Outline

1
Outline

• Harrahs A CRM Success Story
• Cigna HealthCare A CRM Failure
• Learning from Failure BMC Software Case
• Data One Big Hurdle
• The Other Hurdle People Issues
• Build or Buy or Rent?
• What Works? What Does NOT Work?

2
Harrahs Entertainment- How It Outplayed the
Competition

• Strategy of Big Casino Operators
• - If You Build It, They Will Come!
• Created a fantasyland Las Vegas to attract
  customers
• Invested heavily in building costly must-see
  casinos offering a wide range of amenities malls,
  dazzling shows, etc
• Designed to appeal to a broader audience than
  simply gamblers
• Harrahs Strategy was Different
• - Expand Gaming Business Outside Nevada
  Atlantic City
• From 4 casinos in 2 states to 26 casinos in 13
  states by 2003
• Became the first nationwide casino business
• Saw geographic diversification as a means to
• Insulate the company from regional economic
  vagaries
• AND
• Provide the opportunity to attract new
  customers to the Harrahs brand

3
Harrahs Strategy

• 1. Strategic Focus Casinos
• Not Restaurants or Bars or Shows
• Belief that competing on the basis of
  billion-dollar facilities
  was NOT the most prudent use of capital
• Returns on such facilities often weaken when the
  novelty wanes
• 2. Build Lasting Relationships with Core
  Customers Slot Players for Sustainable Profit
  Growth
• Get customers to visit Harrahs regularly
• AND
• Spend more of their gaming money at Harrahs
• Increase Wallet Share

4
Harrahs Strategy

• 3. IT Investment to Create an Enterprise Data
  Warehouse AND Analyze the Data for
  CustomerTailored Marketing
• 4. Absolute Focus on Customer Service
• Customer Satisfaction.

Changed Harrahs from an operations-driven
company which viewed each casino as a stand-alone
business into a data-driven marketing company
that built loyalty to the Harrahs brand in ALL
properties.
5
Harrahs in 1998 vs. 2002

• 1998
• Expanded rapidly in the mid 1990s
• - as states such as Iowa and Illinois legalized
  gaming to raise tax revenues
• - But company was losing market share as rivals
  built newer and more opulent properties in each
  market.
• Revenue 1B
• Stock price Nose-dived towards 10
• 2002
• 16 straight quarters of same-store revenue growth
• Revenue Over 4B
• Stock price Pushing all-time highs at 50

6
The Bottom-Line

• Customers Wallet Share 42 in 2002 Vs. 36 in
  1998
• Each percentage-point increase in Wallet Share
  has coincided with an additional 125M in
  shareholder value.
• Once an also-ran chain of casinos, Harrahs has
  become the second-largest operator in the U.S.,
  behind MGM Entertainment, with the highest 3-year
  investment return in the industry
• Acquired in Spring 2004 Caesars Palace Casinos

7
What Harrahs Knows About You ...

• One afternoon, last May at the Rio Resort in
  Las Vegas.. as I moved from machine to machine,
  the computers at Harrahs office in Memphis,
  Tennessee, were collecting an astonishingly
  detailed account of each second I spent at the
  Rio
• how many different machines I had played on
  (nine)
• how many separate wagers I placed (637)
• my average bet (25 cents)
• the total amount of money Id deposited in the
  machines (350)

8
How Does Harrahs Get the Data?

• A personalized frequent-gambler plastic card with
  a magnetic stripe called Total Rewards that
  Harrahs slot players insert into machines while
  they play.
• One reward credit per 10 gambled
• to earn free trips, meals, hotel rooms, etc.
• Harrahs network links over 40,000 gaming
  machines,
• in 26 casinos, in 13 states
• Card data from each casino captured in a
  300-gigabyte transactional database about
  customer activity at all points of sale
• Transaction data fed into the enterprise data
  warehouse that contains information about
  gambling spends and preferences of 25M customers
  along with names, addresses and demographic data

9
What Does Harrahs Do With the Data?
It can do what its 25 million customers cannot -
consistently make good bets! Who is a profitable
customer? Who should receive which offers?. It
is also important to know when to pull away from
an investment in a customer who is not worth
it. From the moment I signed up for my Total
Rewards card in the casino lobby and filled in my
name, address, date of birth and drivers license
number, Harrahs had a pretty good hunch that my
long term potential was already low.I was a
32-year old man from the distant state of
Montana.did not fit the profile of a high-value
customer ! Age, gender, and distance from the
casino were identified as critical predictors of
frequency.
10
How Harrahs Uses the DataProfile the
High-Value Customer

• Who are these customers? Harrahs found that 30
  of their customers who spent between 100 and
  500 per visit to a Harrahs casino accounted for
  80 of company revenues and almost 100 of
  profits.
• Surprise NOT the gold cuff-linked
  limousine-riding high rollers that casinos fawned
  over many years
• Middle-aged and senior adults with discretionary
  time and income who enjoyed playing slot machines
  
• Did not stay in a hotel but visited a casino on
  the way home from work or on a weekend night out

11
A Perfect Customer ...

• A 62-year old woman who lives within 30 minutes
  of Kansas City, Missouri and plays dollar video
  poker
• Such customers have substantial disposable cash,
  plenty of time on their hands and easy access to
  a Harrahs riverboat casino (in this case, on the
  Missouri river in North Kansas City)

If we only observe her once in a quarter, its
likely that its because shes playing three or
four times a quarter at our competitors. So were
going to make an educated guess and market to her
as if she were a more frequent visitor, and well
let her confirm or disconfirm that. Then well
update the profile on what she does.
12
Customer-Tailored Marketing

• High-value customers are placed into 90 targeted
  segments, each of which receives custom-tailored
  direct-mail incentives to visit any of Harrahs
  26 properties.
• Customers who live far away from Harrahs
  properties typically receive direct-mail
  discounts on hotel rooms or transportation.
  Drive-in customers get food, entertainment, or
  cash incentives
• Most offers are time-sensitive, with tight
  expiration dates..
• to encourage visitors to either return soon
  or switch a visit from a competitor to a Harrahs
  property
• For each direct-marketing pitch, response rates
  and return on investments are trackedfuture
  campaigns are adjusted accordingly
• Every marketing campaign is tested first before
  launch

13
Who Gets the Free Steak?

• John Smith
• 33, Male, Lives Missoula, Montana, Distance 770
  miles
• Total Rewards Level Gold
• Plays Video Poker
• /Bet 25 cents /day 87.50
• /Visit 350 Visits/Year 1
• Predicted Life-Time Value Low
• Offers Direct Mail Coupons for Discounted Show
  Tickets
• Betty Rogers
• 62, Female, Lives Kansas City, Missouri,
  Distance 30 miles
• Total Rewards Level Diamond
• Plays Progressive Slots
• /Bet 1 /day 100
• /Visit 100, Visits/Year 7
• Predicted Life-Time Value High
• Offers Cash, Transportation, Free Meals, Free
  Lodging, Guaranteed Room Reservation, Valet
  Parking, Access to Harrahs Diamond Club

14
Use Customer Service as a Differentiator for
Treating Customer Differently

• Split Customers into Gold, Platinum and Diamond
  tiers based on estimated annual value
• Greater levels of service to Platinum and Diamond
  tiers will induce customer aspiration to earn the
  higher-level card

Example Our best customers wanted service
quickly they didnt want to wait in line to
park their cars or eat in restaurants, or check
in at the front desk. So we routed our customers
into three different lines which created a
visible differentiation in customer service. It
was essential for our customers to see the perks
that others were getting. Every experience in
the casino was redesigned to drive customers
to want to upgrade their
card.
15
Harrahs IT Investment

• Magnetic Card Readers Harrahs Total Rewards
  card readers are installed on all of the
  companys 40,000- plus gaming machines. The
  readers capture a customer ID number from each
  card, and a small LCD screen flashes a
  personalized greeting along with the customers
  current tally of reward points.
• Electronic Gaming Machines All gaming machines
  are computerized and networked. Each machine
  captures transaction data and relays it to
  Harrahs mainframe computers.
• Onsite Transaction Systems IBM-based transaction
  systems are located at each casino property they
  store all casino, hotel, and dining transaction
  data.

16
Harrahs IT Investment

• National Data Warehouse A Unix-based data center
  in downtown Memphis links all of the casinos
  mainframe systems and customer data. Customer
  history and reward-point tallies are passed down
  from this database to the onsite mainframe
  systems - which, in turn, relay the data to the
  card readers.
• Predictive Analysis Software Developed by
  Harrahs and software firm SAS, these programs
  produce nearly instantaneous customer profiles
  that allow the company to design and track
  marketing initiatives and their results.

17
Best Data-Driven Marketing Will Fail If Customer
Service is Third-Rate!

• 1. Measuring Customer Satisfaction is a MUST
• Customers who said they were very happy with
  the Harrahs experience increased their spending
  at Harrahs by 24 per year disappointed
  customers decreased their spending by 10 per
  year.
• 2. Training of ALL Harrahs Employees in a
  Certification Program To Deliver Excellent
  Service
• 3. Bonus Plan Rewards Hourly Workers for
  Achieving Improved Customer Satisfaction
• If a propertys overall rating rose 3 or more,
  each employee could earn 75 to 200 in 2002,
  Harrahs paid 14.2M in bonuses to
  non-management employees.

18
Best Data-Driven Marketing Will Fail If Customer
Service is Third-Rate!

• 4. Reward Depends on Everyones Performance
• If the valets scores were low but the steak
  house receptionists were high, the receptionist
  would check on the valet.
• 5. Bonus NOT Linked to Financial
  Performance of the Properties
• In 2002, one property had record-breaking
  financial results, but employees did not receive
  any bonus because their customer service scores
  were mediocre.

19
Food for Thought from Harrahs Approach

• Meeting budget at the expense of service is a
  very bad idea. If youre not making your numbers,
  you dont cut back on staff.
• Human resource management is critical, especially
  in a service business
• You cant deliver great service if the turnover
  rate is high. The absenteeism rate will be high.
  The managers who ought to be thinking about the
  customers are instead dealing with scheduling,
  hiring and training. The customer ends up
  mangled.

20
The Harrahs Lesson

• Harrahs bet against industry wisdom, moved away
  from the glitz and spectacle and, instead
  invested in a ground-breaking customer management
  strategy that has enabled the company to expand
  market share relatively cheaply in a business
  where most companies grow by building costly new
  properties.
• Competitors are trying to catch up. But Harrahs
  has got a formidable lead. Its systems, reserves
  of data and marketing-led culture will not be
  easy to replicate.

21
A Good Customer Data-Driven Strategy Is NOT
Enough - Effective Execution is Key

• Strategy must be championed at the highest level
  of the firm,
• not just within Marketing
• If I had come in as head of marketing, none of
  this would have worked. I needed the authority to
  get things done right across the company
• G. Loveman, then COO of Harrahs
• 2. People running day-to-day operations have to
  change their mindset and be customer-oriented
• We have a process of quarterly reviews of what
  each property has done. My predecessor would ask
  Did we build any new rooms? Did we finish the
  renovation of the hotel? Where is the hot dog
  stand? I never ask any of those questions. I
  never let them take me on a tour of the building.
  I ask What has happened to 100 and above
  customers who live in adjoining zip codes The
  whole company has become very focused on how we
  market.
• 3. Institute systems with carrots and sticks to
  focus on customer service by linking employee
  rewards to customer satisfaction.

22
Cigna HealthCares IT Transformation - A Case
Example of Bad Execution
1999 Launch of Ambitious IT Project

• Objective An integrated system for enrollment,
  eligibility and claims processing
• Consolidate and upgrade several antiquated (some
  dating back to 1982) back-end systems for claims
  processing and billing
• Integrate them with glitzy new customer-facing
  systems on the front-end

Benefits

• Customer service reps will have a single unified
  view of members
• Customers would get one bill
• Medical claims proceed faster and more efficiently

Project Cost 1 Billion
23
Cigna HealthCares IT Transformation - The
Result
Cigna CIO received the 20/20 Vision Award of CIO
magazine
January 2002 System went live

• 3.5 M members moved from 15 legacy systems to new
  system in a matter of minutes
• But migration did not go smoothly resulting in
  significant glitches in customer service

Bottom-line Fourth largest insurer lost 6 of
its health-care membership in 2002 from 13.3M
to 12.5M Net loss of 445M in the first 9 months
of 2002
Source CIO Magazine, March 15, 2003
24
The CEOs Confession At October 2002 Conference
Call with Investors
Unfortunately we have not executed well on
transformation. The cost is greater than
anticipated, much of the economic and service
benefits are yet to be realized, and
transformational shortfalls have led to service
shortfalls, which have led to lower new sales and
(customer) retention
Comment by CIO of Another Health Insurance
Company CRM is a very important business
solution. Our customers want better tools and
capabilities and product options, and theyre
driving us into this space. But theres a heavy
risk involved. How you connect CRM to the back
office and bring customers on board makes all the
difference. When you stumble, the very
credibility of your company is at stake
25
The Roots of Failure
1. Late Start of IT Transformation Project

• Cigna spent 7.6B between 1996 and 2001 from
  sales of noncore companies such as property and
  casualty insurance on stock buybacks
• What they should have been doing is investing a
  half or third of the money spent on repurchasing
  stock to improve IT systems

26
The Roots of Failure
2. Urgency to Implement New IT Systems

• Sued by thousands of doctors nationwide about
  delays in payment for patient care
• - Cigna paid a 300,000 fine to the state of
  Georgia and signed a consent
  order promising to reform its claims processing
  system which was the worst Ive ever seen,
  according to Georgias insurance commissioner
• Cignas sales team, in order to win large
  lucrative employer accounts in an increasingly
  competitive environment, had promised that the
  new systems would provide improved customer
  service and would be up and running in early 2002
• Cignas management was under pressure to cut
  costs after posting disappointing second quarter
  results in 2002- Anxious for the new systems
  promised cost reductions and productivity gains
  to enable laying off 3,100 people and limit hires
  to 1,100 a total reduction of 2000 positions.

27
An Overview of the IT Project

• Had to build an entire AS400 infrastructure from
  scratch to support the two main platforms for
  claims processing Power MHS software which was
  already on a few AS400 computers and ProClaim
  software still running on IBM mainframes
• We had to develop our own wrapper
  architecture to connect these two platforms and
  integrate claims eligibility on the front-end
  with banking and billing on the back-end. To do
  that we had to completely re-engineer the
  back-end systems
• Most of the architectural work done in-house but
  hired Cap Gemini Ernst Young (CGEY) to help
  implement the change management and business
  processes involved
• CGEY also worked with Cigna HealthCare to develop
  and implement new customer-facing applications
  the CRM system

28
Cignas CRM System
Objectives

• Customer Self-Service
• Enable members to enroll, check the status of
  their claims and benefits, and choose from
  different health-plans all online
• Unified View of Members to Customer Service Reps
  
• Provide the reps a full history of the members
  interaction with the company when a member called
  with problems or questions

Software Bought Two Packages

• Siebel software to handle call center functions
• Computer Sciences package for claims processing

29
Implementation Process

• Began moving members to new systems in 2001 but
  in relatively small numbers 10,000 to 15,000
  people at a time there were minor problems that
  were dealt with but nothing major.
• At the same time, began laying off customer
  service reps as part of a planned consolidation
  of 20 primary and specialty service centers into
  9 regional centers
• Rationale Expected new IT system to deliver
  huge gains in productivity from automated claims
  processing and customer service.
• Cost of Reorganization 33M in severance for
  the 3,100 laid-off employees and 32M to build
  the new regional centers
• January 2002 Moved 3.5M customers in one fell
  swoop
• problems erupted immediately

30
A Migration to Nowhere! - Customers Suddenly Had
Trouble with Coverage

• In one case, Cignas systems could not confirm
  health coverage for some new members for several
  weeks
• Workers at another company effectively lost
  coverage when their membership information would
  not load properly into the new system
• Cigna issued member ID cards with incorrect
  identifiers.
• - Prescription icons were missing
• Result People could not get their prescriptions
  filled at their local drug stores

Morgan Stanley analysts heard about these snafus
in late January 2002 and promptly downgraded
Cignas stock
31
Call Centers Besieged by Calls - No Help However!

• Lay offs resulted in not enough call center reps
  to handle the load
• - people waited on hold, and waited
• No help when they did reach someone, since the
  newly hired reps had not been adequately trained
  on the CRM system
• You can have the best system in the world, but
  if you have people with relatively little tenure,
  youre not going to get the best service.

Cigna has since hired back a number of reps it
laid off!
32
Cignas Mis-Steps in Execution

• Converting data from back-end systems to CRM
  systems
• is NOT 1-2-3
• - Data has to be cleaned and filtered in order
  to be understandable to customer service reps
  taking calls and members seeking information
  online
• When you take data from the back-office system
  that was built to process claims and expose that
  data to the front-end, it starts looking funny
  for example, compressing the 9-digit zip code to
  8 to save space on disks and transferring that
  data as is to the front-end makes your company
  look awkward.
• 2. Rush to go live resulted in the Cigna team not
  having time to do a very thorough volume testing
  or end-to-end testing.

33
Cignas Mis-Steps in Execution
3. CIO of Cigna Corp., the parent company, blames
the IT staff of Cigna HealthCare and the system
integration consultants. The business
divisions had autonomy, and you cant
second-guess the people on the ground every day.
The business unit was working with a name-brand
systems integrator and they were not knocking on
the door saying, Dont go live, dont go live.
Can you truly expect the corporate CIO to have
more visibility into the day-to-day workings of
whats going on in that project than the people
in charge of it?
Big Issue Corporate Governance of IT in a
multi-division organization At the end of the
day, you have to strike the right balance between
central IT authority and strong functional
guidance thats aligned with the business
34
Post-Mortem Changes at Cigna

• CIO of Cigna HealthCare business unit and IT
  manager in charge of transformation were let go.
• Brought in more experienced managers to monitor
  the project
• Slowed down the pace of migration and shored up
  those processes around the conversion of customer
  data
• Instituted more thorough testing practices
• Moved 20 experienced application developers into
  the project
• Relying less on its systems integrator and more
  on in-house IT staff to manage the project

Project cost well over 1 Billion budget
35
Cigna Recovered from the IT Disaster!

• July 2002 Cigna was able to move additional
  members to the new IT systems without major
  incident
• Jan 2003 Successfully migrated another 700,000
  members
• Launched MyCigna.com, an online portal where
  Cigna members can look up their benefits, check
  on the status of their claims, retrieve health
  info and talk to nurses online
• Able to cut another 3,900 positions as part of a
  streamlining of Cignas sales force and medical
  management team
• New IT systems have enabled that downsizing by
  eliminating duplication in claims processing and
  billing
• Customer satisfaction surveys conducted by Cigna
  in late 2003 show that 83 are satisfied with the
  service they get compared to 58 earlier in the
  year

36
Lessons from Cigna Failure
1. Keep the project management in-house -
Even if you hire a consultant to implement your
IT integration project. Have experienced
project managers to monitor every stage of the
process. 2. Test, and retest, in a real
environment and end-to-end before going live
- Take your time moving data from the legacy
systems to the new platforms, and do it in
bite-size chunks so that you can fix glitches as
you go. 3. Make sure your back-end data is
cleansed and filtered for front-end use -
When it comes to data migration, take nothing
for granted.
37
Lessons from Cigna Failure
4. Bring in a focus group of customers -
After you've tested the system with your sales,
marketing and customer service reps, go back and
redesign the front end so that customers can
actually use it. 5. Train and retrain the
customer service reps on the new systems 6.
Don't expect productivity gains for months
after the new platforms go live - Don't
make business decisions based on anticipated
projected savings or gains. Wait to see if they
materialize.
38
CRM Hot Area for IT SpendingBut A Big
Challenge to Implement

• CRM involves a radical cultural shift that
  reshapes a companys sales, marketing, and
  customer service
• Unfortunately, it doesnt 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

39
Learning from Failure - Case of BMC Software

• Succeeded the third time after two failed
  attempts
• What Went Wrong?
• No Customer Strategy - CRM focused on
  performing processes faster
• Top Management Involvement - Not much!
• No Efforts to Get Buy-In from Employees -
  Believed that software would sell itself
• No Attention Paid to Required Organizational
  Changes

40
The Third Time - BMC did it Right!

• Project Headed by VP of Sales for North America
  - Supported by Manager of Marketing Programs
• Defined the CRM programs requirements with the
  help of 175 employees, who served as the
  early champions
• Communicated the benefits to employees
• Showed how the CRM system would help the sales
  force to achieve its targets
• Rolled out the CRM program in stages to
  capitalize on early wins - also, reduced risk
  of any problems affecting the entire company

41
Murphys Law for Data

• The Data You HAVE
• Is NOT
• The Data You WANT
• Is NOT
• The Data You NEED

Data problems are more difficult to solve than
hardware and software problems.
42
Gaps in MIS Data - An Old Problem

• Citibank
• We found that management didnt even have a
  good profile of its market and customers. It
  didnt really know in summary form what (its
  position was) with respect to discrete market
  segments There was very little account
  profitability and not even market segment
  profitability information.

General Electric Information on orders, sales
and margins are of maximum value when tied to
meaningful market segments. And segment-based
data are of limited use to finance, hence the
common misalignment problem between finance and
marketing.
43
A More Serious Problem . . .Data That is
NOT Available

• Soft Data relating to ...
• Customers Buying Process
• Reasons for Infrequent Purchase
• Reasons for Defection
• Quality of Customer Support
• Who Should Collect This Data ?
• People at the Customers Touch-Points
• . . . Field Sales, Telesales, Service,
• Call Centers, Storefront, . . .

44
How to Get Soft Customer Data ?

• 1. Careful design of the form to collect data
• Keep It Simple
• Minimize Text Data
• Use Check Boxes, Rating Scales
• 2. Train the Data Providers
• 3. Motivate the Data Providers
• To get good quality data

45
Data Management Issues

• Development of Relevant and Clear Data
  Definitions and Coding Standards
• Streamline Procedures for Data Collection and
  Flow
• Eliminate unnecessary paperwork
• Ensure timeliness of data
• Assign responsibility and authority to a specific
  individual The Data Administrator
• A demanding job
  for which appropriate
  rewards must be given

46
Data Quality The Cornerstone of CRM
Inaccurate and low-quality data costs US
businesses 611 B each year in bad mailings and
staff overhead alone More injurious than the
unnecessary printing, postage and staffing costs
is the slow but steady erosion of an
organizations credibility among customers and
suppliers as well as its inability to make sound
decisions based on accurate information.
Mission Statement of Cullen/Frost Bankers (an 8
B financial holding company in San
Antonio,Texas) More than 98 of our companys
assets and those of our customers are managed by
data and information and less than 2 are in
the form of cold hard cash. Just as we are
careful and meticulous in managing cash and
negotiables, we have a duty and obligation to
exercise a high degree of care with the data that
is the basis for customer relations and
decision-making.
Source The Data Warehousing Institute Report,
2001
47
Data Cleansing- A Must When Creating the CIF

• The Problem
• CIF requires data from a disparate set of
  databases, located in various parts of the
  enterprise containing data of varying ages
  collected from various sources and channels, and
  stored in a multitude of different architectures
  and platforms
• Ex Shell Exploration and Production took 7
  months to map data from 27 data sources in a 450
  GB data warehouse, using a tool from Kalido Ltd.
• Every system has its own internal set of codes.
  Going back and cleansing the data in those host
  systems wasnt an option. It would have taken
  too much time and been too expensive. Corporate
  politics was not too bad because no single
  business unit lost control of its data. And now
  they all contribute to a greater understanding of
  the company as a whole. Once the concept was
  proved, we had pressure from the top to integrate
  other applications as well. They could see
  themselves what information they could now get
  and how powerful it is.
• Source Computerworld, Apr. 15,2002

48
Cleaning House An Action Plan

• Determine which types of information must be
  captured
• Form a data mapping committee but keep it
  small or risk never reaching agreement
• Find mapping software that can harvest data from
  different sources such as legacy applications, PC
  files, HTML files, unstructured data sources and
  enterprise-wide systems (ERP)
• Start with a high payoff project inside a
  business unit that is a big revenue generator for
  the company
  - you will get the cost
  justification for the buy-in from the top
• Create an ongoing process for data hygiene - to
  keep the data clean.

49
Extracting, Transforming Cleansing Customer
Data- 80 of Firms Underestimate Time
Resources

• Example
• Problem Poor quality of customer master data in
  the ERP system of a manufacturer - a subset
  of large customers was labeled with an
  incorrect industry classification code.
• Result Overlooked in market segmentation
  analysis performed by the Marketing dept. -
  this customer segment received no
  promotions, which would have generated an
  estimated 5M in revenue within one year.

Good data quality does not drive value in and of
itself but it is the means to achieve high-value
benefits. Although data quality maintenance is
not the front-facing functional module in a CRM
project, it is a necessity to get value from the
CRM investment.
Source Gartner Viewpoint, Nov.29, 2001
50
The Politics of Data- Most Vexing Problem

• Information Power
• Who has access
• to What Data ?
• The politics of competition within the
• company is a real obstacle to developing a
• common, shared CRM database.

51
Process Change Is Another Hurdle

• Employees, especially touch-point personnel, have
• to change the way they work
• how they collect data from customers
• quality of the data collected
• how to customize the products and services
  offered to the customers
• Big roadblock for CRM implementation
• Why should a sales rep record details of his
  customer contacts because it doesnt help him
  sell more? He sees it as filling out forms just
  for the sake of filling out forms.

52
No. 1 Implementation ProblemResistance to Change

• Change in Process Typically Results in
• Changes in peoples jobs
• Changes in required skills
• Most Important
• Must consider what people think, what they
  believe is important and what motivates them
• Align these with the new processes
• May require changes in measurement and reward
  systems

53
One Key to Sell Change

• Get key people involved
• Buy-in from opinion leaders would persuade others
• Better to get criticism from the inside, than
  resistance from the outside
• Let them take some ownership of the project
• Participation creates a feeling of control
• Instead of them doing it to you, we are all
  doing it together

54
Managing Change
A very useful framework for thinking about the
change process is problem solving. Managing
change is seen as a matter of moving from one
state to another, specifically, from the problem
state to the solved state in a planned, orderly
fashion.
The Lewin-Schein Model of Change
Unfreezing
Moving
Refreezing
55
People Issues

• Levi Strauss
• Time to fill orders too long
• Embarked on BPR project
• Reduced time from 3 weeks to 3 days
• BUT.
• Created extreme turmoil by demanding that 4,000
  workers re-apply for their jobs as part of a
  reorganization into process groups
• BPR project timetable stretched to 2-years
• Had to make repeated promises for no layoffs
• Spent an extra 14 million for a 2- year
  education effort to calm employees
• WSJ Nov.26,1996

56
Hammer Acknowledges.

• ...Reengineering forgot about people.

I wasnt smart enough about that. I was
reflecting my engineering background and was
insufficiently appreciative of the human
dimension. Ive learned this is critical.

• Expanded BPR three-day basic training class to
  five
• Two more days for people issues

57
CRM is Risky Business

• ERP Focus on Internal Processes
• Resides behind the corporate curtain
• CRM Designed for Customer Interaction
• Every system glitch is in your customers full
  view
• ?

As much as CRM promises to improve customer
relations and increase revenues, there is the
potential for disaster. Your website has to be
friendly . . . Should not confuse visitors . .
or, people will not come back.
58
CRM from Scratch- Dell, Cisco, Staples,
Kraft . . .

• CRM is still a new market space
• relative immaturity of vendors
• CIOs leery of sinking millions of dollars into
  unproven technology
• You have the cost, the ongoing maintenance, the
  implementation - thats just to get you started.
• When you upgrade to the next version, there can
  be considerable cost in that as well. (Kraft CIO)
• You control the evolution of CRM in line with
  customer needs, using the companys business
  processes and customer data, without having to
  rely on upgrades or services from a vendor

59
Why Build ?- One reason Lack of
Integration

• CRM packages do not offer adequate tools
• for integration with back-office applications,
  e.g., ERP
• Critical data has to easily flow back and forth
  between ERP and CRM Systems
• Otherwise, difficult to create customer profiles
  with information on shipment performance and
  customer spending habits
• The vendors sell you the package, but they fail
  to tell you what can and can't happen with that
  software.
• (CIO Magazine, August 15, 2000)

60
Greatest Drawback- Adapting Package to
Customer Relationships

• Tailoring software to entice customer loyalty can
  be far more challenging than developing process
  software.
• In finance, a company is legally bound to create
  reports in certain ways. Its a science. In CRM,
  there are absolutely no rules. Whats the best
  way to keep a customer happy and loyal ? There is
  no best way. Its an art.
• (CIO Magazine, August 15, 2000)

61
Why Dell Chose to Build- Premier Pages
for Business Customers

• Adapted its own customer-related best practices
  in its CRM software . . . a competitive advantage
• Vendors are trying to understand how you develop
  systems and set up customer relationships. Dell
  has been doing both for 16 years. (Dell CIO)
• Technology challenges took a back seat to the
  challenge of breeding acceptance of the system to
  target users - customers and sales people, who
  are not technology professionals
• . . . Hence, had to develop self-managing,
  simple tools

62
Dell Controls Its Destiny!

• Weve made the user experience on the Premier
  Pages very consistent. As we have added
  functionality, Customers have not had to learn
  new things. (Dell CIO)
• Because Dell built the system, it is
  Internet-based and linked to Dells back-end
  system And, Dell controls its evolution in line
  with users needs.

63
Factors To Consider in Buy Decision-
When Build is Not Feasible

• CRM package should not have to scrap legacy
  systems
• Customer-centric design
• Many early CRM systems were designed with
  employees in mind, but customers are the real
  target
• Ease of use and efficiency are critical.
• As you Web-enable those CRM applications, youre
  asking customers to do business the way employees
  do business. If you satisfy the customer and move
  to the Net, your cost of doing business will go
  down. (Cisco CIO)
• Open Data Standards in CRM software
• To enable Web development and integration process
• Vendors willing to enter into a contract to
  provide services for ironing out glitches in the
  system

64
CRM Software For a Song

• Low-cost, easy-to-implement CRM packages tailored
  for small and medium size business have matured.
• Example SalesLogix from Interact Commerce in
  Scottsdale, Arizona.
• Less than 50,000 for 20 users
• Provides common CRM capabilities like lead
  generation and management, deal tracking, and
  customer support
• Its SFA tool, ACT, used for a long time by sales
  reps - can buy it in a store for 200
• Departments in big companies also often turn to
  economical CRM packages as a stop-gap measure
  while they wait for completion of enterprise-wide
  initiatives, which take years to implement.
• No packages (even Siebel) can cover the broad
  range of CRM tasks, at the best of breed level.
  Hence, define your companys CRM priorities and
  find the package that dovetails with your
  requirements.

65
An Alternative Outsource - Use an Application
Service Provider (ASP)

• Hosted CRM offering from Siebel, Oracle,
  PeopleSoft,
• Directly or through hosting partners like Corio,
  US internetworking,
• Must typically license the software (like for an
  internal deployment)
• A combination of per-user and support costs to
  the ASP
• Extra for software customization
• Savings Internal cost of application management
  and support
• Aberdeen Report (2001)
• 44 savings in Year 1 15 in Year 2 based on
  average per-user cost of over 12,000 in Year 1
  And over 5,000 in Year 2 for internally deployed
  CRM
• Larger companies are still reluctant to let the
  family jewels - critical customer information -
  out of their sight. They are also concerned about
  the long-term stability of CRM ASPs. And
  finally, they are critical of the lack of
  customization available from some offerings.
• Source eweek, Feb 25,2002

66
Subscription Service ASPs- A Flat Per-User, Per
Month Fee 50 - 125

• Compared to typical annual cost of 5,000 per
  user
• Plus hardware and support - Total Cost 15,000
• Built from the ground up to to be both different
  and economical
• Relies on a multi-tenant architecture with a
  single application
• much less overhead than multi-user application
• High-level configuration tools instead of
  customization though programming
• changing source code is not supported
• Frequent, incremental improvement
• with only one version to support, developing
  and distributing upgrades
• that benefit the whole customer base takes much
  less time and effort
• Low costs and aggressive pricing
• ability to host more users with a standard
  application lowers overhead costs,
• and savings can be passed on to the customer
• Offer products strictly as services, with no
  licensing option
• savings from lower organizational headcount
  can be passed on too
• Consolidated services at a single point
• provide highly trained staff and the latest in
  security and communication technology

67
The Market Leader Salesforce.com

• Revenue 425 M. in 2002 50 M. in 2001
• Customers 3.800 Deployed Seats 56,000
  (Source Aberdeen Group, March 2002)
• Launched in 1999 with Web-based SFA service
• 50 per user, per month
• Trial allowing the first 5 users free for 12
  months A No-Risk Guarantee
• If they try it and dont like it, they can just
  take their data back..
• Expanded in March 2001 to include full CRM
  functionality
• Marketing Automation and Customer Support
  Management
• Launched Enterprise Edition in Feb. 2002
• Added customization and integration features to
  close the functionality gap between
  Salesforce.com and enterprise CRM systems
• E-Business Suite to be out in late 2002
• Limited ERP functions, including order, invoice
  and contract management
• Our five-year vision is to offer everything that
  SAP or Oracle or PeopleSoft offers, but as an
  online service. CEO Marc Benioff (who left
  Oracle in 1999), Computerworld, Feb 19,2002

68
Example An Investment Bank in San Francisco-
Putnam Lovell Securities Inc

• Started with Salesforces SFA services in October
  2000 for 150 employees
• We looked at Siebel, which would have cost us
  several million dollars Onyx and Pivotal would
  have cost about half a million. Salesforce.com
  came out to 80,000 (VP of Technology)
• Other aspects of Salesforces services were also
  a plus.
• You miss out on the customization features of
  traditional enterprise applications, but you get
  Internet service functionality. They upgrade
  every three months or so and you get the upgrade
  immediately It can be very painful and
  expensive to upgrade on the traditional
  enterprise systems.
• Source Computerworld, Mar.6, 2001

69
CRM Systems Rent or Buy?
CRM Subscription Services Offer rapid
deployment Provide some customization and
integration options - Allow less control over
data location and privacy
Licensed CRM Software Is highly customizable
Integrates more tightly with other applications
Offers complete control over locally housed
application servers and data - Requires more time
to deploy
70
Major Reasons Why CRM Fails

• 1. Data is ignored
• At its core, CRM is about data
• - customers, products, inventory...
• Huge amounts of data must be in the right place
  in the right format
• Must have a detailed understanding of the quality
  of the data
• how to clean it up
• how to keep it clean
• where to source it
• what third-party data is required
• Good data is an imperative for CRM investments to
  pay off
• Action Item
• Must have a Data Quality Strategy
• Devote one-half of the total time-line of the CRM
  project to define data elements and data
  cleansing

71
Major Reasons Why CRM Fails

• 2. Politics rules
• Every business unit in the organization believes
  it owns the customer
• Will not hence share data or support other units
• Action Item
• Formulate CRM strategy at the enterprise level
• Appoint a senior manager to oversee
  cross-departmental CRM
• 3. A flawed process is automated
• Customer-related processes in most organizations
  are flawed because of years of minor corrections
  and neglect of customers demands
• Automating a flawed process makes it run faster -
  a real danger because the enterprise can more
  quickly and efficiently anger its customers
• Action Item
• Use CRM as a springboard to examine all
  customer-related processes
• Remove those that are not needed rework those
  that IT impacts

72
Major Reasons Why CRM Fails

• 4. No attention is paid to skill sets
• It is not enough to install CRM software - you
  have to train and persuade employees to use it
• All the money in the world cant save a CRM
  project if employee training for using the new
  tools is shortchanged
• Action Item
• Educate employees on the benefits of the CRM
  initiative
• Train them to use the tools to communicate with
  the users more effectively
• Rule of thumb For each dollar spent on
  software, 1.50 should be spent on training

73
Major Reasons Why CRM Fails

• 5. Aim of the CRM plan a comprehensive
  solution
• Project scope is too vast
• Big Bang implementation has high risk of
  failure
• Action Item
• Start small and get early wins
• Necessary for executive buy-in for funding
  support
• 6. Whats In It For Me? question is not
  addressed
• Employee buy-in for CRM is critical
• Action Item
• Explore ways for CRM to enrich the jobs of
  employees
• Institute performance measurement system that is
  aligned to CRM goals - it should drive the reward
  system
• What gets measured and rewarded gets done!

74
Technology is NOT the Solution

• Place more emphasis on
• CRM Execution vs.
• CRM Infrastructure
• Do Your Homework !
• Identify High-Value Customers Invest CRM on
  them
• Pilot Test
• . . . Measure returns
• . . . Proof-of-concept
• . . . Top Management buy-in
• Pay Heed to Non-IT Hurdles
• Getting Right Data
• Organizational Barriers
• Performance Measurement Reward Systems

75
First, Get the Process Right

• We did not begin by specifically looking for an
  enterprise-wide CRM solution. The company was
  looking for ways to address the greatest problem
  we see in financial services retention of assets
  (customer money invested). We determined that CRM
  is one of the significant steps in solving this
  critical business problem.
• P. Dhore, EVP of Dreyfus Service Corp.
• Source Mining the Value of Data A CFO
  Perspective, CFO Research Services, August 2002

76
Connect All the Dots

• Identify the business problem
• Set specific goals to address the problem
• Develop the strategy to achieve these goals,
  incorporating all relevant groups and processes
• Implement in a series of small steps to get value
• We derive more long-term value by trying to hit
  singles instead of home-runs.

77
Low Risk Approach To Build CRM System -
Works Especially When IT Budgets Get Slashed

• Break it into smaller modules
• with a clearly defined benefit for each
• Pick the first module with significance
• for proof-of-concept and top management buy-in
• Phased implementation will harvest benefits
• to provide incentives for continuing the CRM
  project

Best Way To Build a Big System - Not to Build
It..Let It Evolve
78
Implementing Small Pieces of CRM That
Matter to Customers Soon...

• Is Better Than a Massive CRM Rollout That Takes
  Two Years or More to Implement and Pay Off
• - Divide long project into blocks of say, 6
  months, that will yield benefits independently
• Examples
• Improve your automated voice-response so that
  customers dont hate them as much and press zero!
• Add/improve self-service features to your Website
• Provide more customer data to call center
  operators so they can solve customer problems on
  the first call
• Improve the integration between your billing
  system and the customers ordering system to make
  selling smoother

79
Small is Beautiful Works..

• When accurate customer data, advanced IT systems
  and marketing experts are in short supply
• For example Emerging Markets Small and Medium
  Enterprises
• Problem Mistaken Notion About CRM Systems
• All relevant data must be captured in an
  integrated data base
• The data should be accurate
• Only the IT-heavy deluxe CRM system will do
• You need sophisticated analytical and marketing
  skills to get good results

80
A Pragmatic Approach
1. Determine the profitability of your
customers 2. Identify the critical pain points
in your current relationships with these
customers 3. Limit the project to the top
customers (8020 Rule) 4. Create an integrated
data base with metrics that matter about
customers Resist the 360-degree customer view
results in too much data of too little
consequence 5. Clean the data to get
satisficing (or good enough) accuracy 6. Analyze
the data to get insights into how you can
improve the relationships with these
customers 7. Develop a plan of action for each
customer AND implement it
81
The CRM Implementation Team- Some Dos and Don'ts

• Get Two Project Managers
• - One from the business side and one from IT
• IT Project Manager must be an adept dotted-line
  manager
• - Since most team members will not be direct
  reports
• IT Staff MUST include
• - Members with IT background PLUS business
  knowledge AND ability to communicate with
  non-technical people in simple English
• - Enough knowledge of T to be able to liaise
  effectively with, and translate business
  requirements to, the T experts
• - Also, need the business savvy to be able to
  tell users when something they ask for is not
  feasible
• Collaboration with Marketing, Sales and Service
  Depts. - A MUST
• - Traditionally IT has been totally disconnected
  from Customer-facing depts. because of ITs
  narrow focus on Finance and Operations