Customer Centricity IBM CMO Study Webinar With Elaine Fletcher And Krishna De

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Insights from the Global Chief Marketing Officer StudyCustomer Centricity:Is it a Panacea or a Pipe-Dream?Elaine Fletcher, IBM Global Business Services

Customer Centricity: from Insight to Action THE CUSTOMER-CENTRIC VISION “The perfect solution is to serve each consumer individually. The problem? There are 7 billion of them.” Consumer products CMO, Singapore IBM 2011 Global CMO Study by IBM Institute of Business Value, October 2011 Largest sample of face-to-face CMO interviews more than 1,700 CMOs Sectors Regions 3% Public 17% 16% Communications North America 21% Industrial 44% Growth markets 36% Distribution 35% 24% Europe Financial Services 4% Japan4 © 2011 IBM Corporation

IBM Institute for Business ValuePreparation for change“ Our survey found that 79 % of respondents expect significant change ahead - with almost 90% in UK and Ireland feeling ill equipped to manage the explosion of data. “ UKI Under preparedness Global Percent of CMOs reporting underpreparedness Compare 50% Data explosion 87% 71 % Social media 70% 68 % Growth of channel and device choices 80% 65 % Shifting consumer demographics 69% 63 % Financial constraints 40% 59 % Decreasing brand loyalty 67% 57 % Emerging market opportunities 41% 56 % ROI accountability 53% 56 % Customer collaboration and influence 72% 56 % Privacy considerations 43% 55 % Global outsourcing 60% 54 % Regulatory considerations 59% 50 % Corporate transparency 78% 47 %Source: Q8 How prepared are you to manage the impact of the top 5 market factors that will have the most impact on your marketing organization over the next 3 to 5 years? n=5 to 59 (n = number of respondents who selected the factor as important)5 © 2011 IBM Corporation

IBM Institute for Business ValueSources of Insight“ It is interesting to observe that the majority of CMOs continue to use focus onunderstanding markets vs understanding individuals to shape their strategy.” Sources used to influence strategy decisions Global Percent of CMOs selecting all sources that apply Compare Market research 87% 82 % Corporate strategy 86% 81 % Competitive benchmarking 83% 80 % Customer analytics 74% 74 % Marketing team analysis 72% 69 % Customer service feedback 76% 68 % Financial metrics 82% 68 % Campaign analysis 72% 68 % Brand performance analysis 72% 65 % Sales/sell-through numbers 62% 53% 61 % Test panels/focus groups 54 % R&D insights 70% 52 % Consumer-generated reviews 40% Third-party reviews & rankings 47% 48 % Retail and shopper analysis 34% 42 % Online communications 37% 41 % Key sources to Professional journals 51% understand individuals 40 % Blogs 32% 37 % Supply-chain performance 28% 26 % 25 % “The perfect solution is to serve each consumer individually. The problem ? There are 7 billion of them.” Consumer products CMO6 Source: Q15 What sources of information influence your marketing strategy decisions? n=92 © 2011 IBM Corporation

IBM Institute for Business ValueUse of Technology“ The majority of CMOs appear eager to deploy tools and technologies to grapple withgrowing volume, velocity and variety of data.” UKI Global Plans to increase the use of technology Compare Percent of CMOs selecting technologies Social media 78% 82 % Customer analytics 78% 81 % CRM 83% 81 % Mobile applications 72% 80 % Content management 70% 73 % Tablet applications 55% 72 % Single view of customer 69% 70 % Collaboration tools 60% 68 % Predictive analytics 50% 66 % Reputation management 57% 63 % Search engine optimization 51% 62 % Campaign management 57% 61 % Score cards/dashboards 52% 56 % E-mail marketing 47% 46 %Source: Q22 Do you plan to decrease or increase the use of the following technologies over the next 3 to 5 years? n=83 to 877 © 2011 IBM Corporation

IBM Institute for Business ValueBarriers to Change“ The data suggests the key three are - Building the business case, Skills and resolving alignment issues within the organisation.” UKI Barriers to using technology in marketing Global Top 5 selected by CMOs Compare Cost 68% 72 % Lack of ROI certainty 65% 61 % Tool implementation issues 35% 47 % Lack of skills of (potential) users 55% 46 % Lack of marketing and IT alignment 37% 45 % Lack of IT integration with organization 32% 43 % Ease of use 33% 37 %Lack of technological ownership in marketing 33% 34 % Business case Lack of IT skills 21% 25 % IT related Reliability 9% 18 % Marketing related IT and marketing relatedSource: Q23 What are the top 5 barriers to using technology? n=92 Usability8 © 2011 IBM Corporation

IBM Institute for Business ValueThe Priority from Digital“ However, confronted with the shift toward emerging digital technologies,CMOs see enhancing customer loyalty as the number one priority. “ UKI Priorities for managing the shift toward digital technologies Global Compare Enhance customer loyalty/advocacy 67% 67 % Design experiences for tablet/mobile apps 46% 57 % Use social media as a key engagement channel 55% 56 % Use integrated software suites to manage customers 55% 56 % Monitor the brand via social media 49% 51 % Measure ROI of digital technologies 58% 47 % Analyze online/offline transaction analysis 42% 45 % Develop social interaction governance/policies 37 % 50% Monetize social media 29 % 24% 24 % Gain comprehensive visibility of supply chain 18% Source: Q12 What are your priorities for managing the shift toward emerging digital technologies? (Select top five.) n=929 © 2011 IBM Corporation

IBM’s CMO Business Value Accelerator THE CUSTOMER-CENTRIC VISION: A PANACEA OR A PIPE-DREAM? IBM’s Business Value Accelerator helps to assess the return on investment and feasibility of a customer- centric approach to sales and customer service . . . across all products and all channels. Communications Provider X/Upsell success rate increased from <10% to >40% Electronics Retailer 17% increase in operating profit Online shopping auction site Doubled Gross Merchandise Vol (GMV) per contact Financial Services Provider Savings to IT alone yielded ROI in one year Grocery Retailer Can now streamline processes and deliver higher levels of personalisation STRATEGY PLANNING: PRODUCT LIFECYCLE PER SEGMENT SEGMENTION DRIVEN PRICING / BUNDLES10 © 2011 IBM Corporation

Is the business case strong enough to win cross-business support? THE JOURNEY IBM has developed a business model to quantify the commercial benefits of a Customer Insights programme. We believe in a self-funding programme built of small steps, which typically take three months and include: • Strong positive in-year ROI • Incremental steps to final business operating model • Alignment of data assets & governance • Next Best Action (cross-sell and service prompts) • Operational benefits/ROI tracking. The model shows the benefits of each step. The interactive control panel lets you configure “what if” scenarios and shows the commercial outcomes. CUSTOMERS REVENUE11 © 2011 IBM Corporation

IBM CMO BVA (Business Value Accelerator) CMOs are under increasing pressure to demonstrate the ROI from Marketing IBM’s BVA includes four work-streams to assess capability, identify gaps and recommend options to improve: Customer Experience 1. Analytical creation of Customer 1. Multi-channel Customer Insights focused service strategy 2. Embedded Insights/Automation 2. Definition of desired customer to Deliver consistent experience journeys across all channels 3. Definition of customer 3. Campaign management & segmentation strategy optimisation 4. Track product performance / 4. Closed loop feedback segment Technology Business Strategy & & Data Model Operating Model 1. IT Architecture & systems 1. Operating model gap & options management gap & options review review 2. Campaign & Real time event 2. Data landscape architecture capability/benefit review gap & options review 3. Enterprise change planning gap 3. Data Governance & DQ gap & & options review options review 4. Measure ROI gap & options review Effectiveness Efficiency PRE-REQUISITES: STEPS: 1. Workshop attendees empowered to represent the needs, priorities and current position 1. Workshop to explore priorities and business model 2. 3 working days prior to workshop provide IBM with a summary IT architecture and data 2. Half-day workshop for each quadrant landscape 3. IBM summarises findings from Gap & Options OUTPUTS: 4. IBM recommends Business Model and Roadmap Recommendations, Gap & Options Review, Business Model, Roadmap12 © 2011 IBM Corporation

Sample Quantification of Benefits (European Bank)Business Benefit Stakeholder Sample Potential Annual BenefitsCustomer Revenue GrowthIncreased lending fees Retail & Commercial  Every 1% improvement in close rate results in €5M additional lending revenue (100,000 LOBs loan applications per year, €5,099 average first year revenue per loan – fees and year 1 interest)Increased average current account & deposit Retail & Commercial  Every 1% increase in average balance results in €13M incremental margin (6.75 millionaccount balances LOBs deposit customers, current average balance of €10,000, 2% margin)Enhanced Customer RetentionReduced customer attrition Marketing  Every 0.5% reduction in attrition results in €7M (saved) revenue per year (9 million customers, 6% attrition rate, average annual revenue of €200 per customer)Revenue from retained Customers Retail & Commercial  Every 1% balance from retained Customers results in €13M incremental margin (6.75 LOBs million deposit customers, current average balance of €10,000, 2% margin)Enhanced Financial and Risk ManagementReduced write offs / provisions for loan losses Risk  Every 1% reduction in loan losses results in €17M additional profits (€1.7 billion in projected annual retail loan losses)Improved capital efficiency Finance  Every €100 million in capital freed up could enable €12M in additional profits (12% internal investment hurdle rate)Optimise Technology CostsReduced development effort & applications IT/CIO  Every 10% reduction in effort results in €3.6M cost savings (€36 million spent annually onsupport Opex related development) 13 © 2011 IBM Corporation

Qualification Questions to ask your client Questions for CMO to ask self and peers: Director of: Database Marketing, Direct Marketing, Internet Marketing, Relationship Marketing, Field Marketing, Marketing Operations, Customer Insights, Customer Care, Customer Experience, Retention Manager 1. Do you have a single view of each customer, or is customer data locked away in product silos so that you cannot see overall how much business the customer does with you? 2. Can you accurately predict which offer is the best for each customer and make that offer at the right time and over the best channel for them to accept it? 3. How well are you able to assess the return on your marketing investment? 4. What is your customer’s experience like when they cross channels (e.g., web site, stores/branch, phone, when they receive emails from you)? Is it consistent? 5. How well do you take advantage of “inbound” customer interactions for marketing purposes – e.g., presenting personalized messages when someone comes to your web site, or calls your call center, or visits a store or branch? 6. How dependent on IT are you to execute your marketing? Are great marketing strategies going to waste because of an IT backlog? Would you like to be more self-sufficient to remove 3rd party OPEX from Marketing Services suppliers? Questions to ask CIO/IT 1. Are the people responsible for individual marketing channels such as web sites, email, POS, etc. looking to you for help figure out how to make their systems work together so they can have a single, cross-channel contact strategy? 2. Are you able to do everything the marketing team is demanding of you, as quickly as they’d like? Do you wish you could enable them to do more self-service? 3. Are you supporting separate marketing software applications, missing out on the economies of scale that would come from supporting one integrated platform?14 © 2011 IBM Corporation

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Customer Centricity IBM CMO Study Webinar With Elaine Fletcher And Krishna De

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