CUSTOMER RELATIONSHIP MANAGEMENT

CONCEPTS AND TECHNOLOGIES

Chapter 13
Planning to Succeed
Section E: Realizing the benefits of CRM

Section E consists of 2 chapters focused on the

following.

Chapter 13: Planning to succeed

Chapter 14: Implementing CRM
The CRM conundrum

 Only costs of CRM programs are known with any

certainty (and even these can be wrong!)
 Benefits from CRM will only be known with certainty
after a period of data building, experimentation and
learning
Why DCF calculations don’t work for CRM 1

1. Where CRM is a “bet the business” imperative or a

major, disruptive change in business strategy, the
risk of failure is too great for ‘expected value’
decision-making. If a company must become
customer-centric quickly, then this is no longer one
investment amongst many – it is a “do or die”
situation.
Why DCF calculations don’t work for CRM 2

2. When faced with discontinuous futures, scenario

planning may be a better option than using
‘expected value’. A CRM change program that costs,
for example $100 million, might not generate one
cent of incremental cash (loses $100 million) but on
the other hand, could transform the business
fundamentally and generate $500 million (but
nothing in between). DCF might show the
investment has an expected value of $300 million
but that is a meaningless figure for the Board; they
either lose $100 million or gain $500 million.
Why DCF calculations don’t work for CRM 3

 CRM’s impact on business performance is almost

always in conjunction with, or mediated by, other
capabilities such as excellent brand management,
customer focused management and employees, new
product development and organizational
responsiveness. If these capabilities are not
developed, the CRM program might fail initially.
However, over time it gathers so much customer
insight that the business takes off.
CRM payback is experienced in 2 stages

1. Immediate benefits from improved operational

performance
● Associated with single view of the customer, data integration,
channel integration, standardised processes, customer self-
service.
● Operational improvements create new CRM assets
(databases, mining tools, customer relationships) and
capabilities (data mining, database management, interacting
with customers).
2. Latent benefits from new CRM assets
● These improved CRM assets and capabilities enable more
ambitious strategic CRM initiatives: bigger changes to align
the business to the needs of the most attractive customers in
the market.
Risk reduction through experimentation

 Invest in a small scale CRM infrastructure, with

databases, tools and analysts to learn about
customers. Experiment with personalised offers to
see how it works.
 If customers do not respond, then he does not
exercise the option to scale up to an expensive CRM
solution.
Benefits Dependency Network
Company planning
& management Measure outcome Identify most
Introduce project of campaigns re appropriate
system
management for all objectives communication Reduced cost by
A&P campaigns medium for target avoiding waste on
customers irrelevant
Customer prospect
customers
database
Reduce marketing Use database to
Contact staff time on admin improve targeting in To improve the
management activities segments effectiveness of
Co-ordinate sales Increased Advertising &
system
and marketing response rate from promotion
activity in follow-up A&P campaigns spend
Realign sales
Redefine customer activity with new
segments customer segments
Enquiry quotation Allocate sales time
& response to potential high Increased rate of To increase sales
tracking system value leads follow up leads value and volume
Introduce new New sales staff
incentives from new
account
customers
management Increased
processes conversion rate of
leads-to-orders
Use system to Increase sales time
Portable PCs for Release sales time target sales
from post-sales with customers
sales staff activity/contact
activity to pre-sales time

Investment
IS/IT Enablers Enabling activities Business changes Benefits
Objectives

Figure 13.1
Alfred Chandler

“Strategy before structure”

Why ‘strategy before structure’?

 Structure can both enable and disable strategic

action
● difficult to promote creativity in a rule-bound bureaucracy
● bureaucracy is conducive to obtaining compliance to
standardised business processes
● struggle to become customer-centric in a functional
organization where specialists report upwards within silos,
but do not share customer insight horizontally across silos.
 There is no single correct structure that is suitable for
all organisations.
Key strategic goals in CRM-driven organizations

 Acquisition of carefully targeted customers or market

segments
 The retention and development of strategically
significant customers or market segments
 The continuous development and delivery of
competitively superior value propositions to the
selected customers
Conventional management structures

1. Functional organization structure

2. Geographic organization structure
3. Product, brand or category organization structure
4. Market or customer-based organization structure
5. Matrix organization structure
Functional structure

 Sales, marketing and service specialists report to a functional

head
 Specialists: market analyst, market researcher, campaign
manager, events manager, account manager, service engineer,
and sales support specialist.
 Small to medium sized businesses with narrow product ranges
tend to prefer the functional organization.
 The three core CRM - sales, marketing and service – may or
may not co-ordinate their efforts, and share their customer
knowledge by depositing it in a common customer database
Geographic structure

 One or more of marketing, selling and service

functions organized on territorial lines
● More common with selling and service than marketing
 When customers are geographically dispersed and
value face-to-face contact with salespeople, there is
a clear benefit in salespeople also being
geographically dispersed.
 Where service needs to be delivered at remote
locations, service may also be distributed
geographically
CRM disadvantage of geographic organization

 There may be many different customer types in a

single geographic area.
● A salesperson selling industrial chemicals might have to call
on companies from several industries such as textiles, paint,
or consumer goods manufacture.
● The applications of the sold product may be diverse
● Buying criteria of the customers may be quite different.
 Salesperson develops neither customer-, nor
product-expertise
Product, brand or category structure

 This structure common in companies that produce a

wide variety of products, especially when they have
different marketing, sales or service requirements.
● Examples: Procter and Gamble, Unilever
 Product or brand managers responsible for
developing marketing strategy for their products
Disadvantages of product/brand management

 An expensive way to market offerings.

 In a worst-case scenario, different product managers
might be calling on the same customer on the same
day.
● gives impression of a lack of coordination, and
● disregard for the value of the customer’s time.
 Customer may also experience varying levels of
service from the different brand- or product-
managers.
 Some companies have tried to co-ordinate their
product-marketing efforts by appointing product
group managers to an oversight role
Category management

 A response to brand and product management

disadvantages
 Category manager works with customer and
product/brand managers to create a category solution
for customer
● Many also enlist competitors
 Objective: improved value for customer and category
team
Category management at Kraft

Figure 13.2
Market or customer-based organization structures

 Common when companies serve different customers or

customer groups with different requirements or buying practices
● IBM has identified 14 different customer groups
 Managers:
● Market managers, segment managers, account managers
 Role and responsibilities:
● Develop expertise on market and customer requirements
● Ensure organization creates and delivers the right value proposition
 Trend towards national, key or global account management
A matrix organisation

Figure 13.3
Matrix structures

 Matrix structure often the preferred when a company

has several different products lines serving several
different customer groups.
 Matrix variations include
● Market- or customer-based managers on one side, and
product managers on the other
● Channel managers on one side, and product managers on
the other
● Geography on one side and industry on the other
 Cross-functional teams may be prelude to matrix
structure
Virtual and network structures

 No longer a simple matter to know where an

organization’s boundary lies.
 The role of IT in a stable corporate environment is to
allow senior management to control information and
decision-making
 As environments become more turbulent, and as
companies attempt to understand and forge network
relationships, the role of IT has changed
Role of IT in more turbulent environments

 IT’s role is to provide information that enables a

company and its network members to:
● Sense and respond rapidly to changes in the business
environment
● Collaborate to develop and deliver better customer value
propositions
● Enhance and share their learning about customers
● Improve their individual and joint cost profiles
 IT is a substitute for a more formalized and
centralized organization structure linking networked
or virtual organizations.
IT’s influence on organizational design

 IT allows information to be shared right across an

organization…..
● vertically, horizontally and laterally
 …. and outside an organization with network
members.
 Structure is therefore no longer tied to traditional
vertical reporting relationships
 IT therefore enables organizations to adopt
decentralized and networked structures
What can an IT-enabled organization do?

 An IT-enabled organization is able to take any sales

or service query from any customer in any channel
and resolve it immediately.
 Among the preferred characteristics of such a design
are:
● A customer interface that is consistent across channels and easy to
use whatever the technology or device
● A first point of contact that takes responsibility for resolving the
query
● A back-end architecture that enables the contact point to obtain
relevant customer and product information immediately
Traditional personal contact patterns

1. Controlled contact pattern

● all contacts channelled through a single point of contact
2. Coordinated contact pattern
● Departments or individuals have direct personal contacts with
departments or individuals on the other side
● One department or person co-ordinates contacts
3. Stratified contact pattern
● individuals and departments on both sides manage their own
contacts with their equivalents on the other side
● Stratified contact pattern, where individuals and departments on both
sides of the dyad manage their own contacts with their equivalents
on the other side of the dyad
IT’s influence on contact patterns

 IT, particularly web-technologies, enables many-to-

many communications between contacts on the
buyer’s and seller’s sides
Key Account Management (KAM) basics

 There is a major trend towards key account management,

national account management, regional account
management and global account management
 KAM is a structure that facilitates the implementation of
CRM at the level of the business unit
 A key account is an account that is strategically significant
 Are two ways to implement KAM.
● A single dedicated person is responsible for managing the
relationship, or
● A key account team is assigned
• The team membership might be fully dedicated to a single key account,
or may work on several accounts
Drivers of KAM

1. Greater concentration of buying power

2. Globalisation
3. Vendor reduction programs
4. Customer expectations
Benefits from KAM

1. Doing large amounts of business with a few customers

offers considerable opportunities to improve efficiency
and effectiveness
2. Selling at a relationship level produces disproportionately
high volume, turnover and profit.
3. Repeat business can be considerably cheaper to win than
new business
4. Long-term relationships enable the use of facilitating
technologies such as extranet-enabled portals, EDI and
shared databases
5. Familiarity and trust reduce the need for checking and
make it easier to do business
A model of KAM development

Figure 13.4
Bow-tie structure for Early-KAM

Figure 13.5
Virtual organization for Synergistic-KAM

Figure 13.6
Team selling

 Form of selling associated with KAM

 Key account team might include specialists that can
sense and respond to customer concerns over a
variety of issues
● engineers, logistics, research and development, sales.
 Team selling may cross organisational boundaries
● Representatives from two or more partnering organisations can
come together to pitch for new business or service an established
customer.
 Partner Relationship Management systems facilitate
such arrangements by making customer, project and
product information available to all partners