A presentation on CRM by Dr. Lakshmi Mohan

6. 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

7. 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.

19. 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

22. 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

25. 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

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

27. 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

28. 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

29. 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

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

31. 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 ! ”

32. Two Dimensions of Competition Customer Needs Satisfied Customers Reached

33. Market Share Customer Needs Satisfied Customers Reached Traditional Marketing Diminishing Returns

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

35. 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.

36. 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

40. 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

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

46. 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 

47. 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.

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

50. 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.”

51. 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.

54. 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”?

56. 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)

57. 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 ?

58. 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

59. 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 !

60. 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

61. 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

62. 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

63. 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

64. 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.

75. 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

82. 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

84. 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

91. How It Hangs Together!

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

98. 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?