OUTLINE 1. The What’s & Why’s of CRM - Why the Hype Even Now? - CRM Challenges - Market Share vs. Wallet Share 2. Focus on Customer’s “Pain Points”: Molex Case Example 3. Customer Information File (CIF) is a MUST! 4. The Performance Dashboard - Customer-Driven Metrics & Reward System Management Process is Key: Case Examples - GE Aircraft Engine Business Group - Enterprise Rent-a-Car - Square D: U. S. Subsidiary of France’s Schneider Electric 6. Summing Up

1. The What’s & Why’s of CRM

- Why the Hype Even Now?

- CRM Challenges

- Market Share vs. Wallet Share

2. Focus on Customer’s “Pain Points”: Molex Case Example

3. Customer Information File (CIF) is a MUST!

4. The Performance Dashboard

- Customer-Driven Metrics & Reward System

Management Process is Key: Case Examples

- GE Aircraft Engine Business Group

- Enterprise Rent-a-Car

- Square D: U. S. Subsidiary of France’s Schneider Electric

6. Summing Up

CRM Landscape in 2001…. # of times CRM mentioned in the media only once in 1989 vs. 14,000 in 2000 Percentage of executives expecting to have CRM programs in place according to Bain & Company’s Annual Survey of Management Tools 72% in 2001 vs. 35% in 2000 the fastest growing tool in the 8-year history of this survey CRM Software Market, according to the Meta Group: $46 B in 2003 vs. $20 B in 2001 Plus CRM Services: At least twice as large Source: HBR , Feb 2002, p. 102

# of times CRM mentioned in the media

only once in 1989 vs. 14,000 in 2000

Percentage of executives expecting to have CRM programs in place according to Bain & Company’s Annual Survey of Management Tools

72% in 2001 vs. 35% in 2000

the fastest growing tool in the 8-year history of this survey

CRM Software Market, according to the Meta Group:

$46 B in 2003 vs. $20 B in 2001

Plus CRM Services: At least twice as large

Source: HBR , Feb 2002, p. 102

A Telling Headline…. PeopleSoft sells CRM software to a friendlier IRS ( Computerworld, August 23, 2001) The deal, valued at more than $10 million, will provide the Internal Revenue Service with the full PeopleSoft 8 CRM suite to make it easier for taxpayers, professional tax preparers and the IRS itself to obtain tax records and other information online around the clock. The package will enable the agency to create separate tax data Web portals for taxpayers and professional preparers as well as build a private portal for IRS employees. The first phase of the deployment will begin in summer 2002, with full implementation expected by 2004.

PeopleSoft sells CRM software to a friendlier IRS ( Computerworld, August 23, 2001)

The deal, valued at more than $10 million, will provide the Internal Revenue Service with the full PeopleSoft 8 CRM suite to make it easier for taxpayers, professional tax preparers and the IRS itself to obtain tax records and other information online around the clock.

The package will enable the agency to create separate tax data Web portals for taxpayers and professional preparers as well as build a private portal for IRS employees.

The first phase of the deployment will begin in summer 2002, with full implementation expected by 2004.

The Benefits…. 1. Moving data access online will reduce costs by pushing more customer enquiries to the Web instead of costly telephone interactions with live agents and call centers - Get customers out of the call centers and into self-service 2. The decision to use CRM software is part of the agency’s desire to modernize and become more customer-friendly. It will enable customers to access the information they want when they need it. I do find it humorous to hear ‘IRS’ and ‘CRM’ in the same sentence together. I think it’s important that the government is realizing that it may have a monopoly but it can’t get away with acting like one.

1. Moving data access online will reduce costs by pushing more customer enquiries to the Web instead of costly telephone interactions with live agents and call centers -

Get customers out of the call centers and into self-service

2. The decision to use CRM software is part of the agency’s desire to modernize and become more customer-friendly. It will enable customers to access the information they want when they need it.

I do find it humorous to hear ‘IRS’ and ‘CRM’ in the same sentence together. I think it’s important that the government is realizing that it may have a monopoly but it can’t get away with acting like one.

The CRM Imperative CRM became a Mantra To boost revenues and profit margins Gain a competitive advantage in an increasingly deregulated and global market place Allure of CRM is simple Based on a powerful common sense premise … Know Your Customers and Treat Them Uniquely Establish personal relationships with customers Create a loyal following of increasingly profitable customers

CRM became a Mantra

To boost revenues and profit margins

Gain a competitive advantage in an increasingly deregulated and global market place

Allure of CRM is simple

Based on a powerful common sense premise

… Know Your Customers and Treat Them Uniquely

Establish personal relationships with customers

Create a loyal following of increasingly profitable customers

Why Do CRM? - Top 3 Rationales from August 2001 Study 1. Increase Customer Retention / Loyalty - 94% 2. Respond to Competitive Pressures - 77% 3. Competitive Advantage from Superior Customer Service - 73% Source: Survey of 96 Global Firms by The Conference Board, Inc., New York, Aug. 2001

Why Do CRM? - A Quote from CEO of i2 Tech With thin margins and fierce competition for the customer’s dollar, the efficiency of a company’s internal business process does not guarantee success. Instead, the ability to react quickly to changes in the market place and to adapt quickly to customer needs provides the competitive advantage. Source: Times of India , June 27, 2003.

But CRM Challenges Business Practices 1. Most companies do not have the information about customers to establish close relationships. 2. CRM requires companies to use the “customer” as the lens to understand and define the marketplace … to manage the business with that customer orientation ... This is difficult since most companies are oriented towards products or finances or markets - everything but the customer.

1. Most companies do not have the information about customers to establish close relationships.

2. CRM requires companies to use the “customer” as the lens to understand and define the marketplace … to manage the business with that customer orientation ... This is difficult since most companies are oriented towards products or finances or markets - everything but the customer.

Big Challenge to Implement CRM A radical cultural shift that reshapes a company’s sales, marketing, and customer service Unfortunately, it doesn’t occur magically once the software is booted up Too often, companies see CRM as software, when it is merely an enabler, a tool in their tool kit The Big Hurdle: Change Management 87% of respondents in a recent survey conducted by online resource center, CRM Forum, pinned the failure of their CRM programs on the lack of adequate change management

A radical cultural shift that reshapes a company’s sales, marketing, and customer service

Unfortunately, it doesn’t occur magically once the software is booted up

Too often, companies see CRM as software, when it is merely an enabler, a tool in their tool kit

The Big Hurdle: Change Management

87% of respondents in a recent survey conducted by online resource center, CRM Forum, pinned the failure of their CRM programs on the lack of adequate change management

Accenture’s Study (2001) - Over 400 Companies in 6 Industries Revealed 21 CRM capabilities that had the highest impact on financial performance, of which: # 1: Customer Service Single most important factor in customer retention # 2: Motivating and Rewarding Customer-Facing People Matters more than ever After all, if busy customers can take care of most of their transactions electronically, it stands to reason that, when they take the trouble to seek out a personal interaction, they need a knowledgeable , informed and empowered individual. Logic tells you there’s a natural relationship between customers who are happy and well-served and employees who are happy and well-served. Source : CID Magazine, Aug. 15 , 2000

Revealed 21 CRM capabilities that had the highest impact on financial performance, of which:

# 1: Customer Service

Single most important factor in customer retention

# 2: Motivating and Rewarding Customer-Facing People

Matters more than ever

After all, if busy customers can take care of most of their transactions electronically, it stands to reason that, when they take the trouble to seek out a personal interaction, they need a knowledgeable , informed and empowered individual.

Logic tells you there’s a natural relationship between customers who are happy and well-served and employees who are happy and well-served.

Source : CID Magazine, Aug. 15 , 2000

Putting CRM To Work ... . . . Like ERP, CRM Systems can be a struggle to get up and running Meta Group Study (March 2001) 55% - 75% of CRM projects fail to meet their stated objectives, often as a result of sales force automation problems and “unaddressed cultural issues” - sales people are often resistant to, and even fearful, of using CRM systems. They’d make comments like “I don’t have time to enter the information” Implementation Costs : Tens of Millions of $

. . . Like ERP, CRM Systems can be a struggle to get up and running

Meta Group Study (March 2001)

55% - 75% of CRM projects fail to meet their stated objectives, often as a result of sales force automation problems and “unaddressed cultural issues” - sales people are often resistant to, and even fearful, of using CRM systems. They’d make comments like “I don’t have time to enter the information”

Implementation Costs : Tens of Millions of $

Some More Sobering Statistics Gartner Study (2001) 70% of large-scale CRM projects – costing more than $50 million and taking more than one year to implement - do NOT achieve project objectives Bain’s Annual Survey (2001) One in every 5 users reported that their CRM initiatives had not only failed to deliver profitable growth but had also damaged long-standing customer relationships.

Gartner Study (2001)

70% of large-scale CRM projects – costing more than $50 million and taking more than one year to implement - do NOT achieve project objectives

Bain’s Annual Survey (2001)

One in every 5 users reported that their CRM initiatives had not only failed to deliver profitable growth but had also damaged long-standing customer relationships.

A June 2002 Survey of 23 Siebel Projects … … 61% had yet to achieve an acceptable ROI after two years … 65% had customization problems … 78% found it was not user-friendly … 57% took longer than planned … 55% over budget by a significant amount Source: Nucleus Research, Inc., Wellesley, Mass.

… 61% had yet to achieve an acceptable ROI after two years

… 65% had customization problems

… 78% found it was not user-friendly

… 57% took longer than planned

… 55% over budget by a significant amount

Source: Nucleus Research, Inc., Wellesley, Mass.

Siebel’s Announcement in Oct 2002: Shifting to … Simplify the large and complex CRM suite Make it easier to integrate Get value in shorter time Source: Siebel Worldwide User Week in October 2002

Simplify the large and complex CRM suite

Make it easier to integrate

Get value in shorter time

Source: Siebel Worldwide User Week in October 2002

A More Pragmatic CRM Scenario CIO Survey (May 2002) 64% are implementing CRM incrementally 49% projects targeted for completion in less than 12 months; 70% in 18 months  Implement in “digestible chunks” to derive ROI

CIO Survey (May 2002)

64% are implementing CRM incrementally

49% projects targeted for completion in less than 12 months; 70% in 18 months

 Implement in “digestible chunks” to derive ROI

Update on CRM “ Up-and-Down” CRM Software Sales (Gartner) 28% increase between 1999 and 2000 25% drop in 2002 17% drop in 2003 Was CRM Another Over-hyped IT Investment? Because most firms failed to reap the expected benefits 2004: CRM Spending Is Picking Up Source: HBR, Nov. 2004

“ Up-and-Down” CRM Software Sales (Gartner)

28% increase between 1999 and 2000

25% drop in 2002

17% drop in 2003

Was CRM Another Over-hyped IT Investment?

Because most firms failed to reap the expected benefits

2004: CRM Spending Is Picking Up

Source: HBR, Nov. 2004

What Has Changed? - A New Realism About How To Deploy CRM Focus CRM on Specific “Pain Points ” Relatively Narrow Scope; Modest Goals NOT “Transform Entire Business”! Get Data ONLY to Address Pain Points Waste to Create a “Real-Time Enterprise” Build on Success of Initial CRM Projects

Focus CRM on Specific “Pain Points ”

Relatively Narrow Scope; Modest Goals

NOT “Transform Entire Business”!

Get Data ONLY to Address Pain Points

Waste to Create a “Real-Time Enterprise”

Build on Success of Initial CRM Projects

CRM: Why All the Hype Even Now? Customers: Always been the Focus of Business There is only one valid definition of a business purpose: to create a satisfied customer. (Peter Drucker, The Practice of Management , 1954) Relationship: The New Focus A customer becomes more profitable with time because: High acquisition cost exceeds gross margin initially Retention cost much lower Greater share of customer wallet boosts profits Management: Focus on Maximizing Life-Time Value (LTV) of Customer Relationships A big challenge to shift corporate thinking from delivering a product to serving a customer Measure and manage customer profitability Become Customer-Centric

Relationship: The New Focus

A customer becomes more profitable with time because:

High acquisition cost exceeds gross margin initially

Retention cost much lower

Greater share of customer wallet boosts profits

Management: Focus on Maximizing Life-Time Value (LTV) of Customer Relationships

A big challenge to shift corporate thinking from delivering a product to serving a customer

Measure and manage customer profitability

Become Customer-Centric

What Is CRM ? All About Knowing the Customer … Collecting, Analyzing and Acting … To Maximize Life-Time Value of Customer Relationships Key to CRM: Customer Information File (CIF) … One Unified View of Customer Information from ALL TOUCHPOINTS: Field Sales, Telesales, Storefront, Website, Customer Service, Loyalty Cards,…. Measure and Manage Customer Profitability Become Customer-Centric

The Three Phases of CRM Acquire New Customers - Innovation - Convenience Enhance Profitability of Existing Customers - Cross-selling & Up-selling - One-stop Shop Retain Profitable Customers for Life - Listen & Respond - Achieve Customer Lock-On

Acquire New Customers

- Innovation

- Convenience

Enhance Profitability of Existing Customers

- Cross-selling & Up-selling

- One-stop Shop

Retain Profitable Customers for Life

- Listen & Respond

- Achieve Customer Lock-On

CRM Challenges “ I don’t know who my customers are” “ We don’t have contact with customers because we sell via channels” “ Our internal systems don’t provide a single unified view of our customers” “ I don’t know which customers are most valuable and deserve special attention” “ I don’t know why my customers defect”

“ I don’t know who my customers are”

“ We don’t have contact with customers because we sell via channels”

“ Our internal systems don’t provide a single unified view of our customers”

“ I don’t know which customers are most valuable and deserve special attention”

“ I don’t know why my customers defect”

The Components of CRM Sales force automation Cust omer service/call center management Marketing automation Call center telephone sales E - commerce Call centers managing aspects of customer contact Campaign management Field sales Re tail Web - based self service Content management Third - party brokers, distributors, agents Field services and dispatch Data analysis and business intelligence tools Data warehouse and data cleansing tools

Customers’ Complaint - No Single Point of Contact The Customer Marketing Customer Service Inside Sales Outside Sales Sales Support Order Processing Management Do not have a 1to1 relationship with the company Have to deal with several people

Do not have a 1to1 relationship with the company

Have to deal with several people

Better Service, Lower Cost - FedEx Integrates Offline & Online Processes Saw the Net as an opportunity A low-cost alternative to call centers Implemented Online Package Tracking System 5 years ago Improved Customer Service Reduced costs - froze recruitment for call centers Customer Self-Service Concept - Pervasive in Travel Industry - Hotels & Airlines give incentives to customers for online booking - Huge potential in B2B CRM

Saw the Net as an opportunity

A low-cost alternative to call centers

Implemented Online Package Tracking System 5 years ago

Improved Customer Service

Reduced costs - froze recruitment for call centers

Customer Web Silo Marketing Silo Manufacturing Silo Technical Support Silo Call Center Silo Sales Silo Cross-Functional Nature of CRM - Requires Integration of Functional Silos

Enterprise Email Coordinating Touchpoints - Requires Integration of Touchpoint Systems Fax Mail Face-to-Face Web Telephone

Shift Corporate Thinking … From Delivering a Product To Serving a Customer Mobil’s Speedpass - a cylinder-shaped credit card, fits on a key chain - Customer swipes against the gas tank before filling up - leaves when done - Saves time - Offers a new level of convenience to customers - More valuable to customers than R&D effort to make better fuel

General Electric - Provides “Value-Add” for Customers Every employee will understand that success can only come from an inextricable link to the success of our customers . Completed 2000 Six Sigma Projects “at the customer, for the customer” last year - Took GE resources and applied them to our customers’ biggest needs using Six Sigma as a foundation. The focus has been totally inside our customer operations . It’s not that we know all the answers but we’re totally committed to finding them; and committed to externalizing all our initiatives for the benefit of the customer. Over the long term, we believe this will differentiate GE in the eyes of the customer. Jack Welch, Chairman’s Letter in Annual Report, Feb 9, 2001

Acquisition vs. Retention of Customers 1. A customer becomes more profitable with time because: - High acquisition cost exceeds gross margin initially - Retention cost much lower - Greater share of customer wallet If we don’t keep the customer for several years, we don’t make money: Land’s End CEO 2. Loyal customers are more profitable: 1% increase in sales - - To existing customers - profits up by 17% - To new customers - profits up by 3% Source : Bain & Co. Study

Profit One Customer Generates Over Time Source: HBR , September-October 1990, pp.59-75

The Profitability Squeeze “ In recent work with over 15 major banks in the US, Canada, Latin America, Europe, and Australia, we have found that the top 20% of customers provide 120% to 150% of profits in many bank product lines.” “ On the other hand, the worst 50% of customers are currently unprofitable to serve, many do not even cover variable costs.” “ For clients with low current value and low potential, the strategy should be to reduce costs of servicing them - use lower-cost channels, reduce credit risk, and , in some cases, fire them ! ”

Two Dimensions of Competition Customer Needs Satisfied Customers Reached

Market Share Customer Needs Satisfied Customers Reached Traditional Marketing Diminishing Returns

Market Share vs. Wallet Share Customer Needs Satisfied Customers Reached 1 to 1 Marketing - Increasing Returns

Market Share Focus . . . . . . Can Hamper Growth Consider Lego, the Danish toy company - Dominant player in construction-toys - Market share in 1995 : 72% worldwide; 90% in Europe BUT….. Children were spending more of their spare time with computers, video games and TV than with toys. Lego was losing share of children’s spare-time activities.

Lego’s New Market Space - Family “Edutainment” - Convergence of toys, education, interactive technology, software, entertainment, computers and consumer electronics - “Have fun and exercise the mind” - Get an increasing share of customer spending as children become young adults and then parents - A new product line, Mindstorms, combines hundreds of Lego bricks with gears, motors, light and touch sensors, and a microprocessor, called the RCX for “robotic command explorer”, that allows users to build their own robots - Young adults and 30- to 40-year-olds use the interactive software too… now account for half of Lego’s revenue

Defining the Market - GE learns its importance GE’s long-standing management tenet : “ Must be #1 or #2 in the market place Otherwise, get out of the business” Question : What is the marketplace ? Management teams began “to define their markets more and more narrowly to assure that their business world fit the number one-or-two share definition. It took a mid-level Company management training class reporting to us in the spring of 1995 to point out without any shyness or sugar-coating that our cherished management idea had been taken to nonsensical levels. They told us we were missing opportunities, and limiting our growth horizons by shrinking our definition of “the market” in order to satisfy the requirement to be number one or two. “ - CEO’s Letter in Annual Report, February 2001

GE’s long-standing management tenet :

“ Must be #1 or #2 in the market place

Otherwise, get out of the business”

Question : What is the marketplace ?

Management teams began “to define their markets more and more narrowly to assure that their business world fit the number one-or-two share definition. It took a mid-level Company management training class reporting to us in the spring of 1995 to point out without any shyness or sugar-coating that our cherished management idea had been taken to nonsensical levels. They told us we were missing opportunities, and limiting our growth horizons by shrinking our definition of “the market” in order to satisfy the requirement to be number one or two. “

- CEO’s Letter in Annual Report, February 2001

Our willingness to see it as “the better idea” was a major factor in our acceleration to double-digit revenue growth rates in the latter half of the ‘90s. GE Redefines “The Market” Each business has a 10%-or-less share in the market The # 1 or # 2 Definition  Increasingly Limited Market Size New Definition  Opened the vast opportunity for GE’s products and services

Each business has a 10%-or-less share in the market

The # 1 or # 2 Definition

 Increasingly Limited Market Size

New Definition

 Opened the vast opportunity for GE’s products

and services

Customer Lock-In Customer has no choice … … until an alternative comes along  Only one supplier with a monopoly stemming from a technology advantage … until competitors catch up ! FedEx: Pioneered airbill bar coding in early 1970s for package tracking - Today, even the U. S. Postal Service has it. High switching costs because of customer’s investment in a supplier’s product… But, still vulnerable ! G.E. - Bought Oracle’s ERP package - But, selected Seibel for CRM despite difficulty of linking the two packages

Customer has no choice …

… until an alternative comes along

 Only one supplier with a monopoly stemming from a technology

advantage … until competitors catch up !

FedEx: Pioneered airbill bar coding in early 1970s for package

tracking - Today, even the U. S. Postal Service has it.

High switching costs because of customer’s investment in a

supplier’s product… But, still vulnerable !

G.E. - Bought Oracle’s ERP package

- But, selected Seibel for CRM despite difficulty

of linking the two packages

Customer Lock-On Customer is not captive…Customer keeps competitors away - Because of ongoing, superior value delivered by the supplier FedEx : Shifted to new pastures when competitors caught up  Used IT to become a one-stop shop for complete order fulfillment, including logistics and supply chain management  Moving “bytes”, not just “boxes”  Developed a free Web-based guide to international shipping for small and mid-size businesses

FedEx Delivers “Global Trade Manager” A B2B Customer-Facing Web Application Project started in 1997, launched in August 2000 Helps shippers to prepare the appropriate import/export forms based on the commodity being shipped and the countries of origin/destination Alerts users to : restrictions on shipping certain commodities, if a country is under embargo, and special licensing requirements Determines government charges and fees, including import duty, value-added tax and excise duty, so they can estimate the total landed costs of their package Before : FedEx prepaid duties and taxes for its customers, then billed for reimbursement later, a process that added time and overhead costs Source: eweek , Nov. 12, 2001 & Computerworld , March 12, 2002 FedEx IT Budget in 2001: $ 1.5 Billion 5000-Person IT Group Worldwide

A B2B Customer-Facing Web Application

Project started in 1997, launched in August 2000

Helps shippers to prepare the appropriate import/export forms based on the commodity being shipped and the countries of origin/destination

Alerts users to : restrictions on shipping certain commodities, if a country is under embargo, and special licensing requirements

Determines government charges and fees, including import duty, value-added tax and excise duty, so they can estimate the total landed costs of their package

Before : FedEx prepaid duties and taxes for its customers, then billed for reimbursement later, a process that added time and overhead costs

Source: eweek , Nov. 12, 2001 & Computerworld , March 12, 2002

A “Comprehensive” CRM System Is A BAD Idea! Ends up creating an overblown system Difficult to implement Will not yield payback CRM Done Right! Is It Strategic? Where Does It Hurt? Do We Need Perfect Data? Where Do We Go From Here? Source: HBR, Nov. 2004

Ends up creating an overblown system

Difficult to implement

Will not yield payback

CRM Done Right!

Is It Strategic?

Where Does It Hurt?

Do We Need Perfect Data?

Where Do We Go From Here?

Source: HBR, Nov. 2004

Case Example: Molex - A Global Manufacturer of Electronics & Fiber-Optic Interconnection Systems Strategic Pain Point: Order Pipeline Large Customer Base 15,000 different sales opportunities worldwide at any given moment Used e-mail and spreadsheets to keep track of it’s pipeline Data were often weeks out of date Difficult to set sales priorities to pursue leads with the highest potential Hard to synchronize Molex’s global efforts Several Molex locations could be working with same customer in different parts of the world without know it

Strategic Pain Point: Order Pipeline

Large Customer Base

15,000 different sales opportunities worldwide at any given moment

Used e-mail and spreadsheets to keep track of it’s pipeline

Data were often weeks out of date

Difficult to set sales priorities to pursue leads with the highest potential

Hard to synchronize Molex’s global efforts

Several Molex locations could be working with same customer in different parts of the world without know it

Molex’s CRM Path 2002: Pipeline Management Visibility for all executives from the CEO on down to see the full range of sales opportunities in real time Enabled measurement of the real value of these opportunities Updated information 24 hours a day rather than just a few times a year Payback: 5% Increase in Revenue Improved order management More precise sales targets Better global coordination of inventory and pricing between regions Use of shared information by sales staff to identify opportunities earlier Data can also be used to improve budget planning

2002: Pipeline Management

Visibility for all executives from the CEO on down to see the full range of sales opportunities in real time

Enabled measurement of the real value of these opportunities

Updated information 24 hours a day rather than just a few times a year

Payback: 5% Increase in Revenue

Improved order management

More precise sales targets

Better global coordination of inventory and pricing between regions

Use of shared information by sales staff to identify opportunities earlier

Data can also be used to improve budget planning

Molex’s CRM Path Pipeline Management Lead Management Sales Forecasting Budgeting Supply Chain Management Cross-Selling

Micro-Marketing Shift away from broad-brush national marketing to customized strategies tailored to a regional or local market, to an individual chain or store, or even to a single customer Feasible only with micro-level information on markets and customers 

Michael Dell’s Principle: “ De-Average” When you’re trying to target profitable segments, averages obscure a lot, and aggregate financial statements are pretty meaningless. Our approach to segmentation is to take really big numbers and “de-average” them. Until you look inside and understand what’s going on by business, by customer, by geography, you don’t know anything. Source: Harvard Business Review, March-April 1998.

De-Averaging in Practice... Performance measures in the P&L track… - Margins - Average Selling Price - Selling Overheads By… - Customer Segment - Product - Country

Dell Manages by Segmentation Organized initially by Geography In ‘97 : by Customer Segments - Totally autonomous When a business unit grows, segment further to get more focus - “To identify unique opportunities and economics” - “To develop people who are very attuned to their market segment.” - “It’s one way to handle growth. You can’t possibly manage something well if it’s too big. Segmentation gives us better attention and focus.”

Organized initially by Geography

In ‘97 : by Customer Segments - Totally autonomous

When a business unit grows, segment further to get more focus

- “To identify unique opportunities and economics”

- “To develop people who are very attuned to their market

segment.”

- “It’s one way to handle growth. You can’t possibly manage

something well if it’s too big. Segmentation gives us better

attention and focus.”

Dell Manages by Segmentation Benefits : - Optimize products to meet customer needs - “Segmentation lets you tailor your programs to the customers’ needs . . . each segment has its own issues . . . In education, for instance, how do you get tech support to a class-room when the teacher doesn’t have a telephone ?” Cultural Challenge : “ Some people still measure themselves by how many people work for them or the revenue they generate. At Dell, success means growing so fast that we take half your business away. It’s a different mind-set.”

CIF is a MUST! - But Not Easy ... 1. Customer data resides in a number of “silos” - Inconsistency makes integration into a single CIF difficult e.g. Customer Name One system : Jane K. Smith Another : Smith, J. K. 2. Who are the profitable customers ? - Need to know who buys X-dollars of Y-products over Z-duration 3. What are the needs of customers ? - Marketing and sales campaigns should be based on needs-based segmentation. For example: Consumer electronics companies tend to segment by age and income Does this relate to buying behavior ? Needs are different for customers who are comfortable with high-tech gadgets and those who are not.

Business Marketing (B2B) Should Know Their Customers Better Direct Sales Model to Customers Limited Number of Customers (unlike B2C) CIF : Even More Critical YET . . . “DATA-POOR” about Customers MIS Reports limited to Revenues & Receivables No Information on Profitability or Product Mix Data on Quotations & Orders Lost . . . Are not even captured in MIS Systems

Direct Sales Model to Customers

Limited Number of Customers (unlike B2C)

CIF : Even More Critical

YET . . . “DATA-POOR” about Customers

MIS Reports limited to Revenues & Receivables

No Information on Profitability or Product Mix

Data on Quotations & Orders Lost

. . . Are not even captured in MIS Systems

Business Customer Forums at Dell To ensure a free flow of information on a regular basis Platinum Councils of Dell’s largest customers every 6-9 months – over 100 customers at the event - One for CIOs and another for technical types 40% of Michael Dell’s time spent with customers Keeps Dell in advisory role about future of technology Helps customers to anticipate future needs - Also helps Dell in demand forecasting Dell sends top technologists AND real engineers who don’t get out to talk to customers - one Dell person to one customer

To ensure a free flow of information on a regular basis

Platinum Councils of Dell’s largest customers every 6-9 months – over 100 customers at the event

- One for CIOs and another for technical types

40% of Michael Dell’s time spent with customers

Keeps Dell in advisory role about future of technology

Helps customers to anticipate future needs

- Also helps Dell in demand forecasting

Dell sends top technologists AND real engineers who don’t get out to talk to customers - one Dell person to one customer

A STARTING POINT FOR A B2B CIF - For Each Customer ... . . . Sales : This Year vs Last Year . . . Which Products? # of Orders ? . . . Receivables : This Year vs. Last Year . . . Last Order : How Much ? When ? . . . Quotations Submitted - When ? Value ? Products ? Orders Got ? - Orders Lost ? To Whom ? Why ? - Status of Pending Quotations . . . Who are the “Influencers”?

Why The Problem ? External Data on Customers & Competitors is SOFT - Most Valuable for CRM, BUT DATA IS DIFFICULT TO GET - Market Research Data Vendors Emerged for Consumer Packaged Goods and Pharma because…. Huge marketing budget Relatively easy to get data from retail store audits or scanner data BIG PROBLEM FOR B2B: WHO IS THE CUSTOMER ? CISCO FORD BOEING MERRILLLYNCH Auto Buyers Air Travelers Investors ANOTHER PROBLEM : WHO COLLECTS THE DATA ? Auto Dealers Airlines

External Data on Customers & Competitors is SOFT

- Most Valuable for CRM, BUT DATA IS DIFFICULT TO GET

- Market Research Data Vendors Emerged for Consumer Packaged Goods

and Pharma because….

Huge marketing budget

Relatively easy to get data from retail store audits or scanner data

BIG PROBLEM FOR B2B: WHO IS THE CUSTOMER ?

The Performance Dashboard - Must Be Customer-Driven Financial results are the bottom-line measures of business performance. But: “ If we do what’s right for the customers, our market share and our return on assets will take care of themselves” (Xerox CEO) “ Any cost that does not add value to consumers of the product has to be reduced” (P & G CEO) “ We did an audit of client experiences with process re-engineering . . . Lots of examples with 60% to 80% reduction in cycle time but only very modest effects at the business unit level because the changes did not matter to the customer.” (McKinsey Study)

An Example : Xerox Copiers Company Strength : Faster delivery than competitors BUT : That was NOT what customers cared about Customer’s Concerns : - When would the copier arrive ? Typical Salesperson’s answer : “2 weeks” - Would it be Installed on Schedule ? - In Working Order - Accurate Bill ?

GE’s Concept of “Span” - Measures the operational reliability for meeting a customer request … the time window around the Customer Requested Delivery Date in which the delivery will happen - High Span  Poor capability to meet customer need Objective  Zero span - Squeeze the two sides of the delivery span - days early and days late - ever closer to the center - the exact day the customer desired RESULTS : Plastics : 50 days span to 5 Aircraft Engines : 80 days span to 5 Mortgage Insurance : 54 days span to 1

The GE Process - In the CEO’s Annual Letter ( Feb 2001 ) When the order is taken, that date becomes known to everyone, from the first person in the process receiving the castings, circuit boards or any other components from the supplier, all the way through to the service reps who stand next to the customer as the process is started up for the first time. Every single delivery to every single customer is measured and in the line of sight of everyone ; and, everyone in the process knows he or she is affecting the business-wide measurement of span with every action taken. WHAT GETS MEASURED AND REWARDED GETS DONE !

The Problem Today - Too much financial information . . . You almost drown in it - can’t see what is important anymore . . . Not much help to employees on how to improve in their daily jobs - No measurement of drivers of revenues and costs such as : . . . Quality of service . . . Customer retention - Good information alone is NOT enough - it has to be USED ! - Easier to upgrade the quality of information than the management process for utilizing the high-quality information

Critical Success Factors are ... The key areas where “things must go right” for the business to flourish They should receive constant and careful attention from management - Determine the Key Indicators Measure the performance of each indicator - Determine the data needed for each indicator

Dell: Customer Service is the New Battleground ! The Customer Experience Initiative : May 1998 Encourage every department to win part of the customer experience - sum of every customer contact, includes looking at company advertising, browsing the company Web site, purchasing a system and receiving follow-up support. State-of-the-art CRM contains all customer inputs : - every customer call; every mouse click; every service call and its resolution - Dell rep can see “everything” when customer calls Use the Net to automate and customize service like Dell stream-lined and customized PC production - today, a third of Dell’s customer-service force dedicated to handling queries online

Three Performance Metrics 1. Order and Delivery - % of orders shipped by target date 2. Installation and Operation - % of customers calls to tech support requiring a part dispatch within 30 days of invoice date 3. Service - % of on-site service calls resolved by a Dell Service Partner within 24 hours Bonuses and profit-sharing tied to 15% improvement in performance

Market-based Performance Measures ... MUST be linked to Reward Systems Measurement and reward systems are critical in developing a market-oriented business. Just as managers will emphasize those things that top management’s statements of beliefs and values focus their attention on, they will also do those things for which they are evaluated and rewarded Source : F. Webster, “Rediscovering the Marketing Concept,” Marketing Science Institute Working Paper, 1988.

The Customer is THE Business at Cisco 70% of Cisco’s employees have a very significant bonus multiplier tied to the annual customer satisfaction survey Status of Critical Accounts reviewed first at every staff meeting “ If you have an unhappy customer, they stay on the Critical Account List until the problem is fixed.” “ Every night, Chambers (CEO) gets a personal update on the status of every critical account.” Senior VP of Customer Advocacy reports to the CEO IT Reports to Customer Advocacy, previously Finance

70% of Cisco’s employees have a very significant bonus multiplier tied to the annual customer satisfaction survey

Status of Critical Accounts reviewed first at every staff meeting

“ If you have an unhappy customer, they stay on the Critical Account List until the problem is fixed.”

“ Every night, Chambers (CEO) gets a personal update on the status of every critical account.”

Senior VP of Customer Advocacy reports to the CEO

IT Reports to Customer Advocacy, previously Finance

How Wingspan Bank.com Does it - Online Offshoot of Bank One Corp “ It’s not about having a better CD rate, It’s about customer service ! Created an “iBoard of Directors” - Customers who offer advice on products and strategy Emphasis on Service is Pervasive Applicants for home equity loans get answer in 60 seconds Every employee has to listen to customer calls for atleast 1 1/2hours a month “ Customer Experience” departments and “Customer Advocacy” teams to quickly address complaints and suggestions Top executive team reads at least 20 customer e-mails a day Invites Customer Feedback “ Our customers have a great desire to improve the bank, and we act on their ideas”. - Software changed to allow users to access all their accounts at once, with single sign-on - Enable download of financial data to customers’ Quicken software

Created an “iBoard of Directors”

- Customers who offer advice on products and strategy

Emphasis on Service is Pervasive

Applicants for home equity loans get answer in 60 seconds

Every employee has to listen to customer calls for atleast 1 1/2hours a month

“ Customer Experience” departments and “Customer Advocacy” teams to quickly address complaints and suggestions

Top executive team reads at least 20 customer e-mails a day

Invites Customer Feedback

“ Our customers have a great desire to improve the bank, and we act on their ideas”.

- Software changed to allow users to access all their accounts at once,

with single sign-on

- Enable download of financial data to customers’ Quicken software

Three Components of the Management Process Organizational Orientation Makes customer retention a priority Gives employees wide latitude to treat customers differently “ Configuration” (a term used by Prof. Day) * Organization structure and accountabilities Metrics and incentives for building relationships Information about customers In-depth, relevant information available through IT systems in all parts of the company * George S. Day, “Creating a Superior Customer-Relating Capability”, MIT Sloan Management Review, Spring 2003

Organizational Orientation

Makes customer retention a priority

Gives employees wide latitude to treat customers differently

“ Configuration” (a term used by Prof. Day) *

Organization structure and accountabilities

Metrics and incentives for building relationships

Information about customers

In-depth, relevant information available through IT systems in all parts of the company

* George S. Day, “Creating a Superior Customer-Relating Capability”, MIT Sloan Management Review, Spring 2003

Orientation - Customer Retention is High Priority for EVERYONE Not just a concern to be delegated to marketing or sales Openness for sharing information about customers … no one function can be allowed to own the customer … knowledge about customers has to be shared with other functions Different Customers should be treated differently based on their long-run value. … IBM made it a company value to take on only the best customers and to do everything possible to cater to their needs.

Not just a concern to be delegated to marketing or sales

Openness for sharing information about customers

… no one function can be allowed to own the customer

… knowledge about customers has to be shared with other

functions

Different Customers should be treated differently based on their long-run value.

… IBM made it a company value to take on only the best

customers and to do everything possible to cater to their needs.

Configuration: Aligning Metrics, Incentives & Structures Case Example: GE Aircraft Engine Business Group Problem: Discovered that its jet engine customers were not happy with the service component even though the Six-Sigma quality metrics showed the opposite. Step 1: In-depth study of what customers really wanted in terms of … … responsiveness … reliability … value added by the services … help in improving their productivity Step 2: Changed the organization structure from functional departments such as sales, marketing and product support - Reorganized around customer-facing processes rather than functions - Corporate VP assigned to each of the top 50 customers, so they had a clear channel to the top of the organization

Problem: Discovered that its jet engine customers were not happy with the service component even though the Six-Sigma quality metrics showed the opposite.

Step 1: In-depth study of what customers really wanted in terms of …

… responsiveness

… reliability

… value added by the services

… help in improving their productivity

Step 2: Changed the organization structure from functional departments such as sales, marketing and product support

- Reorganized around customer-facing processes rather than functions

- Corporate VP assigned to each of the top 50 customers, so they had a clear channel to the top of the organization

Case Example: GE Aircraft Engine Business Group Step 3: Created a “value-add” for the customers in the area they cared the most… help to improve their productivity - Assigned GE leaders of their Six-Sigma quality program to customer’s site to work hand-in-hand on engine-service projects and parts inventory management - Learned that the Net was the best tool for personalizing the delivery of parts

Step 3: Created a “value-add” for the customers in the area they cared the most… help to improve their productivity

- Assigned GE leaders of their Six-Sigma quality program

to customer’s site to work hand-in-hand on engine-service

projects and parts inventory management

- Learned that the Net was the best tool for personalizing

the delivery of parts

Case Example: GE Aircraft Engine Business Group Step 4: Implemented the Net connection Step 5: Incorporated customer-service metrics into the employee evaluation criteria Step 6: Instituted rewards for superior service RESULT: Consistently high ratings on a range of customer-satisfaction metrics

Step 4: Implemented the Net connection

Step 5: Incorporated customer-service metrics into the employee evaluation criteria

Step 6: Instituted rewards for superior service

RESULT: Consistently high ratings on a range of customer-satisfaction metrics

Driving Home the Service Ethic - Enterprise Rent-a-Car A second generation family business Founded in 1957 – leasing cars Added car rental in 1963 1980: Fleet of 6,000 rental cars 1989: Expanded to 50,000 cars 2003: Largest US car rental company - $ 6B Revenues; 500,000 Cars Source: The Financial Times , June 3, 2003

A second generation family business

Founded in 1957 – leasing cars

Added car rental in 1963

1980: Fleet of 6,000 rental cars

1989: Expanded to 50,000 cars

2003: Largest US car rental company

- $ 6B Revenues; 500,000 Cars

Source: The Financial Times , June 3, 2003

Strategy Identified a neglected market… … renting replacement cars to people involved in an accident, breakdown, etc. Not an easy market to serve … day-to-day demand is unpredictable unlike airport rentals where most customers book well in advance … agitated or distressed customers … other parties involved in the process - insurance companies, body shops, mechanics Lot more complicated than handing out keys at the airport

Identified a neglected market…

… renting replacement cars to people involved in an accident,

breakdown, etc.

Not an easy market to serve

… day-to-day demand is unpredictable unlike airport rentals

where most customers book well in advance

… agitated or distressed customers

… other parties involved in the process

- insurance companies, body shops, mechanics

Lot more complicated than handing out keys at the airport

What Makes IT Work? - Culture & Management Process “ Dad (the founder) has always been passionate about customer service… that rubbed off on all of us”. “ Most of the management team came up through the business” Mix of central control where it matters most and decentralized empowerment of Branches Each of the 5,000 Branches is a profit center Monthly financial statements for each Branch show “all the numbers” … right down to what it costs to wash a car plus Customer Satisfaction scores “ The company is a confederation of these small businesses … we view ourselves here (at Corporate) as a switching station for the best ideas” Textbook example of how to grow without losing that entrepreneurial edge

“ Dad (the founder) has always been passionate about customer service… that rubbed off on all of us”.

“ Most of the management team came up through the business”

Mix of central control where it matters most and decentralized empowerment of Branches

Each of the 5,000 Branches is a profit center

Monthly financial statements for each Branch show “all the numbers”

… right down to what it costs to wash a car

plus Customer Satisfaction scores

“ The company is a confederation of these small businesses … we view ourselves here (at Corporate) as a switching station for the best ideas”

Decentralization Works Only If… Line Mangers have training and support to take decisions Recruit bright, entrepreneurial graduates straight out of college and funnel them through the training programme developed by Enterprise Boundaries and incentives to encourage the right kinds of decisions are carefully designed Every Branch gets a Customer Satisfaction Score which determines promotions, not financial performance

The Goal of the Company - Enterprise Service Quality Index (ESQI) I went through a period of healthy paranoia in the early 1990s. We were a billion-dollar company, growing fast; profitability was good. But I was picking up background noise that suggested our customer service had started to slip. The ESQI was a breakthrough for us. Over the years we have refined it and refined it until we now ask only two questions: are you satisfied with our service? And would you come back … Enterprise CEO Customers who say they are “completely satisfied” with Enterprise’s service are three times more likely than others to come back Rising ESQI scores give me more confidence in the future than our strong cash flow or gain in market share. ESQI does not mean we can ignore other things but it will keep us on track.

I went through a period of healthy paranoia in the early 1990s. We were a billion-dollar company, growing fast; profitability was good. But I was picking up background noise that suggested our customer service had started to slip. The ESQI was a breakthrough for us. Over the years we have refined it and refined it until we now ask only two questions: are you satisfied with our service? And would you come back

… Enterprise CEO

Square D Case Example - Getting the Management Process Right First Background: A 100-year-old maker of electrical and industrial equipment Acquired by France’s Schneider Electric in 1991 Integration with Schneider completed in 1993 Goal: Double return on capital by 2000 Strategy: Become Customer-centric

Background:

A 100-year-old maker of electrical and industrial equipment

Acquired by France’s Schneider Electric in 1991

Integration with Schneider completed in 1993

Goal: Double return on capital by 2000

Strategy: Become Customer-centric

Changes in the Management Process New Organization Structure: Company’s three BUs – electrical distribution, industrial control and automation, and transformers – reorganized around customer segments in four main markets - industrial, residential, construction and OEM Remaining functions reorganized to support these four Divisions New Performance Measurement & Incentive Systems: No longer based on # of units sold Targets: # of customers acquired; profit margins Changes took 3 years and were championed straight from the CEO’s office

New Organization Structure:

Company’s three BUs – electrical distribution, industrial control and automation, and transformers – reorganized around customer segments in four main markets - industrial, residential, construction and OEM

Remaining functions reorganized to support these four Divisions

New Performance Measurement & Incentive Systems:

No longer based on # of units sold

Targets: # of customers acquired; profit margins

Investment in IT… To Upgrade the Customer-Facing Processes Order Management System $ 75M in 1996 Enables Sales Engineers create proposals for Customers based on what the factory floor could deliver System implementation driven by top management: Took 3 years Active involvement of line managers for months at a time to understand software implementation issues Customer Support Service 18 far-flung call centers were consolidated into one customer information center for North America in 2000

Order Management System

$ 75M in 1996

Enables Sales Engineers create proposals for Customers based on what the factory floor could deliver

System implementation driven by top management: Took 3 years

Active involvement of line managers for months at a time to understand software implementation issues

Customer Support Service

18 far-flung call centers were consolidated into one customer information center for North America in 2000

Patented a technology to build Web servers into their equipment to identify problems almost as they happen Example More High-Tech…To Secure Customer Loyalty … Design “Self-Repair” Products Monitor at a petrochemicals plant detects a power surge… automatically kills the utility feed. Web server linking the equipment senses damage to any drives (even if a backup generator has taken over). Server emails Square D for replacement drives and contractor asking for an engineer to come to the plant the next day to install them. Next morning, a Square D manager comes to the plant to discuss the event with customer and ensure that contractor’s engineer has installed the replacement drives

Patented a technology to build Web servers into their equipment to identify problems almost as they happen

Example

First Wave of CRM - Why It Did Not Deliver ROI “ Shelfware” Problem: 42% of CRM Goes Unused Vendor offeres a larger discount to buy software licenses which businesses do not need immediately Buyers enticed with economies-of-scale rationale – “less expensive to buy now than to add on later” Unforeseen cost – Maintenance -- Buyer must pay for shelfware too

“ Shelfware” Problem: 42% of CRM Goes Unused

Vendor offeres a larger discount to buy software licenses which businesses do not need immediately

Buyers enticed with economies-of-scale rationale – “less expensive to buy now than to add on later”

Unforeseen cost – Maintenance

-- Buyer must pay for shelfware too

Are CRM Vendors to Blame? “ CRM vendors were their own worst enemy when it came to CRM shelfware. First, they pushed users to ‘all you can eat’ software contracts that would take years to implement. Sure, you get a bigger discount but the vendor walked away with all your money with no real incentive to help make it work… “ The biggest problem was the way vendors originally convinced the market that CRM was a software project, not a business project. When companies spent millions on the first phase and couldn’t find the benefits, they left the rest of the software on the shelf” – VP, Giga Information Group Source: CRMDaily.com, March 7, 2003

Another Reason Major Focus of First Wave: Operational CRM Dealt with Automating Front-End Application e.g., Sales Force Automation, Call Center Integration Generated ‘tons’ of customer data Only limited use made of the data Operational CRM did not provide reporting capabilities, and if it did, “it was 14 canned reports that were unintelligible and difficult to manipulate and customize.”

Major Focus of First Wave: Operational CRM

Dealt with Automating Front-End Application

e.g., Sales Force Automation,

Call Center Integration

Generated ‘tons’ of customer data

Only limited use made of the data

Some Survey Findings “ Estimated worldwide spend on new CRM licenses in 2005: Over $3 B Total spend including maintenance, integration, and related hardware & software: Over $12 B … BUT, only 10% of business and IT executives in the survey strongly agreed that the business results they expected to achieve had been met or exceeded.” – Forrester Report “ Despite billions in CRM investment by the financial services industry, companies have done little to improve the customer experience. Fewer than 60% surveyed have broken down their stovepipes of product lines, and can communicate effectively the complete view of the customer across their organizations.” – BearingPoint Study

First Wave of CRM: Operational CRM Automating marketing, sales and service processes Goal: Operational Efficiency “ Hands and Feet Doing the Day-to-Day Work” But, if calls to the call center are limited to 3 minutes or less, would it result in more loyal, profitable customers? Or, does tracking deals with sales force automation actually lead to more effective selling?

Automating marketing, sales and service processes

Goal: Operational Efficiency

“ Hands and Feet Doing the Day-to-Day Work”

But, if calls to the call center are limited to 3 minutes or less, would it result in more loyal, profitable customers? Or, does tracking deals with sales force automation actually lead to more effective selling?

Next Generation CRM: Analytical CRM “ The Brains of the Operation” Converts Customer Data into Customer Intelligence For Example: How profitable are your customers? How recently and frequently have they made purchases? Who are our best customers and how can we retain them? Use Customer Intelligence as a strategic initiative to understand and respond to high-value customers and reduce customer churn rates Without the analytics, what companies have is “some pretty expensive Rolodexes”. The Limited: Increased Cross Selling yielded ROI of 400% on ACRM

“ The Brains of the Operation”

Converts Customer Data into Customer Intelligence

For Example:

How profitable are your customers?

How recently and frequently have they made purchases?

Who are our best customers and how can we retain them?

Use Customer Intelligence as a strategic initiative to understand and respond to high-value customers and reduce customer churn rates

Aberdeen Group’s 2005 Survey Over 750 companies across several industries 74% of Best-in-Class Firms are focusing on Analytical CRM IDC Report CRM Analytics has fastest growth rate of any segment in analytics software: 12.9% CAGR Median ROI of 55% by firms who have successfully used Analytical CRM Analytical CRM - Key to Becoming Customer Centric Customer Centricity has become a rallying cry today… A product or price advantage can be duplicated but a strong customer-driven organization is NOT easy to replicate… Analytical CRM injects the voice of the customer from the interactions at all touch points into the process for building and sustaining profitable customer relationships.

Aberdeen Group’s 2005 Survey

Over 750 companies across several industries

74% of Best-in-Class Firms are focusing on Analytical CRM

IDC Report

CRM Analytics has fastest growth rate of any segment in analytics software: 12.9% CAGR

Median ROI of 55% by firms who have successfully used Analytical CRM

Manages $165 B in mutual fund assets Objective: Reduce churn Increase “Wallet Share” of current customers Findings from Customer Analysis Several red flags such as sudden increases or decreases in a customer’s contact with Dreyfus More transactions between a customer’s funds Analytic Model for Proactive Marketing Identified potentially restless customers Targeted them with tailored sales calls Bottom-Line Reduced Investment Redemption Rate from 20% annually to 7% 50% fall in customer attrition A Success Story: Dreyfus Corp.

Manages $165 B in mutual fund assets

Objective:

Reduce churn

Increase “Wallet Share” of current customers

Findings from Customer Analysis

Several red flags such as sudden increases or decreases in a customer’s contact with Dreyfus

More transactions between a customer’s funds

Analytic Model for Proactive Marketing

Identified potentially restless customers

Targeted them with tailored sales calls

Bottom-Line

Reduced Investment Redemption Rate from 20% annually to 7%

50% fall in customer attrition

Individual Investor Group 13,000 financial advisors, 450+ Branches, 3 M Customers 2001 Goal: Product-Centric to Customer-Centric Business Acquire Targeted Clients Increase Wallet-Share of Existing Clients Retain High-Value Clients CRM Strategy “ Let’s get our analytical house in order before venturing into an operational CRM platform.” Leveraged available data to build predictive models for refining its marketing efforts Morgan Stanley Case Example - Did Analytical CRM FIRST !

Individual Investor Group

13,000 financial advisors, 450+ Branches, 3 M Customers

2001 Goal: Product-Centric to Customer-Centric Business

Acquire Targeted Clients

Increase Wallet-Share of Existing Clients

Retain High-Value Clients

CRM Strategy

“ Let’s get our analytical house in order before venturing into an operational CRM platform.”

Leveraged available data to build predictive models for refining its marketing efforts

Based on customer data in mainframe-based data silos Performs an “Extract-Transform-Load” (ETL) process monthly to load Customer Data Mart A sophisticated “householding” algorithm groups all data by address to create an individual customer ID Predictive modeling suggests the appropriate level of service and offerings to each client Morgan Stanley Application Overview

Based on customer data in mainframe-based data silos

Performs an “Extract-Transform-Load” (ETL) process monthly to load Customer Data Mart

A sophisticated “householding” algorithm groups all data by address to create an individual customer ID

Predictive modeling suggests the appropriate level of service and offerings to each client

How It Hangs Together!

Business Value of Customer Analytics “ Think about all the money you’re saving not going after customers that the model says will have a very low response rate. The marketing campaign based on a predictive model of propensity to purchase is much different from how you ran it in the past when campaigns were based on selecting media for the targeted audience.” “ Given the pressure our industry was under the past few years, Operational CRM wasn’t at the top of our agenda.” If you’re starting from scratch, do the analytical first … . . . It is not as expensive. . . . You get information you really need to run the business. . . . Hence you get immediate payback. . . . You’re perfectly positioned when you do roll out Operational CRM.

“ Think about all the money you’re saving not going after customers that the model says will have a very low response rate. The marketing campaign based on a predictive model of propensity to purchase is much different from how you ran it in the past when campaigns were based on selecting media for the targeted audience.”

“ Given the pressure our industry was under the past few years, Operational CRM wasn’t at the top of our agenda.”

If you’re starting from scratch, do the analytical first …

. . . It is not as expensive.

. . . You get information you really need to run the business.

. . . Hence you get immediate payback.

. . . You’re perfectly positioned when you do roll out Operational CRM.

Mazda (U.S.) Case Example Departments are run as individual fiefdoms, each with “data silos” and different CRM programs, all uncoordinated Marketing dept . : Conducts direct mail and email campaigns Service dept. : Sends out coupons and reminders Parts dept. : Runs its own promotions Customer Affairs Office : Has its customer surveys We identified over 60 different programs that touched the customer in one form or another. There was a lot of overlap and duplication Started the CRM program in mid-2000 to bring some order to the customer contact information and eliminate the costly duplication of effort Determined to avoid the problems inherent in CRM projects that are too big to manage We are going into this with realistic expectations. We’ll take baby steps and build some successes … and also gain some returns on the investment over the first year or two.

Departments are run as individual fiefdoms, each with “data silos” and different CRM programs, all uncoordinated

Marketing dept . : Conducts direct mail and email campaigns

Service dept. : Sends out coupons and reminders

Parts dept. : Runs its own promotions

Customer Affairs Office : Has its customer surveys

We identified over 60 different programs that touched the customer in one form or another. There was a lot of overlap and duplication

Started the CRM program in mid-2000 to bring some order to the customer contact information and eliminate the costly duplication of effort

Determined to avoid the problems inherent in CRM projects

that are too big to manage

We are going into this with realistic expectations. We’ll take baby steps and build some successes … and also gain some returns on the investment over the first year or two.

Mazda’s CRM Implementation Got buy-in from the top on down to handle the political challenge to get depts. to change their long-time habits Licensed CRM software from E.phipany - System integrator, Wheelhouse Corp., installed CRM in 14 weeks. Savings from changes made in the first 6 months: $ 1 M/year Big Payoff: Clean Integrated Database Before: 4 separate databases for Marketing, Vehicles, Service & Warranty, Call Center Data Cleansing: A major effort For example: Marketing database was sorted by customer name while Vehicles database was sorted by vehicle identification #. Marketing database was also full of errors and duplicates Source: Computerworld , Feb 18, 2002

Got buy-in from the top on down to handle the political challenge to get depts. to change their long-time habits

Licensed CRM software from E.phipany - System integrator, Wheelhouse Corp., installed CRM in 14 weeks.

Savings from changes made in the first 6 months: $ 1 M/year

Big Payoff: Clean Integrated Database

Before: 4 separate databases for Marketing, Vehicles,

Service & Warranty, Call Center

Data Cleansing: A major effort

For example: Marketing database was sorted by customer name while Vehicles database was sorted by vehicle identification #. Marketing database was also full of errors and duplicates

Real Value Of Mazda CRM: Through Analytics Build profiles of our car owners Segment by Value Tiers Build Life-Time Value Indices and Loyalty Indices Develop Measures of Retention Risks Ex : System can identify a loyal Mazda owner ( because she has purchased multiple Mazda cars) but is having service warranty problems. We can identify her as a retention risk and take proactive action right away to keep her as a loyal customer rather than let her fall off the radar screen Help the call center representatives to get a complete view of each caller’s history with Mazda – computer screen will show what vehicle the customer currently owns, vehicles owned before, their service history, their previous contacts with Mazda and whether there is a current promotional offer that they are eligible for and that we can offer while they are on the phone. Make the call center a more proactive channel rather than just a Consumer Affairs line.

Build profiles of our car owners

Segment by Value Tiers

Build Life-Time Value Indices and Loyalty Indices

Develop Measures of Retention Risks

Ex : System can identify a loyal Mazda owner ( because she has purchased multiple Mazda cars) but is having service warranty problems. We can identify her as a retention risk and take proactive action right away to keep her as a loyal customer rather than let her fall off the radar screen

Help the call center representatives to get a complete view of each caller’s history with Mazda – computer screen will show what vehicle the customer currently owns, vehicles owned before, their service history, their previous contacts with Mazda and whether there is a current promotional offer that they are eligible for and that we can offer while they are on the phone.

Make the call center a more proactive channel rather than just a Consumer Affairs line.

Summing Up… … CRM is a Process Identify High-Value Customers Build Customer Loyalty to grow Revenues Reduce Costs through Micromarketing Create a Customer-Focused Organization IT can Help… But There are Non-IT Hurdles

Identify High-Value Customers

Build Customer Loyalty to grow Revenues

Reduce Costs through Micromarketing

Create a Customer-Focused Organization

IT can Help…

But There are Non-IT Hurdles

The Non-IT Hurdles 1. Getting the Right Data 2. Organizational Resistance 3. Performance Measurement and Reward Systems

An Ad from a CRM Software Vendor CUSTOMERS ARE AN INVESTMENT. MAXIMIZE YOUR RETURN. CRM lets you capitalize on every customer interaction across your enterprise. … provides real-time information on all aspects of your customer relationships … integrates business processes seamlessly across your organization to determine the most profitable ways to manage customers … turns every point of customer contact into a profit opportunity Which of the Claims Made in This Ad are True? Which are Not?