Developing a CRM Strategy

1. Developing a CRM Strategy Jennifer Kirby

2. Key Issues • What is a customer relationship management (CRM) strategy? • How does a CRM strategy fit in with other business strategies? • Only 10 percent to 15 percent of companies know the value of their customer base — yet, this is an important intangible asset and drives the detailed tactics of the CRM strategy. • The benefits of CRM come through increased service and communication; to build real loyalty, how is this managed effectively?

3. What Is a CRM Strategy? • “It boldly states the ideal customer base and how an organization intends to get and keep it. I’ve never yet seen one that does this to any depth.” — CRM Consultant • “…It’s the decision about which customers are to be managed, via which channels for which products and services: It means revisiting the marketing strategy.” — CRM Guru • “A CRM strategy is not an infrastructure road map.” — CRM Program Manager • “We need to understand what customers we have, and who we want, then we can put in place a strategy for developing the value of each segment” — CEO

4. A CRM Strategy: Developing the Customer Asset Base Marketing Sales Service How do we create awareness of what we offer to potential customers of value? Target How do we acquire valuable customers who will value us? Win Back Enquire How can we retain or win back customers of value? Customer Life Cycle Retain Acquire Manage Problems Welcome Develop How do we do this efficiently? How do we develop the customers’ loyalty and value to us by developing our value to the customer?

5. CRM Strategy:Top Ranking Objectives Annual loss in a typical company Customer loss: 10% to 30% Employee loss: 15% to 20% Investor loss: 50% Reduces annual profit by 20-50% B2B B2C Percent of Companies Ranking as Top Priority 47 Retention 47 37 Development 26 16 Acquisition 27

6. CRM Strategy: Case Study No. 1 • Segment the customer base in deciles of value. • Develop customer profitability. The most-valuable segment by 3 percent, the next three segments by 20 percent, and decrease the losses on the rest — develop services used, lower distribution cost, increase prices and discount according to potential value. • Acquire new customers of the most-valuable type with targeted selling. • Implement retention programs for the most-profitable customers. $15,000 $10,000 $5,000 0 ($2,500) ($1,000) 1 2 3 4 5 6 7 8 9 10 Household Deciles Ranked by Profit

7. CRM Strategy: Case Study No. 2 • Understand and segment the customer base . • Retain the most-valuable customers after finding out why they defect. • Win back valuable ex-customers. • Develop the loyalty of current customer segments — use differentiated service according to need. • Improve the profitability of unprofitable customers. Communication Value-added Value-tailoring Brand Value

8. CRM Strategy Is an Element of Business Strategy BUSINESS STRATEGY BUSINESS MODEL BRAND PROPOSITION: The Company DNA OPERATIONAL STRATEGY HR STRATEGY MARKETING STRATEGY FINANCE STRATEGY IT STRATEGY R&D STRATEGY CUSTOMER STRATEGY PRODUCTION STRATEGY

9. The Brand Is the Company DNA BRAND PROPOSITION Unifies Internal Delivery Step No. 2: State the Culture: What internal capabilities are needed to deliver the value? Step No. 1: Define the Vision What and who are you? What value will you deliver? Promised Customer Experience Step No. 3: Express the Image How will the the value of the brand be communicated?

10. Corporate DNA Example: Mickey’s Signature

11. Mickey’s Signature No. 2

12. One Mouse, Different Signatures

13. Corporate DNA Consistency

14. Vision: Market Position Market Definition and Audit SWOT Analysis Target market segments Objective for each market segment: Penetration, Development, Maintenance and Productivity Measures: Market share, brand equity and market penetration Based on product life cycle Vision: CVP Customer Definition and Audit Capability Analysis Target customer segments by value Objective for each customer segment: Acquisition, Development Retention and Efficiency Measures: Satisfaction, loyalty, cost to serve and employee satisfaction Based on the customer life cycle Interweaving the Marketing and Customer Strategy Marketing Strategy Customer Strategy How do we take advantage of market opportunities and mitigate competitive threats? How do we get closer to thecustomer to deliver value tothem and create value for us?

15. Relationship Investment Guide Well above average 5 22 Hygiene Factors High Motivators Invest Maintain Efficiently 4 2 Above average 3 Claimed Importance Average 12 Below average 19 Poor 9 Hidden Opportunities Overspending Low Real Relevance High Low Study/Invest Trim

16. Customer Asset Audit Invest to Invest to Win Damage Protect Over Limitation Counter Invest to Win the Careful Competition Build Opportunity Management Manage for Build Manage for Manage for Profitability Selectively Revenue Revenue Manage for Manage for Manage for Consider Profitability Profitability Revenue Divesting Customer Potential (Value to Company) Protect Key Position Large share of wallet Some potential Transactional Highly Secure Vulnerable Fragile Secure Strength of Relationship (Value to Customer)

17. Real Examples of CRM Objectives • Return retention to the industry average and then improve to 3% • Measure the propensity to churn, expected lifetime value, and propensity to accept discounts and special marketing offers • Empower CSRs to decide who to keep according to specified criteria • Establish who end users are to build broker loyalty • Build a customer information culture to increase customer advocacy • Improve communication with customers/partners • Reduce staff turnover in call center • Introduce an effective global sales process • Find CRM initiative with highest payback and use to fund others • Retain our most valuable customers for revenue in the short term • Establish our customers’ optimum potential for selective development • Acquire strategically important customers in the new market • Expand cross-selling opportunities with supporters

18. CRM Metrics Profit Growth Market Share Cost Ratios Corporate Revenue Growth Customer Loyalty Margin Growth Example Key measures to support corporate financial and market goals Customer Lifetime Value Acquisition Risk Profile Strategic Development Customer Profitability Staff Satisfaction Retention Cost to Serve Example Key measures for monitoring the customer strategy Operational Cross-Sell Ratio Complaints Response Levels Recommendation Levels RFM Measures NPD Times Example Channel-Specific Measures Conversion Ratios Staff Turnover Key measures for monitoring the customer processes Staff Qualifications Response Times Call Answering Times Infrastructure Staff Sickness Customer Data Accuracy “Do Not Mail” Markers Example Key measures for monitoring efficiency and inputs

19. CVP Product Price Communication: public relations, advertising, sales, promotion, merchandising and direct marketing/messaging Channel CVP by segment How customized for each segment How differentiated for each segment Service/customer care by customer segment/life cycle Contact by life cycle/segment How media and content is personalized in communication for each segment Which channel is used by which segments for what (touchpoints) Management by segment: who, where, how CRM Strategy — Tactics Marketing Strategy Customer Strategy

20. Tactics for Retention and Building Loyalty • Reward schemes • Incentives • Cross-selling • Product bundling • Product & price • Brand values • Contact • Customer care • Contracts • Products & price Loyalty Scheme CRM Strategy Attitude and Behavior Behavior • Rational value • Creates stickiness • Makes sales • Retention, attraction,increased sales • Real loyalty? • Rational and emotional value • Creates loyalty • Creates relationships • Retention, attraction, customershare, recommendations,lower costs and wider margin

21. Customer Care:The Social Bond That Binds Anticipate the Crisis Build Communities Understand & Empathize Collaborate & Involve Advice & Information • Improve perceived service and you improve loyalty. • The customer does not care how much you know about them, until they know how much you care. • Stop thinking you are servicing a product — service the customer. • Feeling recognized, valued and cared about is the basis of the bond that is loyalty.

22. Relationship Models:Resource Allocation by Segment • Upward movement of wallet share is a trigger for additional resource. • Greater customer spend rewarded with greater levels of account management. Relationship Manager Personalized Self-Serve One:One to Few:One Key Account Teams >50% One:Few to One:One Company Share of Wallet 10 - 50% One:Many Dedicated Hunters < 10% One:Few Contact Center Medium High Low Market Value of Customer

23. Marketing StrategySupport Human resources IT Knowledge — research Customer StrategySupport Skills and competencies Internal communications Organization IT infrastructure IT architecture Research, analysis and planning Knowledge management Customer data strategy Business process architecture CRM Strategy: Capabilities

24. Recommendations • Establish your market position against requirements and competitors. Define a “value,” different, customer proposition • Make the brand the company DNA to deliver the proposition • Segment the market for share of wallet and lifetime value • Establish the motivating factors for customer loyalty: Where do you need to excel and where can you cut cost? Any gems? • Value your customer base potential — not just on current profit. • Develop skills in the new areas of customer relationship building — service, contact strategies and relationship models. Understand what technology enables you to do.