Outline - PowerPoint PPT Presentation


Title: 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
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Title: 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
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