected benefits 2004: CRM Spending Is Picking Up - Source: HBR.25% drop in 2002 .17% drop in 2003 Was CRM Another Over-hyped IT Investment? .

Focus CRM on Specific “Pain Points” Relatively Narrow Scope. Build on Success of Initial CRM Projects Lakshmi Mohan Customer Relationship Management 17 . Get Data ONLY to Address Pain Points 3. Modest Goals NOT “Transform Entire Business”! Waste to Create a “Real-Time Enterprise” 2.A New Realism About How To Deploy CRM 1.What Has Changed? .

CRM: Why All the Hype Even Now? Customers: Always been the Focus of Business There is only one valid definition of a business purpose: to create a satisfied customer. The Practice of Management. (Peter Drucker. 1954) Relationship: The New Focus A customer becomes more profitable with time because: • High acquisition cost exceeds gross margin initially • Retention cost much lower • Greater share of customer wallet boosts profits Management: Focus on Maximizing Life-Time Value (LTV) of Customer Relationships • A big challenge to shift corporate thinking from delivering a product to serving a customer • Measure and manage customer profitability Lakshmi Mohan • Become Customer-Centric Customer Relationship Management 18 .

Analyzing and Acting … To Maximize Life-Time Value of Customer Relationships Key to CRM: Customer Information File (CIF) … One Unified View of Customer Information from ALL TOUCHPOINTS: Field Sales. Measure and Manage Customer Profitability Become Customer-Centric Lakshmi Mohan Customer Relationship Management 19 .….What Is CRM ? All About Knowing the Customer … Collecting. Website. Loyalty Cards. Telesales. Customer Service. Storefront.

One-stop Shop • Retain Profitable Customers for Life .Convenience • Enhance Profitability of Existing Customers .The Three Phases of CRM • Acquire New Customers .Innovation .Achieve Customer Lock-On Lakshmi Mohan Customer Relationship Management 20 .Listen & Respond .Cross-selling & Up-selling .

CRM Challenges  “I don‟t know who my customers are”  “We don‟t have contact with customers because we sell via channels”  “Our internal systems don‟t provide a single unified view of our customers”  “I don‟t know which customers are most valuable and deserve special attention”  “I don‟t know why my customers defect” Lakshmi Mohan Customer Relationship Management 21 .

distributors.party brokers.The Components of CRM Sales force automation Call center telephone sales Customer service/call center management Call centers managing aspects of customer contact Marketing automation Campaign management E-commerce Field sales Re tail Web -based self service Content management Third . agents Field services and dispatch Data analysis and business intelligence tools Data warehouse and data cleansing tools Lakshmi Mohan Customer Relationship Management 22 .

Customers’ Complaint .No Single Point of Contact • Do not have a 1to1 relationship with the company • Have to deal with several people Management The Customer Order Processing Marketing Customer Service Inside Sales Outside Sales Sales Support Lakshmi Mohan Customer Relationship Management 23 .

Better Service. Lower Cost .Pervasive in Travel Industry .froze recruitment for call centers Customer Self-Service Concept .FedEx Integrates Offline & Online Processes • Saw the Net as an opportunity • A low-cost alternative to call centers • Implemented Online Package Tracking System 5 years ago • Improved Customer Service • Reduced costs .Huge potential in B2B CRM Lakshmi Mohan Customer Relationship Management 24 .Hotels & Airlines give incentives to customers for online booking .

Requires Integration of Functional Silos Web Silo Sales Silo Marketing Silo Call Center Silo Customer Technical Support Silo Lakshmi Mohan Customer Relationship Management Manufacturing Silo 25 .Cross-Functional Nature of CRM .

Requires Integration of Touchpoint Systems Web Telephone Face-to-Face Email Mail Enterprise Fax Lakshmi Mohan Customer Relationship Management 26 .Coordinating Touchpoints .

Saves time .More valuable to customers than R&D effort to make better fuel Lakshmi Mohan Customer Relationship Management 27 .a cylinder-shaped credit card. fits on a key chain .Shift Corporate Thinking … From Delivering a Product To Serving a Customer Mobil‟s Speedpass .Offers a new level of convenience to customers .Customer swipes against the gas tank before filling up leaves when done .

Over the long term. for the customer” last year . The focus has been totally inside our customer operations.General Electric . 2001 Lakshmi Mohan Customer Relationship Management 28 .Took GE resources and applied them to our customers‟ biggest needs using Six Sigma as a foundation. Completed 2000 Six Sigma Projects “at the customer. and committed to externalizing all our initiatives for the benefit of the customer.Provides “Value-Add” for Customers Every employee will understand that success can only come from an inextricable link to the success of our customers. Jack Welch. Feb 9. we believe this will differentiate GE in the eyes of the customer. It‟s not that we know all the answers but we‟re totally committed to finding them. Chairman’s Letter in Annual Report.

High acquisition cost exceeds gross margin initially .To new customers .Greater share of customer wallet If we don’t keep the customer for several years.Retention cost much lower .profits up by 3% Source : Bain & Co. Retention of Customers 1. we don’t make money: Land’s End CEO 2.profits up by 17% . A customer becomes more profitable with time because: . Loyal customers are more profitable: 1% increase in sales .To existing customers . Study Lakshmi Mohan Customer Relationship Management 29 .Acquisition vs.

Profit One Customer Generates Over Time Credit Card $30 42 44 49 55 Auto Servicing 25 35 70 88 88 Year 1 2 3 4 5 Source: HBR.59-75 Lakshmi Mohan Customer Relationship Management 30 . pp. September-October 1990.

the strategy should be to reduce costs of servicing them . Latin America. and . Europe. the worst 50% of customers are currently unprofitable to serve.use lower-cost channels. reduce credit risk.” “ For clients with low current value and low potential. in some cases. Canada. many do not even cover variable costs. fire them ! ” Lakshmi Mohan Customer Relationship Management 31 .The Profitability Squeeze “ In recent work with over 15 major banks in the US. and Australia. we have found that the top 20% of customers provide 120% to 150% of profits in many bank product lines.” “ On the other hand.

Two Dimensions of Competition Customer Needs Satisfied Customers Reached Lakshmi Mohan Customer Relationship Management 32 .

Market Share Customer Needs Satisfied Traditional Marketing Diminishing Returns Customers Reached Lakshmi Mohan Customer Relationship Management 33 .

Increasing Returns Customers Reached Lakshmi Mohan Customer Relationship Management 34 .Market Share vs. Wallet Share Customer Needs Satisfied 1 to 1 Marketing .

Lego was losing share of children‟s spare-time activities. Can Hamper Growth Consider Lego. video games and TV than with toys. . .Market Share Focus . the Danish toy company .. Lakshmi Mohan Customer Relationship Management 35 . 90% in Europe BUT…. .Dominant player in construction-toys .Market share in 1995 : 72% worldwide. . Children were spending more of their spare time with computers. .

that allows users to build their own robots .Lego’s New Market Space .A new product line.Young adults and 30. computers and consumer electronics . motors. light and touch sensors. education. interactive technology. software. combines hundreds of Lego bricks with gears. called the RCX for “robotic command explorer”. Mindstorms. and a microprocessor. entertainment.Get an increasing share of customer spending as children become young adults and then parents .“Have fun and exercise the mind” .to 40-year-olds use the interactive software too… now account for half of Lego‟s revenue Lakshmi Mohan Customer Relationship Management 36 .Family “Edutainment” .Convergence of toys.

They told us we were missing opportunities. It took a mid-level Company management training class reporting to us in the spring of 1995 to point out without any shyness or sugar-coating that our cherished management idea had been taken to nonsensical levels. and limiting our growth horizons by shrinking our definition of “the market” in order to satisfy the requirement to be number one or two. get out of the business” – Question : What is the marketplace ? Management teams began “to define their markets more and more narrowly to assure that their business world fit the number one-or-two share definition.Defining the Market . “ . February 2001 Lakshmi Mohan Customer Relationship Management 37 .GE learns its importance – GE‟s long-standing management tenet : “Must be #1 or #2 in the market place Otherwise.CEO’s Letter in Annual Report.

Lakshmi Mohan Customer Relationship Management 38 .GE Redefines “The Market” – Each business has a 10%-or-less share in the market – The # 1 or # 2 Definition  Increasingly Limited Market Size – New Definition  Opened the vast opportunity for GE‟s products and services Our willingness to see it as “the better idea” was a major factor in our acceleration to double-digit revenue growth rates in the latter half of the „90s.

 High switching costs because of customer‟s investment in a supplier‟s product… But.Today.E.Bought Oracle‟s ERP package . even the U. selected Seibel for CRM despite difficulty of linking the two packages Lakshmi Mohan Customer Relationship Management 39 . still vulnerable ! G.Customer Lock-In Customer has no choice … … until an alternative comes along  Only one supplier with a monopoly stemming from a technology advantage … until competitors catch up ! FedEx: Pioneered airbill bar coding in early 1970s for package tracking . S. Postal Service has it.But. .

including logistics and supply chain management  Moving “bytes”. superior value delivered by the supplier FedEx : Shifted to new pastures when competitors caught up  Used IT to become a one-stop shop for complete order fulfillment.Customer Lock-On Customer is not captive…Customer keeps competitors away . not just “boxes”  Developed a free Web-based guide to international shipping for small and mid-size businesses Customer Relationship Management 40 Lakshmi Mohan .Because of ongoing.

5 Billion 5000-Person IT Group Worldwide Source: eweek. a process that added time and overhead costs FedEx IT Budget in 2001: $ 1.FedEx Delivers “Global Trade Manager” A B2B Customer-Facing Web Application  Project started in 1997. including import duty. 2002 Lakshmi Mohan Customer Relationship Management 41 . launched in August 2000  Helps shippers to prepare the appropriate import/export forms based on the commodity being shipped and the countries of origin/destination  Alerts users to : restrictions on shipping certain commodities. value-added tax and excise duty. if a country is under embargo. 12. Nov. 2001 & Computerworld. so they can estimate the total landed costs of their package Before: FedEx prepaid duties and taxes for its customers. then billed for reimbursement later. March 12. and special licensing requirements  Determines government charges and fees.

Nov.A “Comprehensive” CRM System Is A BAD Idea!  Ends up creating an overblown system  Difficult to implement  Will not yield payback CRM Done Right!  Is It Strategic? Where Does It Hurt?  Do We Need Perfect Data?  Where Do We Go From Here? Source: HBR. 2004 Lakshmi Mohan Customer Relationship Management 42 .

000 different sales opportunities worldwide at any given moment  Used e-mail and spreadsheets to keep track of it’s pipeline  Data were often weeks out of date  Difficult to set sales priorities to pursue leads with the highest potential  Hard to synchronize Molex’s global efforts  Several Molex locations could be working with same customer in different parts of the world without know it Lakshmi Mohan Customer Relationship Management 43 .Case Example: Molex .A Global Manufacturer of Electronics & Fiber-Optic Interconnection Systems Strategic Pain Point: Order Pipeline  Large Customer Base 15.

Updated information 24 hours a day rather than just a few times a year  Payback: 5% Increase in Revenue .Visibility for all executives from the CEO on down to see the full range of sales opportunities in real time .Enabled measurement of the real value of these opportunities .More precise sales targets .Improved order management .Data can also be used to improve budget planning Lakshmi Mohan Customer Relationship Management 44 .Use of shared information by sales staff to identify opportunities earlier .Molex’s CRM Path  2002: Pipeline Management .Better global coordination of inventory and pricing between regions .

Molex’s CRM Path Pipeline Management Lead Management Cross-Selling Sales Forecasting Budgeting Supply Chain Management Lakshmi Mohan Customer Relationship Management 45 .

Shift away from broad-brush national marketing to customized strategies tailored to a regional or local market, to an individual chain or store, or even to a single customer

Feasible only with micro-level information on markets and customers
Lakshmi Mohan Customer Relationship Management 46

Michael Dell’s Principle: “De-Average”
When you’re trying to target profitable segments, averages obscure a lot, and aggregate financial statements are pretty meaningless. Our approach to segmentation is to take really big numbers and “de-average” them. Until you look inside and understand what’s going on by business, by customer, by geography, you don’t know anything.
Source: Harvard Business Review, March-April 1998.

Lakshmi Mohan

Customer Relationship Management


De-Averaging in Practice...
Performance measures in the P&L track… - Margins - Average Selling Price - Selling Overheads By… - Customer Segment - Product - Country
Lakshmi Mohan Customer Relationship Management 48

“It‟s one way to handle growth.” . You can‟t possibly manage something well if it‟s too big.“To develop people who are very attuned to their market segment.Totally autonomous  When a business unit grows. segment further to get more focus .Dell Manages by Segmentation  Organized initially by Geography  In „97 : by Customer Segments .” Lakshmi Mohan Customer Relationship Management 49 . Segmentation gives us better attention and focus.“To identify unique opportunities and economics” .

each segment has its own issues . for instance. . .Optimize products to meet customer needs . .Dell Manages by Segmentation Benefits : . . In education.” Lakshmi Mohan Customer Relationship Management 50 . It‟s a different mind-set.“Segmentation lets you tailor your programs to the customers‟ needs . how do you get tech support to a class-room when the teacher doesn‟t have a telephone ?” Cultural Challenge : “Some people still measure themselves by how many people work for them or the revenue they generate. At Dell. success means growing so fast that we take half your business away.

. Smith Another : Smith. For example: Consumer electronics companies tend to segment by age and income Does this relate to buying behavior ? Needs are different for customers who are comfortable with high-tech gadgets and those who are not. Lakshmi Mohan Customer Relationship Management 51 .But Not Easy .CIF is a MUST! .g.Inconsistency makes integration into a single CIF difficult e. Customer data resides in a number of “silos” . 2. J. Customer Name One system : Jane K. 1. Who are the profitable customers ? . What are the needs of customers ? .Marketing and sales campaigns should be based on needs-based segmentation.Need to know who buys X-dollars of Y-products over Z-duration 3. K..

. . . “DATA-POOR” about Customers MIS Reports limited to Revenues & Receivables No Information on Profitability or Product Mix Data on Quotations & Orders Lost . . Are not even captured in MIS Systems Lakshmi Mohan Customer Relationship Management 52 .Business Marketing (B2B) Should Know Their Customers Better Direct Sales Model to Customers Limited Number of Customers (unlike B2C) CIF : Even More Critical YET .

one Dell person to one customer Lakshmi Mohan Customer Relationship Management 53 .One for CIOs and another for technical types  40% of Michael Dell‟s time spent with customers  Keeps Dell in advisory role about future of technology  Helps customers to anticipate future needs .Business Customer Forums at Dell  To ensure a free flow of information on a regular basis  Platinum Councils of Dell‟s largest customers every 6-9 months – over 100 customers at the event .Also helps Dell in demand forecasting  Dell sends top technologists AND real engineers who don‟t get out to talk to customers .

. Quotations Submitted .Orders Lost ? To Whom ? Why ? .For Each Customer . . . . ... . . . .Status of Pending Quotations . Last Year . Who are the “Influencers”? Lakshmi Mohan Customer Relationship Management 54 . . . . Which Products? # of Orders ? . Receivables : This Year vs.When ? Value ? Products ? Orders Got ? . Last Order : How Much ? When ? . . Sales : This Year vs Last Year .A STARTING POINT FOR A B2B CIF .

Market Research Data Vendors Emerged for Consumer Packaged Goods and Pharma because…. Huge marketing budget Relatively easy to get data from retail store audits or scanner data BIG PROBLEM FOR B2B: WHO IS THE CUSTOMER ? FORD CISCO BOEING Auto Dealers Auto Buyers Air Travelers Investors Airlines MERRILL LYNCH ANOTHER PROBLEM : WHO COLLECTS THE DATA ? Lakshmi Mohan Customer Relationship Management 55 .Why The Problem ? External Data on Customers & Competitors is SOFT .Most Valuable for CRM. BUT DATA IS DIFFICULT TO GET .

But: “ If we do what‟s right for the customers. Lots of examples with 60% to 80% reduction in cycle time but only very modest effects at the business unit level because the changes did not matter to the customer.” (McKinsey Study) Lakshmi Mohan Customer Relationship Management 56 . .Must Be Customer-Driven Financial results are the bottom-line measures of business performance.The Performance Dashboard . . our market share and our return on assets will take care of themselves” (Xerox CEO) “ Any cost that does not add value to consumers of the product has to be reduced” (P & G CEO) “ We did an audit of client experiences with process re-engineering .

An Example : Xerox Copiers Company Strength : Faster delivery than competitors BUT : That was NOT what customers cared about Customer‟s Concerns : .Would it be Installed on Schedule ? .In Working Order .Accurate Bill ? Lakshmi Mohan Customer Relationship Management 57 .When would the copier arrive ? Typical Salesperson‟s answer : “2 weeks” .

GE’s Concept of “Span” .Measures the operational reliability for meeting a customer request … the time window around the Customer Requested Delivery Date in which the delivery will happen .ever closer to the center .days early and days late .the exact day the customer desired RESULTS : Plastics Aircraft Engines Mortgage Insurance Lakshmi Mohan : 50 days span to 5 : 80 days span to 5 : 54 days span to 1 Customer Relationship Management 58 .High Span  Poor capability to meet customer need Objective  Zero span .Squeeze the two sides of the delivery span .

from the first person in the process receiving the castings. Every single delivery to every single customer is measured and in the line of sight of everyone. WHAT GETS MEASURED AND REWARDED GETS DONE ! Lakshmi Mohan Customer Relationship Management 59 . and. everyone in the process knows he or she is affecting the business-wide measurement of span with every action taken. circuit boards or any other components from the supplier.In the CEO’s Annual Letter ( Feb 2001 ) When the order is taken. that date becomes known to everyone. all the way through to the service reps who stand next to the customer as the process is started up for the first time.The GE Process .

.can‟t see what is important anymore . Quality of service . . .The Problem Today . .Good information alone is NOT enough . You almost drown in it . . Not much help to employees on how to improve in their daily jobs . Customer retention . . . .Easier to upgrade the quality of information than the management process for utilizing the high-quality information Lakshmi Mohan Customer Relationship Management 60 .Too much financial information .No measurement of drivers of revenues and costs such as : .it has to be USED ! .

Critical Success Factors are ..Determine the Key Indicators Measure the performance of each indicator Determine the data needed for each indicator Lakshmi Mohan Customer Relationship Management 61 .. The key areas where “things must go right” for the business to flourish They should receive constant and careful attention from management .

browsing the company Web site.Dell: Customer Service is the New Battleground ! The Customer Experience Initiative : May 1998 Encourage every department to win part of the customer experience . includes looking at company advertising. every service call and its resolution .Dell rep can see “everything” when customer calls Use the Net to automate and customize service like Dell stream-lined and customized PC production . a third of Dell’s customerservice force dedicated to handling queries online Lakshmi Mohan Customer Relationship Management 62 .today. State-of-the-art CRM contains all customer inputs : . purchasing a system and receiving follow-up support. every mouse click.sum of every customer contact.every customer call.

Installation and Operation . Order and Delivery .% of on-site service calls resolved by a Dell Service Partner within 24 hours Bonuses and profit-sharing tied to 15% improvement in performance Lakshmi Mohan Customer Relationship Management 63 .% of customers calls to tech support requiring a part dispatch within 30 days of invoice date 3.Three Performance Metrics 1.% of orders shipped by target date 2. Service .

. 1988.” Marketing Science Institute Working Paper.. Webster.Market-based Performance Measures . “Rediscovering the Marketing Concept. MUST be linked to Reward Systems Measurement and reward systems are critical in developing a market-oriented business. Just as managers will emphasize those things that top management‟s statements of beliefs and values focus their attention on. Lakshmi Mohan Customer Relationship Management 64 . they will also do those things for which they are evaluated and rewarded Source : F.

they stay on the Critical Account List until the problem is fixed. previously Finance Lakshmi Mohan Customer Relationship Management 65 .The Customer is THE Business at Cisco 70% of Cisco‟s employees have a very significant bonus multiplier tied to the annual customer satisfaction survey Status of Critical Accounts reviewed first at every staff meeting “If you have an unhappy customer.” “Every night. Chambers (CEO) gets a personal update on the status of every critical account.” Senior VP of Customer Advocacy reports to the CEO IT Reports to Customer Advocacy.

Customers who offer advice on products and strategy  Emphasis on Service is Pervasive – Applicants for home equity loans get answer in 60 seconds – Every employee has to listen to customer calls for atleast 1 1/2hours a month – “Customer Experience” departments and “Customer Advocacy” teams to quickly address complaints and suggestions – Top executive team reads at least 20 customer e-mails a day  Invites Customer Feedback “ Our customers have a great desire to improve the bank.Enable download of financial data to customers‟ Quicken software Lakshmi Mohan Customer Relationship Management 66 .Software changed to allow users to access all their accounts at once. with single sign-on . It‟s about customer service !  Created an “iBoard of Directors” .How Wingspan Bank. . and we act on their ideas”.Online Offshoot of Bank One Corp “It‟s not about having a better CD rate.com Does it .

relevant information available through IT systems in all parts of the company * George S. “Configuration” (a term used by Prof. “Creating a Superior Customer-Relating Capability”. Day.Three Components of the Management Process 1. Organizational Orientation  Makes customer retention a priority  Gives employees wide latitude to treat customers differently 2. MIT Sloan Management Review. Day) *  Organization structure and accountabilities  Metrics and incentives for building relationships 3. Spring 2003 Lakshmi Mohan Customer Relationship Management 67 . Information about customers  In-depth.

… IBM made it a company value to take on only the best customers and to do everything possible to cater to their needs.Customer Retention is High Priority for EVERYONE  Not just a concern to be delegated to marketing or sales  Openness for sharing information about customers … no one function can be allowed to own the customer … knowledge about customers has to be shared with other functions  Different Customers should be treated differently based on their long-run value.Orientation . Lakshmi Mohan Customer Relationship Management 68 .

Incentives & Structures Case Example: GE Aircraft Engine Business Group Problem: Discovered that its jet engine customers were not happy with the service component even though the Six-Sigma quality metrics showed the opposite. marketing and product support .Corporate VP assigned to each of the top 50 customers.Reorganized around customer-facing processes rather than functions .Configuration: Aligning Metrics. so they had a clear channel to the top of the organization Customer Relationship Management 69 Lakshmi Mohan . Step 1: In-depth study of what customers really wanted in terms of … … responsiveness … reliability … value added by the services … help in improving their productivity Step 2: Changed the organization structure from functional departments such as sales.

Assigned GE leaders of their Six-Sigma quality program to customer’s site to work hand-in-hand on engine-service projects and parts inventory management .Case Example: GE Aircraft Engine Business Group Step 3: Created a “value-add” for the customers in the area they cared the most… help to improve their productivity .Learned that the Net was the best tool for personalizing the delivery of parts Lakshmi Mohan Customer Relationship Management 70 .

Case Example: GE Aircraft Engine Business Group Step 4: Step 5: Implemented the Net connection Incorporated customer-service metrics into the employee evaluation criteria Instituted rewards for superior service Step 6: RESULT: Consistently high ratings on a range of customersatisfaction metrics Lakshmi Mohan Customer Relationship Management 71 .

000 cars 2003: Largest US car rental company . 2003 Lakshmi Mohan Customer Relationship Management 72 .Enterprise Rent-a-Car  A second generation family business  Founded in 1957 – leasing cars  Added car rental in 1963  1980: Fleet of 6.$ 6B Revenues.000 rental cars 1989: Expanded to 50. 500.Driving Home the Service Ethic . June 3.000 Cars Source:The Financial Times.

breakdown. etc.Strategy  Identified a neglected market… … renting replacement cars to people involved in an accident. mechanics Lot more complicated than handing out keys at the airport Lakshmi Mohan Customer Relationship Management 73 .  Not an easy market to serve … day-to-day demand is unpredictable unlike airport rentals where most customers book well in advance … agitated or distressed customers … other parties involved in the process . body shops.insurance companies.

What Makes IT Work? .  “Most of the management team came up through the business”  Mix of central control where it matters most and decentralized empowerment of Branches  Each of the 5.Culture & Management Process  “Dad (the founder) has always been passionate about customer service… that rubbed off on all of us”.000 Branches is a profit center  Monthly financial statements for each Branch show “all the numbers” … right down to what it costs to wash a car plus Customer Satisfaction scores  “The company is a confederation of these small businesses … we view ourselves here (at Corporate) as a switching station for the best ideas” Textbook example of how to grow without losing that entrepreneurial edge Lakshmi Mohan Customer Relationship Management 74 .

not financial performance Lakshmi Mohan Customer Relationship Management 75 .Decentralization Works Only If… Line Mangers have training and support to take decisions Recruit bright. entrepreneurial graduates straight out of college and funnel them through the training programme developed by Enterprise Boundaries and incentives to encourage the right kinds of decisions are carefully designed Every Branch gets a Customer Satisfaction Score which determines promotions.

ESQI does not mean we can ignore other things but it will keep us on track. profitability was good. growing fast. The ESQI was a breakthrough for us. But I was picking up background noise that suggested our customer service had started to slip.The Goal of the Company . Lakshmi Mohan Customer Relationship Management 76 .Enterprise Service Quality Index (ESQI) I went through a period of healthy paranoia in the early 1990s. Over the years we have refined it and refined it until we now ask only two questions: are you satisfied with our service? And would you come back … Enterprise CEO Customers who say they are “completely satisfied” with Enterprise’s service are three times more likely than others to come back Rising ESQI scores give me more confidence in the future than our strong cash flow or gain in market share. We were a billion-dollar company.

Square D Case Example .Getting the Management Process Right First Background:  A 100-year-old maker of electrical and industrial equipment  Acquired by France‟s Schneider Electric in 1991  Integration with Schneider completed in 1993  Goal: Double return on capital by 2000  Strategy: Become Customer-centric Lakshmi Mohan Customer Relationship Management 77 .

construction and OEM  Remaining functions reorganized to support these four Divisions New Performance Measurement & Incentive Systems:  No longer based on # of units sold  Targets: # of customers acquired. and transformers – reorganized around customer segments in four main markets . residential.Changes in the Management Process New Organization Structure:  Company’s three BUs – electrical distribution.industrial. profit margins Changes took 3 years and were championed straight from the CEO’s office Lakshmi Mohan Customer Relationship Management 78 . industrial control and automation.

Investment in IT… To Upgrade the Customer-Facing Processes Order Management System  $ 75M in 1996  Enables Sales Engineers create proposals for Customers based on what the factory floor could deliver  System implementation driven by top management: Took 3 years  Active involvement of line managers for months at a time to understand software implementation issues Customer Support Service  18 far-flung call centers were consolidated into one customer information center for North America in 2000 Lakshmi Mohan Customer Relationship Management 79 .

More High-Tech…To Secure Customer Loyalty … Design “Self-Repair” Products Patented a technology to build Web servers into their equipment to identify problems almost as they happen Example Monitor at a petrochemicals plant detects a power surge… automatically kills the utility feed. a Square D manager comes to the plant to discuss the event with customer and ensure that contractor’s engineer has installed the replacement drives Lakshmi Mohan Customer Relationship Management 80 . Web server linking the equipment senses damage to any drives (even if a backup generator has taken over). Server emails Square D for replacement drives and contractor asking for an engineer to come to the plant the next day to install them. Next morning.

First Wave of CRM .Buyer must pay for shelfware too Lakshmi Mohan Customer Relationship Management 81 .Why It Did Not Deliver ROI “Shelfware” Problem: 42% of CRM Goes Unused  Vendor offeres a larger discount to buy software licenses which businesses do not need immediately  Buyers enticed with economies-of-scale rationale – “less expensive to buy now than to add on later”  Unforeseen cost – Maintenance -.

2003 Lakshmi Mohan Customer Relationship Management 82 . When companies spent millions on the first phase and couldn‟t find the benefits. you get a bigger discount but the vendor walked away with all your money with no real incentive to help make it work… “The biggest problem was the way vendors originally convinced the market that CRM was a software project.Are CRM Vendors to Blame? “CRM vendors were their own worst enemy when it came to CRM shelfware. Sure. March 7. they pushed users to „all you can eat‟ software contracts that would take years to implement. they left the rest of the software on the shelf” – VP. Giga Information Group Source: CRMDaily. First.com. not a business project.

and if it did.g.. “it was 14 canned reports that were unintelligible and difficult to manipulate and customize. Call Center Integration   Generated „tons‟ of customer data Only limited use made of the data Operational CRM did not provide reporting capabilities.Another Reason Major Focus of First Wave: Operational CRM  Dealt with Automating Front-End Application e. Sales Force Automation.” Lakshmi Mohan Customer Relationship Management 83 .

integration.” – BearingPoint Study Lakshmi Mohan Customer Relationship Management 84 .” – Forrester Report “Despite billions in CRM investment by the financial services industry. and related hardware & software: Over $12 B … BUT. only 10% of business and IT executives in the survey strongly agreed that the business results they expected to achieve had been met or exceeded. Fewer than 60% surveyed have broken down their stovepipes of product lines. companies have done little to improve the customer experience. and can communicate effectively the complete view of the customer across their organizations.Some Survey Findings “Estimated worldwide spend on new CRM licenses in 2005: Over $3 B Total spend including maintenance.

First Wave of CRM: Operational CRM − Automating marketing. if calls to the call center are limited to 3 minutes or less. would it result in more loyal. sales and service processes − Goal: Operational Efficiency − “Hands and Feet Doing the Day-to-Day Work” − But. profitable customers? Or. does tracking deals with sales force automation actually lead to more effective selling? Lakshmi Mohan Customer Relationship Management 85 .

The Limited: Increased Cross Selling yielded ROI of 400% on ACRM Lakshmi Mohan Customer Relationship Management 86 .Next Generation CRM: Analytical CRM “The Brains of the Operation” Converts Customer Data into Customer Intelligence For Example: − How profitable are your customers? − How recently and frequently have they made purchases? − Who are our best customers and how can we retain them? Use Customer Intelligence as a strategic initiative to understand and respond to high-value customers and reduce customer churn rates Without the analytics. what companies have is “some pretty expensive Rolodexes”.

9% CAGR − Median ROI of 55% by firms who have successfully used Analytical CRM Customer Centricity has become a rallying cry today… A product or price advantage can be duplicated but a strong customerdriven organization is NOT easy to replicate… Analytical CRM injects the voice of the customer from the interactions at all touch points into the process for building and sustaining profitable customer relationships.Key to Becoming Customer Centric  Aberdeen Group‟s 2005 Survey − Over 750 companies across several industries − 74% of Best-in-Class Firms are focusing on Analytical CRM  IDC Report − CRM Analytics has fastest growth rate of any segment in analytics software: 12.Analytical CRM . Lakshmi Mohan Customer Relationship Management 87 .

A Success Story: Dreyfus Corp.  Manages $165 B in mutual fund assets  Objective: − Reduce churn − Increase “Wallet Share” of current customers  Findings from Customer Analysis − Several red flags such as sudden increases or decreases in a customer‟s contact with Dreyfus − More transactions between a customer‟s funds  Analytic Model for Proactive Marketing − Identified potentially restless customers − Targeted them with tailored sales calls  Bottom-Line − Reduced Investment Redemption Rate from 20% annually to 7% − 50% fall in customer attrition Lakshmi Mohan Customer Relationship Management 88 .

000 financial advisors. 450+ Branches.Morgan Stanley Case Example .” − Leveraged available data to build predictive models for refining its marketing efforts Lakshmi Mohan Customer Relationship Management 89 .Did Analytical CRM FIRST!  Individual Investor Group − 13. 3 M Customers  2001 Goal: Product-Centric to Customer-Centric Business − Acquire Targeted Clients − Increase Wallet-Share of Existing Clients − Retain High-Value Clients  CRM Strategy − “Let‟s get our analytical house in order before venturing into an operational CRM platform.

Morgan Stanley Application Overview  Based on customer data in mainframe-based data silos  Performs an “Extract-Transform-Load” (ETL) process monthly to load Customer Data Mart  A sophisticated “householding” algorithm groups all data by address to create an individual customer ID  Predictive modeling suggests the appropriate level of service and offerings to each client Lakshmi Mohan Customer Relationship Management 90 .

How It Hangs Together! Lakshmi Mohan Customer Relationship Management 91 .

Lakshmi Mohan Customer Relationship Management 92 . . Operational CRM wasn‟t at the top of our agenda. . .Business Value of Customer Analytics “Think about all the money you‟re saving not going after customers that the model says will have a very low response rate.” “Given the pressure our industry was under the past few years. . . You‟re perfectly positioned when you do roll out Operational CRM. . . You get information you really need to run the business. It is not as expensive. . .” If you‟re starting from scratch. . Hence you get immediate payback. do the analytical first… . The marketing campaign based on a predictive model of propensity to purchase is much different from how you ran it in the past when campaigns were based on selecting media for the targeted audience. .

There was a lot of overlap and duplication  Started the CRM program in mid-2000 to bring some order to the customer contact information and eliminate the costly duplication of effort  Determined to avoid the problems inherent in CRM projects that are too big to manage We are going into this with realistic expectations.) Case Example Departments are run as individual fiefdoms. each with “data silos” and different CRM programs. : Conducts direct mail and email campaigns Service dept.  Lakshmi Mohan Customer Relationship Management 93 . all uncoordinated  Marketing dept. : Runs its own promotions Customer Affairs Office : Has its customer surveys We identified over 60 different programs that touched the customer in one form or another. : Sends out coupons and reminders Parts dept.S.Mazda (U. We’ll take baby steps and build some successes … and also gain some returns on the investment over the first year or two.

Mazda’s CRM Implementation
 Got buy-in from the top on down to handle the political challenge to get depts. to change their long-time habits  Licensed CRM software from E.phipany System integrator, Wheelhouse Corp., installed CRM in 14 weeks.  Savings from changes made in the first 6 months: $ 1 M/year

 Big Payoff: Clean Integrated Database
Before: 4 separate databases for Marketing, Vehicles, Service & Warranty, Call Center Data Cleansing: A major effort For example: Marketing database was sorted by customer name while Vehicles database was sorted by vehicle identification #. Marketing database was also full of errors and duplicates
Source: Computerworld, Feb 18, 2002
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Real Value Of Mazda CRM: Through Analytics

Build profiles of our car owners

 Segment by Value Tiers  Build Life-Time Value Indices and Loyalty Indices  Develop Measures of Retention Risks
Ex: System can identify a loyal Mazda owner ( because she has purchased multiple Mazda cars) but is having service warranty problems. We can identify her as a retention risk and take proactive action right away to keep her as a loyal customer rather than let her fall off the radar screen  Help the call center representatives to get a complete view of each caller‟s history with Mazda – computer screen will show what vehicle the customer currently owns, vehicles owned before, their service history, their previous contacts with Mazda and whether there is a current promotional offer that they are eligible for and that we can offer while they are on the phone.

Make the call center a more proactive channel rather than just a Consumer Affairs line.
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Summing Up… … CRM is a Process
 Identify High-Value Customers  Build Customer Loyalty to grow Revenues  Reduce Costs through Micromarketing  Create a Customer-Focused Organization

IT can Help… But There are Non-IT Hurdles
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Organizational Resistance 3.The Non-IT Hurdles 1. Performance Measurement and Reward Systems Lakshmi Mohan Customer Relationship Management 97 . Getting the Right Data 2.

MAXIMIZE YOUR RETURN.An Ad from a CRM Software Vendor CUSTOMERS ARE AN INVESTMENT. … provides real-time information on all aspects of your customer relationships … integrates business processes seamlessly across your organization to determine the most profitable ways to manage customers … turns every point of customer contact into a profit opportunity Which of the Claims Made in This Ad are True? Which are Not? Lakshmi Mohan Customer Relationship Management 98 . CRM lets you capitalize on every customer interaction across your enterprise.

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