eCRM: 1 to 1 Marketing

eCRM:1 to 1 Marketing Jason C.H. Chen (陳周宏教授), Ph.D. Professor of MIS Graduate School of Business Gonzaga University Spokane, WA 99258, USA chen@jepson.gonzaga.edu

Presentation Outlines • Why are companies moving to CRM ? • What’s in it for you? • 1 to 1principles and best practices • Other challenges • Where do you go from here?

E-BUSINESS Demands Products What they need/want? How many they need/want? When they need/want? How to reach them? BUSINESS FOCUS Customer centric • SCM • CRM • BPR • ERP Who ______ are the customers? _______are the customers? Their __________ habits. Where • purchasing

eBusiness Key Concepts • eBusiness • The strategy of how to automate old business models with the aid of technology to maximize customer value • eCommerce • The process of buying and selling over digital media • eCRM (eCustomer Relationship Management) • The process of building, sustaining, and improving eBusiness relationships with existing and potential customers through digital media

WHAT HOW eBusiness Processes WHY Customer Relationship Redesign Business Processes (Outside-In) Applying Technology

Formula for Customer Benefit • Customer Benefit (cb)= + v(value of market offering) + b(value of brand) + r(value of relationship) - c(cost of market offering) - t(cost of time) • The v, b, r, c, and t vary across customer segments and individual customers. • How to maximize cb? • eCRMis one of the strategies to maximize cband • Mobilization

Customer Relationships Have Become the top priority for CEOs Worldwide 1. Relationship with Customers 2. Cost Competitiveness 3. Effective Use of Information Technology 4. Managing Change 5. Shareholder Value 6. Revenue Growth 7. Industry Restructuring 8. Globalization 9. Value-Added Supplier Relaationships CRM has become the #1 priority for CEOs … Figure 1:Top Executive Priorities Ranked By Percent Citing Issue As “Critically Important”

CRM has become the #1 priority for CEOs … Acquisitions 6% Alliances 7% Deeper Penetration 46% New Customers 19% New Products 22% Source:The Alexander Group,Incorporated

Why the shift in focus to CRM? • Most companies have already attained operating efficiencies and optimum productivity through past efforts of : • Downsizing • Strategically outsourcing non-value added actives • Business Process Reengineering • Implementation of FRP System • Products in many industries have become commoditized forcing companies to sacrifice margins for sales volume

Presentation Outlines • Why are companies moving to CRM ? • What’s in it for you? • 1 to 1 principles and best practices • Other challenges • Where do you go from here?

And oh, check these numbers… • Cutting customer defections by just 5% has the effect of boosting profit between 25% and 85%.* • Today ,the average business is losing between 15-35% of its customers annually** • 69% of these defections are due to a poor sales or service interaction with the customer** *Harvard Business Review **Forum Corporation

USA Companies … • Every (Years) Lost -------------------- ---------------- • 5 • 4 • 1 • Customers ½ _________ • Employees ½ __________ • Investors ½ __________

Other reasons why you need 1 to 1 • Increase customer loyalty • Get more business per customer • Become less dependent on price • Increase customer satisfaction • Save time • Speed up your sales cycle

Business (Our) Objectives • 1. Get customers • 2. Keep customers • 3. Grow customers The only difference is how firms do this

Share of Market vs. Share of Customer Customer Needs Satisfied Share of Market MassMarketing Customers Reached

Share of Market vs. Share of Customer The longer the bar, The higher unit Margins will be Customer Needs Satisfied 1 to 1 Share of Customer MassMarketing Customers Reached Share of Market

In Four Words … customers different • Treat • differently • Personalization

A Lasting Competitive Advantage The only true competitive advantage comes from the understanding you have of your customer that your competitors don’t. This information has to come from the customer (_________ !?) Big Data The more effort customer invests, the grater their stake in making relationship work. Going to a competitor  ____________ the relationship Reinventing

Presentation Outlines • Why are companies moving to CRM ? • What’s in it for you? • 1to1 principles and best practices • Other challenges • Where do you go from here?

Summary of 1to1 Strategies Identify Differentiate Interact Customize Customer: -Identities -Contact info -Transactions -Interactions -Give the right people access when they need it One view of the customer: Integrated customer data Value: -Actual (current profits) -Strategic (potential value) Needs: -Individual -Segment All customers are not created equal Learn more: -Needs -Value -Preferences -Behaviors Never make a customer tell us the same thing twice Customer Need Set: -Product -Service -Delivery -Bundles Use your knowledge about customers to customize

Identify–What information do you need? • Goal: obtain more and better information about a • greater number of your customers… and use it to • build relationships • Name, rank, serial number, phone, fax, email • History, transactions • Customer needs - Business objectives - Complaints - Choice of communication channel - Habits and preferences • Revenues, profitability, LTV (loan-to-value ratio) - Potential value - Lifecycle stage Source:Insight Technology Group,1998

Where is the customer data? Where is it? Who has access? Who manages it ? Who owns it? Sales Marketing Operations Internet Customer Service Collections Department OtherProviders CallCenter

How do you manage it ? • Make sure individuals are recognized at all contact points • Link customer interactions over time, across all divisions • Give the right people access to this info at the right times • Figure out who“the customer” is when the “customer” is an enterprise

Charles Schwab creates links • Broker access to complete customer account(s) including business and personal links • Broker sees account the way the customer sees the account • Picks up where last action/interaction left off • Integration across all channels

“One Customer” view is key Integrate customer information across the value chain Customer A Customer A Customer A Customer A Customer A Marketing Call Center The Web Sales Force What IT is needed to achieve this goal? Ans: Integrated database

Differentiate • Customers have different values to the enterprise • Actual value • Strategic value=share of customer, not market • Customers have different needs from the enterprise • Strategy? • Market segmentation, • 80/20 Rule

Basis of customer differentiation • Differentiate them by their NEEDS • What the customer needs, not what you want to sell • Some needs are apparent through transactional records

Interact– Interaction strategy Goal: Generate more customer feedback less expensively … and use it as a competitive advantage- From expensive sales people to call center … to the even less expensive Web site- Identify all contact points“We identified all guest contact points, and the employees most likely to be involved. It was eye-opening. No one realized how many opportunities we were missing.” Patrick Kennedy, GuestNet CEO- Generate feedback, not just messages- Engage your customers in an ongoing dialogue that enables you to learn more and more about their particular needs, priorities, and interests …

Rules of interaction • Conversation is a consensual act • Neither party in control • Feedback results in behavior changes by everyone in your organization • Each interaction picks up where last left off – across al channels • Don’t ask too much: use “drip irrigation”

Benefits of Interaction • Uncovers • Needs (so you can sell more) • (Dis)Satisfaction • Risk of defection • Complaints • Makes you smarter about the customer each time • Helps build barriers to exit

Touch point integration • Integration of all customer contact points is becoming increasingly important as customer information migrates to the Web … Beyond the Phone

Interaction Using Call Centers • Measuring the efficiency of call centers: • Hold times and call abandonment rates • Measuring their effectiveness: • Ratio of complaints handled on first call • Percentage of inquiries generating leads • Share-of-customer data gathered What are the implications when you off load support the web? How does the call center change Review the metrics list – which metrics are efficient vs. effective? Which ones support Learning Relationships?

Capital One – The customer call • Analyze data on • 7M households • Also analyze related • data on millions of • Capital One customers • Pick from 50 options • on whom to notify Customize Identify Interact Differentiate • Remember and pass • along 25 pieces of • info related to this • particular customer • Prepare service rep • to make customized • product offer at end • of call • Predict what this • individual may want

Customize • Reward customers for collaborating with you by tailoring whatever you possibly can for them: service, fees, billing, delivery, terms, product…- Low cost- High efficiency- Based on individual customer preferences

How mass customization works • Production and service delivery processes are modularized • Component elements or services are mass produced • Configuration is digitally controlled • Finer granularity of modules leads to larger number of possible “fits” • Whatkind of strategic resource issue? _________ Combinable

Mass customization of a credit card offering Design: Golf Nature NASCAR Art Sports Team School Annual Fee: None $10 $15 $25 $35 $50 NASCAR No Annual Fee APR: 8% 10% 12% 14% 16% 18% 12% APR Billing Org. By Category Purchase Protection Billing: Weekly Bi- Weekly Monthly Bi- Monthly Org. by Date Org. by Category Ancillary Services: Travel Club Dining Club Card Reg. Credit Ins. Accident Ind. Purchase Protectior …custom configurations (7776 unique options) The more modules,the greater your ability to customize. Standardized modules are combined into …

Presentation outlines • Why are companies moving to CRM? • What’s n it for you? • 1to1 Principles and best practices • Other challenges • Where do you go from here?

Infrastructure Change hurts … • Start small • Expand gradually, culture changes take time • Don’t forget about training • Hold people accountable for the right things • Measure and reward the right things!

Sales • Identify and track the right infor • - Sales forces automation • Differentiate • Spend the right time and effort on MVCs, MGCs, and BZs • Interact • Drip irrigation, never asking the same thing • Customize • Change behavior based on feedback

Call center • Move from cost center to profit center • Sell more to customers (Increase SOC- "Servoce Organization Controls") • Support for complicate products • Ancillary services (Increase loyalty) • Pre-qualify leads • Low-cost market research • Improve Complaint discovery and tracking Practice IDIC ("Infinite Diversity in Infinite Combinations")

1to1 web site • Requirements:- Identify and remember visitors (Amazon.com)- Differentiate visitors on each visit- Does this fast!- Tracks and interprets clickstreams- Remembers all this!- Customizes based on individual preferences

Top 5 Reasons CRM Efforts Failfrom the Home office in silicon valley 5. There isn’t a wealth of experience in this area. No one has got it down to a science (WebVan) 4. The inability to really effectively implement strategy - even if you have the right strategy, process, and rules coding (formulation vs. implementation) 3. The company thinks they understand strategy and process well, but really don’t. 2. No strategy, tactics, business rules or processes in place. 1. The company has processes but they are bad processes (like any automation, CRM tools make good things better and bad things worse _______ ). faster

Presentation outlines • Why are companies moving to CRM? • What’s in it for you? • 1to1 principles and best practices • Other challenges • Where do you go from here?

How you can make an impact • Get senior management buy-in • Encourage them to establish your multi-disciplinary team • Develop short and long term plans • Help them start Small, “Light Campfires” • Bring in Strategy/Change Management/Training coaches • Help ”decode” IT and marketing Needs and Languages • Evaluate and prioritize projects. Look for a couple of “Quick Wins” • Document success, share across the company (best practices) • Start scaling the solution, Test, pilot, Test! • Improve on plans and keep going!

Cost-effective 1to1 • Differentiate by value • Roll out 1 to 1 initiatives • based on member value • 80/20 Rule Below zeros Number of members 1 to 1 Most Growable Members Most Valuable Members 20% of (valuable) members but they generate 80% or more of value Member Value

What should you do real soon? • Work on your database! • Ask one question at each interaction • Develop a strategy for your BZs • Figure out who you really want to do business with • Find out why some customers who are buying less this year • Make those touch point improvements! • Check out your VRU again • Improve complaint handling • Customize what you can, economically • Ask your best customers what you can do differently/better for them (DO IT)

Trend for Now and Future • Social Media Technology • Big Data and Data Mining • Market Basket • Target Market • Cloud computing • Others …

eCRM: 1 to 1 Marketing