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  • 1. The Road to CRM Riches
  • 2. The Road to CRM Riches 1 The Road to CRM Riches As the global economy lurches As the cost of a typical CRM unsteadily through the early part implementation continues to grow – of the 21st century, companies around and the pressure to address the the world are searching for ways to shortcomings in customer management restore the growth and profitability operations intensifies – organizations they enjoyed in the buoyant 1990s. will have to become more vigilant in: For many of these organizations, identifying which CRM capabilities customer relationship management will provide the greatest financial (CRM) is seen as a particularly benefit; building a bullet-proof business attractive proposition. case for the project; gaining executive and stakeholder support; creating Indeed, better management of the an intelligent and comprehensive customer base offers great potential execution plan; and using the new for companies to improve their top system to develop customer insights and bottom lines – especially given that will fuel more effective strategies how difficult it’s become for businesses and programs for marketing, sales, of all types to attract and retain loyal and customer service. customers. However, as many companies have discovered, adopting the right CRM capabilities – and generating significant business benefit from those investments – is not as easy as they first thought. In fact, many industry observers and analysts are quoting failure rates as high as 60 percent for recently completed CRM projects, and are equally bearish on initiatives currently under way.
  • 3. The Customer Challenge In the past decade, it has become With such stiff challenges facing increasingly difficult for companies to them, it’s no wonder that companies connect with existing and prospective are increasingly under pressure to come customers, for a variety of reasons. These up with better ways to manage their include: the commoditization of brands customer relationships. The stakes truly and products, with the number of items are high. A misstep in a key marketing, on offer to consumers expanding sales, or customer service activity today significantly in the past 20 years; can be disastrous, even to healthy tougher and more numerous competitors; company – and possibly fatal to a explosion in the amount of market ‘noise’ weak one. following the huge jump in the number of messages that bombard consumers on a daily basis; proliferation of customer interaction channels, especially with the advent of the Internet and wireless devices; and ever-rising customer demands and expectations, driven by their increased ability to evaluate offers and prices as never before through the Internet plus their experiences with value and service leaders such as Virgin, FedEx, Wal-Mart, and Siemens.
  • 4. The Road to CRM Riches 3 CRM to the Rescue? In the face of this “customer revolution”, Hoping to do more than enhance behavior and fulfill customer needs as many companies have sought to address their call center and sales force activities, completely as possible. This “third wave” their shortcomings in key customer-facing other companies are focusing on how of CRM, which will bring about the activities via CRM initiatives (Figure 1). they can improve their customer ultimate transformation of the customer In fact, according to a report from The interactions – with the goal being to experience, is geared towards improving Conference Board, some 52 percent of not only increase customer satisfaction, customers’ brand loyalty and creating the 96 global companies the organization but also to create compelling reasons lifetime customer value. By integrating surveyed have implemented a CRM for customers to continue to patronize customer communications and brand solution, while Forrester Research the organization. During this “second across all channels, a seamless, integrated estimates that 45 percent of companies wave” of CRM, companies seek to customer experience is created – are considering or piloting CRM. provide customers with multiple ways regardless of how an individual chooses of interacting with the company and to interact with the company. Some companies’ efforts could be gather valuable data on customer characterized as the “first wave” of transactions, preferences, and behavior Unfortunately, CRM efforts of all types CRM: bolstering the effectiveness of from activity at those contact points. are either foundering or are likely to call centers and sales forces. The goal The Internet, in particular, has proved fall short of their goals. Gartner Group of such projects is to increase customer to be a powerful tool for creating new predicts that during the next five years, satisfaction by improving the efficiency lines of communication with existing 55 percent of all CRM projects will fail of the existing channels used for and prospective customers. to meet their objectives. Furthermore, customer interaction. These initiatives the Data Warehousing Institute recently typically result in more convenient Having focused their CRM efforts on noted that 41 percent of CRM projects transactions for customers, e.g., shorter realizing benefits from their sales and are “experiencing difficulty” or are hold times for customers calling for service functions, the most forward- “potential flops”. And, a study by assistance, or a sales associate’s ability thinking companies are now turning crmindustry.com revealed that 56 to access instantly customers’ buying the spotlight on marketing - the last percent of US-based companies have histories and product pricing information. bastion of CRM benefit realization. not achieved a measurable return on They are using deep customer insights their CRM investment. and analysis, drawn from individual (yet integrated) customer interactions, to understand and predict customer Figure 1 The Three Waves of CRM CRM Wave 1 CRM Wave 2 CRM Wave 3 Call Center/ Multi-Channel Interaction Reinvention of Marketing Sales Force Effectiveness Transforming CRM CRM Goals Improve channel efficiency Improve customer interactions Predict customer behavior Increase customer satisfaction Increase customer retention Build brand and lifetime customer value Investment Provide more efficient means Provide customers with multiple Integrate communications Strategy of customer interaction points of contact; gather insights and brand across channels Resulting Customers enjoy more Customers have more options to Customers are given Customer convenient transactions, but interact with the company, but a seamlessly integrated Experience channels are not integrated the experiences are fragmented experience across across contact points all channels Outcomes Customer acquisition Customer retention Customer value Product sales Cross-selling Brand value
  • 5. CRM Pitfalls Why are analyst groups such as Gartner a CRM effort fails to ensure – early in up with a good technology tool, it most bearish on the ability of today’s CRM the process – that executives understand likely will never fully realize the potential projects to be successful? What’s behind the initiative and the business case for it; benefits of the tool because the changes the arguably chequered track record are clearly convinced of the need for in business processes, strategies and of many recent initiatives? What’s CRM; and are willing and able to organization structure necessary to to blame for the fact that, while CRM proactively support the initiative, leverage the technology were not made. projects have improved some aspects especially at critical junctures of An HR services firm discovered this the of companies’ customer-facing operations, the project (e.g., securing funding). hard way. After spearheading the few have generated the type of significant implementation of a call center system, company-wide benefits that CRM Companies have also struggled with the company’s CIO found that call proponents tout as possible? aligning key internal functions or center employees were refusing to use business units affected by the CRM it because they were never fully coached There are several critical factors behind initiative. Functional misalignment is on how the system could help them CRM’s underperformance (Figure 2). a very complex issue that often takes improve the way they did their jobs. One of the most prevalent is the failure the form of a battle between IT and On the other hand, if marketing, sales, of many companies to obtain and the company’s customer-facing functions and service decide to push ahead with maintain executive support for the or a disagreement among sales, a CRM initiative without IT’s support CRM project. Consider the typical marketing, and customer service on and resources, the effort often stalls scenario. A group within a company the right priority for competing or gets derailed when it comes time decides that it could benefit from new CRM recommendations. to implement the supporting CRM CRM capabilities. It begins to study technologies. the issue, momentum builds, and soon In the former situation, a company’s there’s strong grassroots support for IT department may want to implement Alignment discord among business units the effort. Unfortunately, when the a particular CRM solution, but hasn’t is also a common cause of CRM project time comes for senior management secured agreement from the functions failure. For instance, if sales wants to to sign off on the sizable investment that will have to use it. This almost adopt sales force automation software, required, no executive is willing to do always results in a waste of resources customer service wants new productivity so. Too many times, a group planning because, although the company may end tools for its call center, and marketing is
  • 6. The Road to CRM Riches 5 pushing for new campaign management Figure 2 capabilities – and all three efforts move Principal CRM Project Problem Areas forward without consensus – a collection of “one-offs” that don’t work well together will be built. The result is more • Failure to obtain and maintain executive money spent than necessary; clumsy – or worse, non-existent – technological support for the project integration; redundant or conflicting customer data gathered; and a • Failure to align key internal functions or business fragmented customer experience from units on goals and mission of the project one interaction channel or touchpoint to another. • Inability to accurately link the CRM project A third area that has proved a problem to higher-level business strategies is accurately linking the CRM project to higher-level business strategies – in • Focusing on “capability building” instead other words, identifying short- and long- of ROI creation term business objectives and how CRM will support them. Many companies have • Lack of an integrated plan for project implementation fallen prey to the “sexy technology” trap – becoming so enthralled with a particular • Failure to achieve successes early in the project CRM technology that the organization loses sight of whether the tool will actually support how the company goes to market. A simple example is the company whose marketing department car-rental companies use to process Furthermore, such a disjointed approach wants to implement a campaign customers returning cars. On the surface, can result in the implementation of a management tool to improve the the idea was attractive, but when specific capability before there’s a solid efficiency and effectiveness of direct executives were finally pressed to understanding of the key dependencies marketing. Yet, the company generally quantify the tangible value of the new that must be in place for the company takes a mass-marketing approach to system to the hotel – i.e., if it would to generate value from the capability – customer acquisition and uses call increase the number of room-nights e.g., building a campaign management centers as the primary vehicle for booked or justify higher room rates – it system before a customer database is customer and prospect communications. became clear that the project couldn’t fully functional. In this instance, an investment in direct- be economically justified. marketing CRM tools wouldn’t support Finally, many CRM projects are considered the company’s principal customer A fifth problem area concerns having failures because they don’t achieve early activities, and such an investment an integrated plan for project successes that help shorten the payback rightly would be deemed a failure. implementation. Many companies are time and create momentum for the juggling several CRM projects at once, projects. Instead, they are executed in A focus on “capability building” instead all competing for the same limited pool such a way that the companies can’t of ROI creation also plagues many CRM of resources rather than being executed begin to realize a payback on the new initiatives. In fact, it’s not uncommon that as part of an integrated CRM systems for two or three years. This a sponsor of a CRM project “knows” implementation program that ensures not only makes it difficult to justify the intuitively that a capability is needed capabilities are built in an order and investment in the projects, but also gives and will create value, but doesn’t spend timeframe that makes sense to the the efforts the appearance of “black enough time thinking through how that organization at large. Without such holes” that are consuming valuable value will be generated. For instance, an integrated plan, IT often becomes corporate resources. In some cases in one global hospitality company was overloaded and unable to keep up with the past, these projects have been aborted considering implementing a system the demands of the various projects. well before they were finished – resulting featuring a hand-held device that would in a substantial waste of time, money, help check guests in as they pulled up and opportunities. to the front door – similar to the one
  • 7. Avoiding the Pitfalls: CRM Strategy and Roadmap Development How can organizations learn from This approach – which we call the CRM The CRM Strategy and Roadmap the mistakes of others and avoid these Strategy and Roadmap – is appropriate is a distinct alternative to traditional common pitfalls? To ensure that they for these typical CRM situations: approaches to CRM capability address these critical CRM elements – development. It focuses on business and, thus, improve the chance that their • For a company that’s struggling to outcomes, not capabilities alone. It projects will generate true business reconcile competing requests for CRM is analytically rigorous, relying on benefits for them and avoid becoming investments – often from different an ROI focus instead of subjective “one of the statistics” – companies must business units or departments – and considerations. Its emphasis on identify, prioritize, and build the right must determine which requests should revenue and cost drivers links the CRM capabilities for creating customer be funded and how each initiative CRM investment directly to a and company value. will affect not only a business unit company’s income statement. And, or department, but also the company it provides a value-based, prioritized as a whole. plan for CRM implementation to ensure that the most important • For a company that lacks executive areas are addressed first. alignment behind a CRM strategy and plan. • For a company that’s interested in proactively designing a “greenfield” CRM capability and has to pinpoint which capabilities are appropriate for their specific business requirements.
  • 8. The Road to CRM Riches 7 There are four key steps to a CRM • What’s the balance between product understanding of the project, “buy-in” Strategy and Roadmap project: strategic focus and customer focus? of the initiative, willingness to take context identification, capabilities proactive action to support the effort, etc. • Who does the company see as its most assessment, business case development, This helps the project team know, at a valuable customers and why? and implementation plan creation. glance, which stakeholders are in their camp and which need special attention Answering questions such as these Strategic Context or additional information. Alternatively, helps determine which CRM capabilities The first step is to understand how a large, cross-functional “input team” the company pursues. CRM fits into the context of the can be created comprising numerous company’s overall business strategy. representatives from all functions affected At this stage, it is vital to understand This entails first confirming the company’s by the project to ensure that views of how the CRM project will fit with the vision for the CRM project as well as the executives, managers, and line employees priorities of key stakeholders. To ensure project’s business imperative – taking alike help shape the project and the that the project has strong backing from into consideration the existing business system that’s ultimately created. the right people – and that the views environment and the company’s of these individuals are in sync – the corporate strategic priorities. Capabilities Assessment company must understand what key Next, the project team conducts a sponsors believe are the project’s • Is the company’s market growing, comprehensive assessment of the objectives. Similarly, the views of stagnant, or declining? company’s current CRM capabilities – managers responsible for marketing, such as marketing program execution • Is cutting costs the organization’s sales, and service – as well as their direct and management, customer interaction most pressing immediate concern or reports – must be considered to ensure management, and brand/message is boosting revenues the priority? that everyone is “pulling for the same alignment. team” as the project progresses. One • What’s the relative emphasis between technique used to help achieve such customer acquisition, development, alignment and consensus is the “war retention, and cost-to-serve? room,” in which key stakeholders are • Which channels are most critical for graphically plotted on a board along interacting with and serving customers? several dimensions – e.g., their
  • 9. This exercise helps the company Business Case Development A simple example is a company that understand how current performance on The third step involves building a sound handles 98 percent of its 10 million these capabilities stacks up against business case to support the CRM customer calls with live agents – at a benchmarks from other CRM practitioners investment. This effort begins with cost of $5 per call. If the company – i.e., whether the company is lagging, estimating how the company could could reduce this percentage to just performing at parity with its competitors, improve its financial position by 94 percent by shifting more calls to or leading its industry – and identifies enhancing its performance on key customer self-service options, it would “stretch goals” for future improvement. “drivers” of revenue and costs. Such save $2 million. Clearly, this makes a The team also reviews the CRM drivers include customer retention, strong case for the company to invest capabilities to determine which ones are new customer acquisition, and sales in increasing its customer self-service most germane to the company’s particular per customer on the revenue side, and capabilities to achieve quantifiable situation, and assigns a “weight” to each average length of call center “call- financial benefits. capability based on how much or little it handling time”, total number of calls contributes to the company’s ability to handled, and direct-mail expenses on With a solid understanding of where it create customer value. The result of the the cost side. By understanding how can generate the greatest improvements assessment, weighting and scoring the company performs on all revenue in financial performance – i.e., increasing process is a comprehensive report and cost drivers, benchmarking this revenue and reducing costs – the showing areas of strength and performance against industry standards company must next identify which CRM opportunity across relevant CRM or new performance goals, and capabilities are necessary to bring about capabilities – and highlighting specific quantifying the gap between current such improvement. For example, if gaps between current and potential and potential performance, the company improving the effectiveness of direct performance. can determine where it should focus its marketing is seen as a way to significantly CRM efforts to achieve maximum increase revenue, two CRM capabilities – financial benefits. Predictive Modeling and Marketing Program Execution – would be critical to achieving that revenue goal. By conducting this exercise for every revenue and cost driver, the company can easily
  • 10. The Road to CRM Riches 9 Figure 3 Prioritizing CRM Targets High Long Term Quick Win Value Short Term Long Term Cancel Consider Interdependent Low Capabilities Ease of Low High Implementation identify which CRM capabilities are As the illustration shows, the team can critical to improving its financial also identify interdependent capabilities performance – and then map these i.e. those capabilities that rely on the capabilities against their ease of previous implementation of others. implementation to create a picture that clearly shows which capabilities should To complete the business case for the be pursued in the CRM project and in project, the company must tally how what order. much additional profit each CRM initiative can realistically generate As illustrated in Figure 3, prioritizing for the company (using the revenue- capabilities in this way helps management enhancement and cost-reduction identify which ones may represent a quick estimates developed earlier in this win, which require a longer-term phase), and map these estimates against investment, and which – because of low the high-level costs associated with value and implementation difficulty – completing the respective initiative should not be pursued. With the (including hardware, software, training, capabilities thus prioritized, the company third-party resources, and maintenance). can then group the capabilities into The results of this exercise will help the logical initiatives – e.g., implementing company demonstrate that the project marketing automation software and can be economically justified and secure improving marketing processes could the funds necessary to execute it. More be grouped into a Direct Marketing important, it significantly reduces the Effectiveness initiative, or adopting company’s chances of embarking on a customer self-care capability and a project that will result in little or improving call-handling could be bundled no payback. as a Call Center Optimization initiative.
  • 11. Implementation Plan Creation The CRM Strategy and Roadmap The final step involves creating the approach can help the company roadmap that clearly defines “how to determine financing and sourcing options get there”: the technical, process, and for the project as well. If, for example, the organizational elements that must be company has a high demand for capital, addressed to complete the CRM initiative. it may opt to explore alternatives to outright capital expenditures – such as These include the following: co-sourcing or outsourcing arrangements • Interdependencies between new and with strategic partners. These can reduce existing systems and processes the amount of money the company has to spend to complete the CRM initiative • Resources needed and available in exchange for some percentage of the • Organizational alignment financial gains the project generates for the company. On the other hand, a • Executive alignment company for which CRM is a core • Necessary new or redesigned processes competency may prefer to build capabilities itself. • Key technology infrastructure and applications • Execution plan • User training
  • 12. The Road to CRM Riches 11 Case Study: Hotel Operator One company that is using this approach to guide the design and implementation of its CRM initiative is a large North American hotel operator. In its role as a franchiser of several well-known hotel brands, the company provides a number of shared services to its properties, including a central reservations center, e-commerce support, brand marketing, and a frequent- guest loyalty program. Although the company’s historic performance in delivering these services was good, there was a growing perception internally that several CRM-related enhancements were needed to improve the effectiveness of its customer interactions. Company executives – confronted with numerous uncoordinated, independent CRM investment requests from various areas of the company – realized that a cross-functional, integrated approach to CRM would provide the company with the best capabilities for enhancing their shared services organization, optimizing their customer relationships, and improving franchisee business performance. Accenture was asked to help the company develop a CRM strategy and implementation plan. The first order of business was to develop After assessing its existing CRM access by call-center representatives the company’s enterprise-wide CRM capabilities and identifying areas for to customer records strategy and identify and prioritize its improvement, the project team conducted • Sales Effectiveness, which included sales CRM initiatives. As part of this effort, a comprehensive analysis of what force automation capabilities and an the project team first conducted a financial impact improvements in its integrated channel sales approach “touch point analysis” of the company’s “lagging” capabilities could have on operations to identify the key points of the organization. • IT Infrastructure Enhancements, customer interaction and help the which focused on creating more robust company focus its attention on those This effort led to a dramatic customer data models and enhanced areas with the greatest impact on conclusion: the company could guest profiles customers. Customer touch points were generate an estimated $65 million grouped into four areas: Establishing in additional net profit over five When the CRM project is completed, the Relationship; Pre-Trip Experience; years by focusing on 15 to 20 key the company will have in place On-Property Experience; and Maintaining capabilities in its direct marketing, capabilities to generate incremental the Relationship. The specific CRM sales, and call-center operations. improvements in business results across capabilities that related to each of these direct marketing, its call center, and touch points also were identified. The team grouped these capabilities into sales. As one example, the new four distinct initiatives: campaign management software and Next, the project team conducted an related marketing processes will allow • Direct Marketing Effectiveness, which assessment of existing CRM capabilities. the company to more effectively sought to improve the company’s Through this assessment, it became leverage its industry-leading customer campaign management efforts and its clear that the company was an industry analysis capabilities by creating more ability to provide offers more closely leader in developing insights into its timely, targeted, and relevant direct- tailored to individual customers customers’ needs and behaviors and marketing campaigns. running an efficient call center, but • Call Center Optimization, which could benefit from enhancements in involved building robust capabilities direct marketing execution, call center for more “intelligent” handling of effectiveness, and sales. customers’ incoming calls and better
  • 13. Conclusion Undoubtedly, CRM has generated value But building the right CRM capabilities By following this approach, companies for many companies in the past several is only the first part of the CRM journey. can realize a significant return on their years. However, the value that’s been Once these capabilities are in place, it is CRM investments – and, subsequently, delivered pales in comparison to what incumbent upon the organization to take attract the attention, loyalty, and business is possible. As economic uncertainty the necessary steps to ensure that the of their most valuable customers for years continues and customers become more new CRM capabilities are leveraged most to come. demanding, organizations simply must effectively. These steps include: creating a find ways to improve the chances that high-level customer strategy that builds their new CRM initiatives succeed. upon the new CRM capabilities to improve the way the company interacts A major step in this direction involves with customers and prospects; developing adopting an ROI-based approach to CRM. a better understanding of existing This ensures that the capabilities built in customers’ needs and profitability, and a CRM project are not only the right grouping customers into logical segments; capabilities – i.e., they are consistent with creating strategies for each segment to the company’s mission – but are also the maximize the value of those groups of ones that support the key activities that customers; and identifying and building enable the company to realize its business the processes, organization structures and goals and, thus, have the greatest measures necessary to implement these potential to provide the highest return strategies and optimally serve each to the company in the form of reduced customer segment. costs and enhanced revenue.
  • 14. About Accenture Accenture is a global management consulting, technology services and outsourcing company. Committed to delivering innovation, Accenture collaborates with its clients to help them become high-performance businesses and governments. With deep industry and business process expertise, broad global resources and a proven track record, Accenture can mobilize the right people, skills, and technologies to help clients improve their performance. With more than 83,000 people in 47 countries, the company generated net revenues of US$11.8 billion for the fiscal year ended Aug. 31, 2003. Its home page is www.accenture.com. Contact Information: Brian Crockett brian.k.crockett@accenture.com
  • 15. © 2002 - 2003 Accenture. All rights reserved. Accenture and its logo, and Accenture High Performance Delivered are trademarks of Accenture.

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