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Towards a Model for Measuring Customer Intimacy in B2B Services
François Habryn, Dr. Benjamin Blau, Prof. Dr. Gerhard Satzger, Dr. Bernhard Koelmel
IESS Conference - February 17th 2010

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  • 1. Towards a Model for Measuring Customer Intimacy in B2B Services François Habryn, Dr. Benjamin Blau, Prof. Dr. Gerhard Satzger, Dr. Bernhard Koelmel IESS Conference - February 17th 2010 KARLSRUHE SERVICE RESEARCH INSTITUTE (KSRI) www.ksri.kit.edu KIT – University of the State of Baden-Württemberg and National Large-scale Research Center of the Helmholtz Association www.kit.edu
  • 2. Agenda 1 Introduction and objectives 2 Model presentation Illustrative case study Realization 3 Conclusion 2 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 3. Agenda 1 Introduction and objectives 2 Model presentation Illustrative case study Realisation 3 Conclusion 3 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 4. The value discipline Customer intimacy is the ability to tailor and shape the offering in order to fit an increasingly fine definition of the customer Customer intimacy aims at transforming the customer provider relationship into a „co-creation oriented“ partnership Product Leadership „Best Product“ Product Differentiation Operational Customer Competence Responsiveness Operational Excellence Customer Intimacy „Best Total Cost “ „Best Total Solution“ Source: Treacy and Wiersema 1995, The Discipline of Market Leaders 4 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 5. In order to achieve high customer intimacy, it is important to understand and manage the relationships established by the employees of the supplier and customer Customer intimacy is the formal or informal set of relationships established between supplier and customer. •  multiple points and frequency of contacts •  multiple points of view about the relationship and its benefits to both parties. (Abraham 2006) 5 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 6. Our objective is the definition and measurement of a customer intimacy grade (CIG) which yields the following benefits   to obtain a systematical overview of all relationships between employees of a supplier and its customer, and to have the ability to visualize their evolution over time;   to foster the exchange of customer related information among the employees;   to analyze and benchmark the relationship with different customers in order to support the provider organization in her choice to invest in one or the other customer. 6 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 7. Agenda 1 Introduction and objectives 2 Model presentation Illustrative case study Realization 3 Conclusion 7 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 8. Our model is built upon the three following layers 8 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 9. First, based on litterature review, we have decomposed the concept of customer intimacy to identify our indicators Customer Intimacy Grade CIGOC Relationship Adaptation AOC Quality ROC Communication Commitment Relationship Trust TOC COC COC Bonds BOC Interaction IOC Activity IOC Identification IOC Layer 1 – CIG Decomposition 9 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 10. Our model is built upon the three following layers 10 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 11. In order to reflect these different degrees of granularity we decided to apply graph theory Service Provider Customer Service Provider Customer Service Provider Customer 60 C1 C1 30 C1 P1 P1 P1 70 15 60 BU1 C2 BU1 C2 BU1 C2 P2 P2 P2 C3 C3 C3 BU2 BU2 BU2 Interaction Graph Activity Graph GA Identification Graph GId GIn Network Layer Graph Interaction Graph GIn Activity Graph GA Identification Graph GId Objective Representation of the Representation of the past Representation of the established contacts “adding value” activities perceived similarities (outcomes) CIG Impact Communication Trust and Commitment Trust Node Individual Individual Individual Edge Interaction Shared activity Identification Weight w aggregation based on all aggregation based on activity aggregation based on interactions between two duration, impact for the perceived similarity factors employees, their customer and type of activity (e.g. social, geographical, frequency and quality cultural) 11 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 12. Graph centrality metrics can be calculated for nodes and sets of nodes Service Provider Customer Service Provider Customer Service Provider Customer 60 C1 C1 30 C1 P1 P1 P1 70 15 60 BU1 C2 BU1 C2 BU1 C2 P2 P2 P2 C3 C3 C3 BU2 BU2 BU2 Interaction Graph Activity Graph GA Identification Graph GId GIn Network Layer Graph Interaction Graph GIn Activity Graph GA Identity Graph GId Degree Centrality Number of contacts in the Number of qualitative Number of individuals CD(v) customer (resp. provider) relationships known personally in the organization customer organization Closeness Centrality Ease of the communication Intensity of the relationship - CC(v) Betweenness Importance and implicit Degree of involvement in Ongoing research Centrality CB(v) power of this employee for the overall activities with the overall communication the customer 12 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 13. Illustrative case study 0: No Contact between SP and C 1: SP-BU1 recruits the employee P1 who knows C1 and C2 2: P2 gets in contact with P1 3: P2 obtains a meeting with C1 and C2 with the help of P1 4: P2 prepares a contract with C1 and C2 for BU2 5: Management needs to decide in which customers to invest Service Provider Customer P1 C1 BU1 C2 P2 BU2 13 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 14. Our model is built upon the three following layers 14 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 15. Then we need to find the elements of Customer Intimacy evidence in customer information containers CIG employee CIG Organization CIG Calculator CI Event Aggregator Complex Event Processing CI Event CI Event CI Event CI Event Face to Project CRM Reference Mail Phone face Database Application database Social Support Company´s Production Mailing List Web Site Networks Application directory system Call center Customer Interaction Channels Customer Information Sources Customer Information Container 15 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 16. Agenda 1 Introduction and objectives 2 Model presentation Illustrative case study Realization 3 Conclusion 16 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 17. Conclusion   A new approach for measuring the degree of intimacy established with a customer   Support the exchange of customer knowledge across business units´ boundaries   Benchark intimacy grade in order to improve customer relationship processes   Future Research   Calibration of the model - weight determination   Specify how to leverage the multiple centrality indicators   Validation through a prototype implementation with CAS   Creation of customer-intimacy based Key Performance Indicators 17 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 18. Thank you for your attention KARLSRUHE SERVICE RESEARCH INSTITUTE (KSRI) www.ksri.kit.edu KIT – University of the State of Baden-Württemberg and National Large-scale Research Center of the Helmholtz Association www.kit.edu
  • 19. BACKUP 19 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 20. Research Project: Measuring customer intimacy in B2B services. Customer intimacy is ability to taylor and shape the offering in order to fit an increasingly fine definition of the customer (Treacy & Wiersema 1993) Scenario / Problem Motivation •  Several employees with • CRM is not adapted for complex B2B services: if different objectives interact with Research Focus focuses on the outcome of the relationship rather than Purchasing cycle complexity the customer (e.g. sales, Integrated on the relationship itself support, services) without relationship management knowing each other •  They use different tools which Benefits are not integrated (email, phone, •  Obtain systematical overview of all relationships customer db) between supplier and customer employee; visualize their Classic CRM •  Silo organization and evolution over time; globalization make collaboration Number of items •  Create awareness of the employees on the relationship between employees more they own and foster exchange of customer related complex information; •  Analyze and benchmark the relationship with different customers in order to support the organization in her Provider Customer choice to invest in one or the other customer. Business Unit 1 Post Sales Product A Objective Lack of internal Business Unit 2 collaboration Service   Provide a model for measuring the customer intimacy Delivery B grade with specific customers at multiple levels of Business Unit 3 granulity (employee, team, business unit) Pre Sales Product C   Validate the results with a prototypical = employee / team implementation through an empiric usability test 20 20 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 21. There is currently no generally accepted means for quantifying customer intimacy Author Characteristics Niven, 2002 5 aspects to implement in a balanced scorecard   No measurement for Cuganesan, 2008 Focus on accounting numbers, but no individual customers formula presented at the end   Qualitative but not Kaplan, 2005 Focus on value creation and cost of differentiation quantitative models   No leverage of existing Potgieter & Roodt, Evaluation of the readyness of an 2004 organization to pursue a CI strategy from a information systems cultural perspective   Individual or organizational Tuominen, Rajala, & 5 stages maturity model, qualitative model aspects but not both Mo, 2004 Yim, Tse, & Chan, 2008 Focus on services, evaluation of the relationship between customer firm and customer staff relationship Donaldson and O´Toole Characteristics of close relationships 2007 21 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 22. The following table illustrates some of the customer intimacy events which can be read from information systems Event Source Metric Non routine service Help Desk – Number of problems recorded and encounter goes right Customer support solved – average severity – average duration to solution Shared activities Project database Role in the project, Number of project with the same customer, Average project duration, Project impact for the customer Interactions Email, Phone calls, Number of emails, phone calls, calendars face to face meetings; regularity of the interaction; time since first interaction Successful outcomes Project database Number of closed opportunities, number of completed projects Customized contracts CRM – Sales Force Contract definition - Special Automation payment term, Specific purchasing procedures, long term contract 22 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 23. Model calibration: CI events identified previously must be aggregated in a form that is satisfactory for the user   Conjoint analysis The objective of conjoint analysis is to determine what combination of a limited number of attributes is most influential on respondent choice or decision making. (wikipedia)   Analytical Hierarchy Process comprehensive and rational framework for structuring a decision problem, for representing and quantifying its elements, for relating those elements to overall goals, and for evaluating alternative solutions. (wikipedia)   Analytical Network Process is a more general form of the analytic hierarchy process (AHP) used in multi-criteria decision analysis. ANP does not require independence among elements, so it can be used as an effective tool in these cases. 23 2/17/10 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 24. Managing the relationships with customers is important and existing information systems shows some limits in that regard   “Much of the (CRM) software on the market today helps automate process, but doesn't necessarily provide incremental value back to the user.   Sales people often complain that Customer Relationship Management or Sales Force Automation is just an administrative burden” (AMR Research 2008)   CRM is not adapted for complex B2B services: if focuses on the outcome of the relationship rather than on the relationship itself 24 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 25. Relationship bonds are exit barriers that tie the customer to the supplier and maintain the relationship (Liljander & Strandvik 1995) Bond Includes following adaptation Technological Service adaptation, process adaptation, Resource etc. Time Time specific service delivery agreements Knowledge Knowledge of the strength and weaknesses of the customer. Knowledge on the customer perception of quality of service Legal Contract duration, contract flexibility. Impact of the contract on the customer Geographical Geographical distance between employees from the service provider and customer 25 2/17/10 Fußzeile: Name, Vortragstitel... Karlsruhe Service Research Institute www.ksri.kit.edu
  • 26. The requirements on our CIG model are following... Motivation Requirement Avoid resistance from employees to Automate the measurement using adopting the system information available in information Provide easy of operationalization of the systems model Provide a meaningful and individualized Provide specific information for individual indicator customers Provide the means to understand the Provide a measurement at multiple levels relationship composition and to identify of granularity: individuals, teams, business the „boundary spanners“ units, whole entreprise Provide the ability to easily compare Provide quantified information different relationships 26 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 27. The objective of this thesis is to evaluate the relationship with a customer, leading to the creation of a Customer Intimacy Grade (CIG) This project can be decomposed along the following milestones: 1.  Decomposition of the concept of customer intimacy into meaningful aspects called CI Components 2.  Identification of the element of customer intimacy evidence inside information systems called CI Events 3.  Aggregation of the CI events in order to calculate the CI components and the CIG using graph theory 4.  CIG Calibration using the analytical network process theory 5.  Validation of the benefits of using this indicator through a prototypical implementation and an empiric analysis, in partnership with CAS AG. 27 Karlsruhe Service Research Institute www.ksri.kit.edu
  • 28. We assume that in the field of B2B Services, high customer intimacy is developed when both the quality of the relationship and the degree of adaptation are high Degree of adaptation to the customer Customer Intimacy Solution tailored High Undirected to customer Adaptation needs Standard Solutions Inflexible for Anonymous Response to Low Markets Customer Needs Low High Quality of the relationship with the customer 28 2/17/10 Fußzeile: Name, Vortragstitel... Karlsruhe Service Research Institute www.ksri.kit.edu