Customer Relationship Management

1. Customer Relationship Management

2. Facts about customer relations • Cost of selling to a new customer is six times as high as to existing customer • Odds of selling to a new customer = 1/7 to an existing customer = 1/2 • Each dissatisfied customer tells 8 to 10 people • 70% of dissatisfied customers will do business again if they feel their complains are handled well • 1 extra % of customer retention can boost turnover by as much as 15% • Many companies don’t have proper customer support • CRM = doing things right + actively seeking new business

3. retention Impact of a 5% Increase in Retention Rate on Customer Net Present Value

4. CRM definition • “customer centric” approach • Business philosophy which places the customer at the heart of organisations’ processes, activities and culture • IT is the tool to implement this “a sales and service business strategy where the organisation wraps itself around the customer [such that] whenever there is interaction, the message is appropriate for that customer” Curley, B. (1999) “Profiting from the relationship” Insurance and Technology, 24 (3), pp. 34-38.

5. Why CRM? • Customers don’t care about their suppliers’ internal difficulties • They want to be able to access product and services at the least cost • They want a single point of entry • Existing loyalty programmes are a start but don’t go far enough • Variations in the cost of selling to different customers => CPA

6. A bit of history • In the 50’s mass marketing • In the 1970’s market segmentation • In the 1990’s personalised marketing • Since: relationship marketing • acquiring customers is far more expensive than keeping them • knowledge about individual customers is required to guide highly focused marketing strategies • More intense, global competition • more fragmentation of markets • high level of product quality • The Internet reduced switching costs in many industries • Shift in power from the seller to the consumer

7. The 3 phases of CRM • Acquiring new customers • Promotion / Advertising • Better products and superior service • Enhancing profitability of existing customers • cross-selling and up-selling (one stop shopping) • Provision of additional services • Generally re introducing switching costs • Retaining most profitable customers • best customer list • customer profitability analysis • make best offer to best customer - personalisation

8. Novelty of the CRM Approach • Complete and integrated solution - breaks down the walls of conventional functional areas • Most companies are good at one of the 3 activities - CRM concentrates on all 3 • Overall corporate objective of providing customer satisfaction • Data collection aspects • Data mining aspects • Dissemination aspects • Offer single point of entry for customer queries

9. Survey of CRM initiatives • 80% of CRM initiatives are quick win projects • Important to have clearly define goals • Reduce call numbers • Produce more finely tuned products • Sell more unit per deal • … • CRM must be profit making • 50% of top 500 firms said lack of internal collaboration is an obstacle • Only 30% of companies have metrics in place

10. Clear obstacles • Lack of collaboration • Outright conflict between departmental needs • Fragmentation of existing customer facing processes • Most unstructured in most firms • Idiosyncrasy of processes will lead to scope creep • Customer frustration may lead to excessive demands

11. Develop common goals centred on the customer • CRM project is as multi-disciplinary as ERP project • Data also comes from disparate systems • Using key scenarios is supposed to help • Potential for conflicts must be removed • Involve trusted customers when applicable • Do genuine fact finding on how customers are dealt with today • Process mapping • rules and procedures • Case studies

12. Mapping process change • Integration of customer content • integration of customer contact • integration of end-to-end CRM business processes • Integration with ERP • Integration of activities never computerised before

13. ABC of data mining in CRM • Affinity analysis: odd / unexpected patterns in customer behaviour. • Clustering sorting customers into similar groups based on certain attributes or behaviours. • Predictive modelling uses historical purchase data plus information about promotions to predict future behaviour. • Segmentation like clustering; but used to support the development of tailored offerings • Tapscott: help to perform ‘surgical strikes’ instead of ‘carpet bombing’

14. Data Issues • As with ERP Bad data quality will be a problem • Data stewards • Building up to a DQM strategy • Dynamic process of tidying up live data • Interface into existing systems • Front and back office • Multiple communication channels with outside • 360° view • New data collection mechanisms => increased cost

15. Metrics • Sales analysis • Returns • Warrant service requests • Calls / complaints • Time to closure • New contacts generation • Sales conversion • Customers retention • Campaign tracking • Pricing strategy changes

16. Staff buy in • Even more so than for ERP, CRM requires staff buy in. • One bad experience is enough • Communicate on what is being sought • And have clear performance measurements • Create programmes to show that it matters • Monitor performance and overall effect over the long time • Measure €€ returns regularly

17. Integration of customer content • Transactional data • “Human” data (obtained in conversation) • Try to minimise the cost of collecting such data • Web services are now a mainstream channel • Intranet / CRM systems provide a platform for distribution on a wide basis

18. Integration of business processes • Sales and Services primarily • Accounting • Logistics / shipping • + all intermediaries downstream • Distributors • Experts in position to prescribe or recommend • Contractors supporting the provision of services • Eg: BGE

19. Integration of customer contact information • All channels • 24 / 7 • Available to all CCP (customer Contact Personnel)

20. Infrastructure for CRM Customers Telephony Internet Face-to-Face Mail Fax Customer Interface Infrastructure Front Office CRM Processes Marketing Services Sales Legal HR Finance R&D Servers Storage Data Mining and Analysis Back Offices and External Systems Data Warehousing

21. Business Intelligence • Making sense • Identifying problems • Understanding cause and effect relationships • Anticipating future changes • EIS / OLAP / dashboards of info • + datawarehouses and data mining

22. Customer contact point • Call centre (70% of all contact points) evolving into a selling channel • Goals of the contact point • Listening to the customer • creating higher levels of loyalty • providing a better experience • CTI • Hidden cost => increased in-coming calls • But automation means complete framework for measuring performance • Counter measures can be derived from findings • Email management provides further automation

23. The Internet • Better economics • Average cost of banking transaction = €1 / 54 cents with call centre and 13 cents on web site. • Unlimited connectivity (in theory) • Seamless data collection • Integration with SCM • Event driven built into services / automated • click-for-help • Significant risk in integrating with back end

24. Building the case for ROI • Will crm improve our ablity to generate revenues? • Will it improve decision making? • Will crm improve customer satisfaction? • Will it improve quality of service? • Will it improve quality of products? • Will it reduce operational costs? • Will it improve employee satisfaction? • At least will it not decrease it?

25. Paradox of productivity gains Amongst other things, this shows the need for METRICS

26. Key decisions for ROI • What costs must be absorbed? – see lecture on TCO for ERP • Eg: infrastructure costs • Hardware costs • What benefits must be measured? • What is the true impact of the software? • Choices: sales growth, customer growth and how they will be weighted (so they can be converted into € figures) • Also consider tradeoffs (things that could not be done without the software)

27. Knowledge management • Tacit knowledge • Explicit knowledge • Sales area dominated by the former • CRM is an attempt to codify knowledge and store it for easy access • CRM is also an attempt to create new knowledge • Finally CRM is an attempt to built knowledge into the business processes of the firm • Event driven marketing / cross selling / up selling

28. A study of CRM in Ireland Eircom: old monopoly market opened to competition in Dec. 1998 AIB: interesting because no CRM specific platform but CRM unit Irish Life: merger of Irish Life plc and Irish Permanent plc in April 1999 and Acquisition of TSB in 2001 Insurance: over 1.56 million customers (41% of the Irish population) Annual premium income is in excess of €600 million. Over 2.5 million customer contacts re forty thousand insurance claims per year

29. Eircom • Problems • poor system integration • paper based system used for order tracking and diaries • no customer contact history. • technology limited and inadequate • limited segmentation analysis and campaign management. • Legacy order management systems outdated • systems consisted of a number of disparate information systems with no integration between the front and back offices. • Front office staff had to deal with multiple desktop applications,

30. Eircom solution • Siebel CRM (1999) to manage corporate clients • GT-X system (1998) for the mass consumer segment • Difference: Siebel geared towards relationship / GT-X geared towards transactional efficiency • Also: total integration between front office, customer information database, the data warehouse and back office systems • Creation of CRM department (half IT / half business) in charge of all related projects

31. AIB • CRM unit has end-to-end responsibility for the delivery of CRM projects • Mosaic of in-house systems • the client view system • up to the minute customer information, contact history log and customer contact diary • the segmentation system • groups customers based on demographics, and assigns specific customers to relationship managers • the campaign management system • For both current and potential customers • Replaced a manual system • Never upgraded legacy systems with “proper” CRM platform because functionality was already there “So it doesn’t have the full functionality and nice bits offered by CRM software packages, it has the core bits and all the other bits are being added and tagged on” (CRM Consultant AIB).

32. Irish Life - Problems • two distinct processes. • In house semi-automated point of sale (POS) system using Visual Basic™ • not structured in terms of the information that it held or of the processes involved. • still involved paper-based processes which were time consuming and ineffective. • Separate process for customer campaigns • Eg: mail shots • not automated • very hard to target the right customers with the right information • Ineffective and hard to gauge results

33. Irish Life - Solutions • Complete Siebel CRM application used by some selected actors – sales department • In parallel, developed new POS system able to generate personalised service • Integration means sales personnel can prepare meetings with clients • Also used for diary keeping / scheduling

34. Insurance - problems • Lost monopoly in 2001 • Started customer retention programme • But CRM big bang “impractical” • IT systems disparate with minimum linkages between them. • integrating these involves contrived data re-structuring • changes required would be so great it would involve ‘starting all over again’. • Piecemeal approach followed – over next 5 years

35. Insurance - solution • Norkom’s Alchemist Customer Interaction software • predictive application models • analytical tool used to build customer models • data mining • propensity modelling. • Also facilitates the collection and analysis of customer information • Creates intelligence to increase the effectiveness of marketing campaigns. • driven by a data warehouse that extracts and stores data from the operational systems. • Sales people only initially • Then extension to marketing and services

36. Summary – drivers of projects

37. Summary – Goals and Objectives

38. Summary - priorities

39. Eircom success

40. Summary – problems encountered

41. Conclusions • Complete range of CRM projects • From complete to piecemeal approach • From vendor driven to in-house development • Benefits are obtained in all cases, but more so when CRM strategy is complete