Customer Relationship Management
Facts about customer relations Cost of selling to a new customer is six times as high as to existing customer Odds of sell...
retention Impact of a 5% Increase in Retention Rate on Customer Net Present Value Industry % Increase in Customer NPV Adve...
CRM definition “ customer centric” approach  Business philosophy  which places the customer at the heart of organisations’...
Why CRM? Customers don’t care about their suppliers’ internal difficulties They want to be able to access product and serv...
A bit of history In the 50’s mass marketing In the 1970’s market segmentation In the 1990’s personalised marketing Since: ...
The 3 phases of CRM Acquiring new customers Promotion / Advertising Better products and superior service Enhancing profita...
Novelty of the CRM Approach Complete and integrated solution - breaks down the walls of conventional functional areas Most...
Survey of CRM initiatives 80% of CRM initiatives are quick win projects Important to have clearly define goals Reduce call...
Clear obstacles Lack of collaboration Outright conflict between departmental needs Fragmentation of existing customer faci...
Develop common goals centred on the customer CRM project is as multi-disciplinary as ERP project Data also comes from disp...
Mapping process change Integration of customer content integration of customer contact integration of end-to-end CRM busin...
ABC of data mining in CRM Affinity analysis:  odd / unexpected patterns in customer behaviour. Clustering  sorting custome...
Data Issues  As with ERP Bad data quality will be a problem Data stewards Building up to a DQM strategy Dynamic process of...
Metrics Sales analysis  Returns Warrant service requests Calls / complaints Time to closure New contacts generation Sales ...
Staff buy in Even more so than for ERP, CRM requires staff buy in. One bad experience is enough Communicate on what is bei...
Integration of customer content Transactional data “ Human” data (obtained in conversation) Try to minimise the cost of co...
Integration of business processes Sales and Services primarily Accounting Logistics / shipping + all intermediaries downst...
Integration of customer contact information All channels 24 / 7 Available to all CCP (customer Contact Personnel)
Customers Telephony Internet Face-to-Face Mail Fax Front Office CRM Processes Sales Marketing Services Data Mining and Ana...
Business Intelligence Making sense Identifying problems Understanding cause and effect relationships Anticipating future c...
Customer contact point Call centre (70% of all contact points) evolving into a selling channel Goals of the contact point ...
The Internet Better economics Average cost of banking transaction = € 1 / 54 cents with call centre and 13 cents on web si...
Building the case for ROI Will crm improve our ablity to generate revenues? Will it improve decision making? Will crm impr...
Paradox of productivity gains  Amongst other things, this shows the need for  METRICS
Key decisions for ROI What costs must be absorbed?  – see lecture on TCO for ERP Eg: infrastructure costs Hardware costs W...
Knowledge management Tacit knowledge Explicit knowledge Sales area dominated by the former CRM is an attempt to codify kno...
A study of CRM in Ireland Eircom: old monopoly market opened to competition in Dec. 1998 AIB: interesting because no CRM s...
Eircom Problems poor system integration paper based system used for order tracking and diaries no customer contact history...
Eircom solution Siebel CRM (1999) to manage corporate clients GT-X system (1998) for the mass consumer segment   Differenc...
AIB CRM unit has end-to-end responsibility for the delivery of CRM projects Mosaic of in-house systems the client view sys...
Irish Life - Problems two distinct processes.  In house semi-automated point of sale (POS) system using Visual Basic™ not ...
Irish Life - Solutions Complete Siebel CRM application used by some selected actors – sales department In parallel, develo...
Insurance - problems Lost monopoly in 2001 Started customer retention programme But CRM big bang “impractical” IT systems ...
Insurance - solution Norkom’s Alchemist Customer Interaction software predictive application models analytical tool used t...
Summary – drivers of projects Company Origins AIB Eircom Insurance Co Irish Life Poor Customer Segmentation X X X X Proces...
Summary – Goals and Objectives  Company Goals and Objectives AIB Eircom Insurance Co Irish Life Holistic view of the custo...
Summary - priorities Company Most Important  Objectives   AIB Eircom Insurance Co Irish Life Holistic view of the customer...
Eircom success Key performance indicator 1998 2002 Customer Service Level 20% in 10 seconds 85% in 10 seconds  Calls aband...
Summary – problems encountered Company Limitations AIB Eircom Insurance Co Irish Life Getting  ‘buy-in’  from users X X Un...
Conclusions Complete range of CRM projects From complete to piecemeal approach From vendor driven to in-house development ...
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Cross selling 2

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Cross selling 2

  1. 1. Customer Relationship Management
  2. 2. Facts about customer relations Cost of selling to a new customer is six times as high as to existing customer Odds of selling to a new customer = 1/7 to an existing customer = 1/2 Each dissatisfied customer tells 8 to 10 people 70% of dissatisfied customers will do business again if they feel their complains are handled well 1 extra % of customer retention can boost turnover by as much as 15% Many companies don’t have proper customer support CRM = doing things right + actively seeking new business
  3. 3. retention Impact of a 5% Increase in Retention Rate on Customer Net Present Value Industry % Increase in Customer NPV Advertising Agency 95 Life Insurance 90 Bank 85 Insurance 84 Car Service 81 Credit Card 75 Laundry 45 Software 35
  4. 4. CRM definition “ customer centric” approach Business philosophy which places the customer at the heart of organisations’ processes, activities and culture IT is the tool to implement this “ a sales and service business strategy where the organisation wraps itself around the customer [such that] whenever there is interaction, the message is appropriate for that customer” Curley, B. (1999) “Profiting from the relationship” Insurance and Technology , 24 (3), pp. 34-38.
  5. 5. Why CRM? Customers don’t care about their suppliers’ internal difficulties They want to be able to access product and services at the least cost They want a single point of entry Existing loyalty programmes are a start but don’t go far enough Variations in the cost of selling to different customers => CPA
  6. 6. A bit of history In the 50’s mass marketing In the 1970’s market segmentation In the 1990’s personalised marketing Since: relationship marketing acquiring customers is far more expensive than keeping them knowledge about individual customers is required to guide highly focused marketing strategies More intense, global competition more fragmentation of markets high level of product quality The Internet reduced switching costs in many industries Shift in power from the seller to the consumer
  7. 7. The 3 phases of CRM Acquiring new customers Promotion / Advertising Better products and superior service Enhancing profitability of existing customers cross-selling and up-selling (one stop shopping) Provision of additional services Generally re introducing switching costs Retaining most profitable customers best customer list customer profitability analysis make best offer to best customer - personalisation
  8. 8. Novelty of the CRM Approach Complete and integrated solution - breaks down the walls of conventional functional areas Most companies are good at one of the 3 activities - CRM concentrates on all 3 Overall corporate objective of providing customer satisfaction Data collection aspects Data mining aspects Dissemination aspects Offer single point of entry for customer queries
  9. 9. Survey of CRM initiatives 80% of CRM initiatives are quick win projects Important to have clearly define goals Reduce call numbers Produce more finely tuned products Sell more unit per deal … CRM must be profit making 50% of top 500 firms said lack of internal collaboration is an obstacle Only 30% of companies have metrics in place
  10. 10. Clear obstacles Lack of collaboration Outright conflict between departmental needs Fragmentation of existing customer facing processes Most unstructured in most firms Idiosyncrasy of processes will lead to scope creep Customer frustration may lead to excessive demands
  11. 11. Develop common goals centred on the customer CRM project is as multi-disciplinary as ERP project Data also comes from disparate systems Using key scenarios is supposed to help Potential for conflicts must be removed Involve trusted customers when applicable Do genuine fact finding on how customers are dealt with today Process mapping rules and procedures Case studies
  12. 12. Mapping process change Integration of customer content integration of customer contact integration of end-to-end CRM business processes Integration with ERP Integration of activities never computerised before
  13. 13. ABC of data mining in CRM Affinity analysis: odd / unexpected patterns in customer behaviour. Clustering sorting customers into similar groups based on certain attributes or behaviours. Predictive modelling uses historical purchase data plus information about promotions to predict future behaviour. Segmentation like clustering; but used to support the development of tailored offerings Tapscott: help to perform ‘surgical strikes ’ instead of ‘carpet bombing’
  14. 14. Data Issues As with ERP Bad data quality will be a problem Data stewards Building up to a DQM strategy Dynamic process of tidying up live data Interface into existing systems Front and back office Multiple communication channels with outside 360 ° view New data collection mechanisms => increased cost
  15. 15. Metrics Sales analysis Returns Warrant service requests Calls / complaints Time to closure New contacts generation Sales conversion Customers retention Campaign tracking Pricing strategy changes
  16. 16. Staff buy in Even more so than for ERP, CRM requires staff buy in. One bad experience is enough Communicate on what is being sought And have clear performance measurements Create programmes to show that it matters Monitor performance and overall effect over the long time Measure €€ returns regularly
  17. 17. Integration of customer content Transactional data “ Human” data (obtained in conversation) Try to minimise the cost of collecting such data Web services are now a mainstream channel Intranet / CRM systems provide a platform for distribution on a wide basis
  18. 18. Integration of business processes Sales and Services primarily Accounting Logistics / shipping + all intermediaries downstream Distributors Experts in position to prescribe or recommend Contractors supporting the provision of services Eg: BGE
  19. 19. Integration of customer contact information All channels 24 / 7 Available to all CCP (customer Contact Personnel)
  20. 20. Customers Telephony Internet Face-to-Face Mail Fax Front Office CRM Processes Sales Marketing Services Data Mining and Analysis Data Warehousing Back Offices and External Systems Legal HR Finance R&D Servers Storage Customer Interface Infrastructure Infrastructure for CRM
  21. 21. Business Intelligence Making sense Identifying problems Understanding cause and effect relationships Anticipating future changes EIS / OLAP / dashboards of info + datawarehouses and data mining
  22. 22. Customer contact point Call centre (70% of all contact points) evolving into a selling channel Goals of the contact point Listening to the customer creating higher levels of loyalty providing a better experience CTI Hidden cost => increased in-coming calls But automation means complete framework for measuring performance Counter measures can be derived from findings Email management provides further automation
  23. 23. The Internet Better economics Average cost of banking transaction = € 1 / 54 cents with call centre and 13 cents on web site. Unlimited connectivity (in theory) Seamless data collection Integration with SCM Event driven built into services / automated click-for-help Significant risk in integrating with back end
  24. 24. Building the case for ROI Will crm improve our ablity to generate revenues? Will it improve decision making? Will crm improve customer satisfaction? Will it improve quality of service? Will it improve quality of products? Will it reduce operational costs? Will it improve employee satisfaction? At least will it not decrease it?
  25. 25. Paradox of productivity gains Amongst other things, this shows the need for METRICS
  26. 26. Key decisions for ROI What costs must be absorbed? – see lecture on TCO for ERP Eg: infrastructure costs Hardware costs What benefits must be measured? What is the true impact of the software? Choices: sales growth, customer growth and how they will be weighted (so they can be converted into € figures) Also consider tradeoffs (things that could not be done without the software)
  27. 27. Knowledge management Tacit knowledge Explicit knowledge Sales area dominated by the former CRM is an attempt to codify knowledge and store it for easy access CRM is also an attempt to create new knowledge Finally CRM is an attempt to built knowledge into the business processes of the firm Event driven marketing / cross selling / up selling
  28. 28. A study of CRM in Ireland Eircom: old monopoly market opened to competition in Dec. 1998 AIB: interesting because no CRM specific platform but CRM unit Irish Life: merger of Irish Life plc and Irish Permanent plc in April 1999 and Acquisition of TSB in 2001 Insurance: over 1.56 million customers (41% of the Irish population) Annual premium income is in excess of €600 million. Over 2.5 million customer contacts re forty thousand insurance claims per year Company Business Maturity CRM software Eircom Telecom 5 years Seibel CRM, GTX, Campaign Management System AIB Financial Services Industry 3 years Client view system, segmentation tool, Campaign Management System Irish Life Financial Services Industry 2 year Siebel eInsurance, POS system Insurance Co Health Care 18 months Analytical tool
  29. 29. Eircom Problems poor system integration paper based system used for order tracking and diaries no customer contact history. technology limited and inadequate limited segmentation analysis and campaign management. Legacy order management systems outdated systems consisted of a number of disparate information systems with no integration between the front and back offices. Front office staff had to deal with multiple desktop applications,
  30. 30. Eircom solution Siebel CRM (1999) to manage corporate clients GT-X system (1998) for the mass consumer segment Difference: Siebel geared towards relationship / GT-X geared towards transactional efficiency Also: total integration between front office, customer information database, the data warehouse and back office systems Creation of CRM department (half IT / half business) in charge of all related projects
  31. 31. AIB CRM unit has end-to-end responsibility for the delivery of CRM projects Mosaic of in-house systems the client view system up to the minute customer information, contact history log and customer contact diary the segmentation system groups customers based on demographics, and assigns specific customers to relationship managers the campaign management system For both current and potential customers Replaced a manual system Never upgraded legacy systems with “proper” CRM platform because functionality was already there “ So it doesn’t have the full functionality and nice bits offered by CRM software packages, it has the core bits and all the other bits are being added and tagged on” (CRM Consultant AIB).
  32. 32. Irish Life - Problems two distinct processes. In house semi-automated point of sale (POS) system using Visual Basic™ not structured in terms of the information that it held or of the processes involved. still involved paper-based processes which were time consuming and ineffective. Separate process for customer campaigns Eg: mail shots not automated very hard to target the right customers with the right information Ineffective and hard to gauge results
  33. 33. Irish Life - Solutions Complete Siebel CRM application used by some selected actors – sales department In parallel, developed new POS system able to generate personalised service Integration means sales personnel can prepare meetings with clients Also used for diary keeping / scheduling
  34. 34. Insurance - problems Lost monopoly in 2001 Started customer retention programme But CRM big bang “impractical” IT systems disparate with minimum linkages between them. integrating these involves contrived data re-structuring changes required would be so great it would involve ‘starting all over again’ . Piecemeal approach followed – over next 5 years
  35. 35. Insurance - solution Norkom’s Alchemist Customer Interaction software predictive application models analytical tool used to build customer models data mining propensity modelling. Also facilitates the collection and analysis of customer information Creates intelligence to increase the effectiveness of marketing campaigns. driven by a data warehouse that extracts and stores data from the operational systems. Sales people only initially Then extension to marketing and services
  36. 36. Summary – drivers of projects Company Origins AIB Eircom Insurance Co Irish Life Poor Customer Segmentation X X X X Process not Standardised X Competitive Environment X X X Regulatory Environment X X Inefficient use of customer data X X X X Automation of customer centric business processes X X Improve Campaign Management X Predictive Customer Modelling X X
  37. 37. Summary – Goals and Objectives Company Goals and Objectives AIB Eircom Insurance Co Irish Life Holistic view of the customer X X X Customer retention X X X X Target Marketing X X X X Increase in revenue X X X X Improve customer relationship X X X X Better use of customer information X X X X Communicate more effectively with customers X X X
  38. 38. Summary - priorities Company Most Important Objectives AIB Eircom Insurance Co Irish Life Holistic view of the customer X Customer retention X Target Marketing X Increase in revenue X X X Better use of information X Improve the customer relationship X
  39. 39. Eircom success Key performance indicator 1998 2002 Customer Service Level 20% in 10 seconds 85% in 10 seconds Calls abandoned 24% 4% Customer wait time 150 seconds 8 seconds Transaction handling time 480 seconds 205 seconds Query resolution at point of contact 60% 87% Electronic enablement 17% 50% Cost per contact-Care Centre € 4.48 € 3.26 Eircom.ie hits per month 285K 426K Eircom.ie substitutable contacts 20% 35%
  40. 40. Summary – problems encountered Company Limitations AIB Eircom Insurance Co Irish Life Getting ‘buy-in’ from users X X Unwillingness to change X X No large scale processing power X Lack of ‘fool proof’ systems X X Lack of integration X X X No real time CRM X X X Economic limitations X X Lack of service function X X
  41. 41. Conclusions Complete range of CRM projects From complete to piecemeal approach From vendor driven to in-house development Benefits are obtained in all cases, but more so when CRM strategy is complete
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