Making A Compelling Business Case For CRM

1
Making A Compelling Business Case For CRM
2
Contents

• What is CRM
• What are CRM Systems
• Identifying CRM Benefits
• Profitability Models For CRM
• Calculating Project Costs
• Identifying, Assessing and Managing Risk in CRM
  Implementation
• Presenting The Business Case
• Conclusions

3
What is CRM? Understanding CRM

• It is a business strategy that is focused on
  maximizing shareholder value through winning,
  growing and keeping the right customers.
• CRM is customer rather than product focused
• It requires changes in processes, systems and
  culture
• It embraces the front office functions of
  sales, marketing and customer service as well as
  back office operations and new product
  development
• It embraces all channels and media from the
  Internet to field sales
• It embraces sales partners both up and down the
  supply chain

4
What is CRM? The Many Flavors of a CRM System
Marketing Propensity Work Benches Data
Warehouses Campaign Management Quick
Counts Executive Information Systems (EIS)
Collateral Management
Sales Sales Force Automation (SFA)
Electronic Territory Management Systems (ETMS)
Partner Relationship Management (PRM)
Opportunity Management (OM)
Knowledge Management
Sales
Marketing
Service
Customer Relationship Management (CRM)
Service Field Service Reps Call
Centers E-Mail
Decision Support Systems (DSS) Frequently Asked
Questions (FAQs) Product Encyclopedias Product/Se
rvice Information
5
What is CRM? Types of CRM Systems

• Operational Oriented CRM
• Part of the front-office or customer facing
  applications
• Systems can hold transactional level data on
  individual products, customers, transactions
• Provide support for multiple access customer
  contacts
• Analytical CRM
• Provides support for the strategic planning
  process
• Systems hold aggregated data
• Units of analysis are campaign, market segment,
  key account, market or product
• Collaborative CRM
• Use of traditional and new groupware/web
  technologies to facilitate customer, staff and
  business partner communications

6
What is CRM? The CRM Applications Environment
Operational CRM Business Operations Mgmt.
Analytical CRM Business Operations Mgmt.
ERP/PRM
Supply Chain Mgmt
Legacy Systems
Back Office
Data Warehouse
Order Mgmt.
Order Promising
Closed Loop Processing (EAI Toolkits,
Embedded/ Mobile Agents
Customer Activity Data Mart
Customer Data Mart
Product Data Mart
Front Office
Customer Service
Marketing Automation
Sales Automation
Mobile Sales (Product CFG)
Field Service
Vertical Apps
Marketing Automation
Mobile Office
Category Mgmt
Campaign Mgmt
Voice (IVR, CTI, ACD
Conferencing
E-Mail
Fax/Letter
Direct Interaction
Customer Interaction
Web Conference
E-resp Mgmt
Collaborative CRM Business Collaboration Mgt.
7
What is CRM? Some Key Players

• Customer Service Applications
• People Soft Vantive
• Clarify
• Scopus
• Remedy
• Onyx
• Sales Management
• Siebel
• Aurum
• Pivotal
• E-Commerce
• Broadvision
• Silknet

8
Calculating CRM Benefits Problems With CRM
System ROI Calculations

• There is no baseline data prior to the use of the
  system, making before and after comparisons
  difficult
• There are too many other independent variables
• Many of the benefits sought are soft or
  intangible and hard to quantify

9
Calculating CRM Benefits Some Useful
Benchmarks

• Latest studies show CRM projects yield an
  immediate increase of 8 in revenues, and a
  target growth of 16 within 2 years
• A 1998 Insight Technology Group research
  indicated 21 of CRM projects met all
  expectations
• These companies saw the following
• Revenue increases of up to 42
• Sales costs decreases up to 35
• Sales cycle length reduction of 25
• Margin improvements of 2
• Customer satisfaction increase of up to 20
• Some of the highest system ROIs have been
  achieved in the high growth areas of information
  technology and telecommunications

10
Relevant Strategic Models Customer Solutions
Strategy

• Investment in understanding customers economics
  to make them more favorable
• Products woven into the fabric of customers
  operations
• Highly efficient value chain linking customers to
  suppliers
• High levels of customer retention
• Negative early cash flow
• CRM System Implication Complex CRM Systems
  giving a single view of key customers across all
  channels

11
Relevant Strategic Models Switchboard Profit
Strategy

• Useful strategy in markets characterized by
  multiple sellers communicating to multiple buyers
• The emphasis is on the creation of a single
  channel for all communications, creating a
  switchboard leading to reduced costs for both
  buyers and sellers
• Leading to increased profitability as volumes
  grow
• Need to have easy access to the switchboard
• The switchboard controls information flow
• The offer is of a standardized, high volume
  service
• CRM System Implication High initial investment
  in efficient systems for low cost processing

12
Relevant Strategic Models Time Profit
Strategy

• Focused on taking advantage of the first entrant
  advantage, allowing innovators to generate excess
  returns before competitors step in
• Profit in this scenario comes from uniqueness
  which can be exploited by efficient customer
  management systems
• High prices and abundant profits are available
  for a short period of time
• Constant innovation is necessary as value
  migrates away from recent innovations
• Ability to bring new products and services to
  market quickly
• CRM System Implication Rapid development and
  roll out of systems

13
Relevant Strategic Models Installed Base
Profit Strategy

• The supplier creates an extensive installed base
  of users who buy the suppliers brand of existing
  and future products
• It focuses on acquiring high value customers,
  often at a loss
• It requires a sound understanding the customer
  purchase cycle
• The companys product portfolio is designed to
  meet customer needs throughout their life cycle
• The aim is to set the standard, achieve a strong
  presence and then harvest the profits
• CRM System Implications Excellent cross and up
  sell systems and processes

14
Three Key Questions

• Who are the most profitable customers today?
• Within that group, which customers have the
  highest profit growth potential
• What mix and level of investments are needed to
  meet those customers needs efficiently and
  enable profit growth to occur?
• Key Finding All Strategies Are Based On A Fuller
  Understanding Of the Customer

15
Four Key Areas OF CRM Impact

• Communication
• Exchange of information builds greater
  understanding between organization and customer
• Efficiency
• Areas for improving productivity while NOT in
  front of the customer
• Effectiveness
• Areas for improving productivity when in front of
  the customer
• Decision Making
• Leveraging information collected to set future
  direction

16
Key Advantages of CRM Implementation

• Automating Sales Best Practices
• Ensuring Better Trained Employees
• Creating Increased Customer Satisfaction
• Increasing Efficiency
• Reducing Sales Cycle
• Improving Communications
• Improving Management Decision Making
• Simplified Order Processing

17
Three Key Benefits of CRM

• Increase in Revenue
• Decrease in Costs/ Increased Savings
• Ability to Respond to Competitive Pressures and
  Market Changes

18
Three Key Benefits of CRM Methods of Valuing
Revenue Increase

• Estimating the benefits in the form of costs
  saved by not increasing sales through the best
  viable alternative method (e.g. more direct mail,
  advertising etc.)
• If there are no other viable alternatives, the
  benefit is the contribution the increased sales
  will make to your bottom line (normally sales
  revenue less direct costs)

19
Three Key Benefits of CRM Sources Of
Increased Revenue

• Increased Sales
• Gaining new customers
• Improved cross sell and up sell opportunities
• Retaining customers longer
• One of improvement in revenue due to reduction in
  number of calls required to close a sale by
  improving need and solution identification
• Better Sales or Customer Mix
• Increasing sales of higher margin and/or
  strategic products
• Selling to higher quality customers with high
  margin products, high loyalty or high repeat
  potential
• Improved Customer Retention
• Improved response time to customer requests for
  information
• Delivered product meets customer requirements
• Reduced costs of buying the product/service
• Reduced cost of using the product/service
• Immediate access to order status
• Greater range of solutions options
• More responsive support service

20
Three Key Benefits of CRM Methods of Valuing
Cost Decrease

• Conduct a systematic analysis of current
  operations to produce a detailed baseline from
  which to measure improvements
• Estimate the change between how you do things now
  and how you plan to do them in the future

21
Three Key Benefits of CRM Sources Of
Decreased Costs

• Call Centers/Customer Contact Centers
• Up to 70 reduction in costs through the
  automation of processes such as training, call
  answering, call routing
• Creation of a more conducive working environment
  leading to better customer service
• Lower staff turnover rates
• Improved call per hour rates and lower telecom
  line charges
• Direct Mail
• Cost savings through better targeting,
  personalization and elimination of duplicates and
  lost customers
• Better targeting allows for higher response rates
  and reduced costs
• Improved Sales Forecasting
• Improved production cycles
• Enable improved inventory management

22
Three Key Benefits of CRM Sources Of
Decreased Costs

• Sales Support, Salespeople, Travel Subsistence
• Automation of proposals, configuration and
  quotations
• Reviewing customer history prior to call leading
  to improved interactions
• Improved management of sales collateral
• Improved sales forecasts and call reports
• Capturing critical customer information at POS
  improves number of calls required to close a sale
• Elimination of sales calls to deal with incorrect
  orders and restore customer goodwill
• Finding and providing information (product,
  technical) to customers
• Shortened learning cycles for new products and
  services
• Reduced travel time
• Ability to provide new sales people with tools to
  accelerate their learning curves
• Staff Motivation Loyalty
• Increase in staff motivation and loyalty will
  lead to reduced staff turnover
• Employee retention leads to reduced recruitment
  and training costs and an accelerated learning
  curve

23
Three Key Benefits of CRM Responsiveness To
Change

• Provides support for organizational change
• Offers rapid deliver of strategic changes to
  product, pricing and customer information
• Difficult to quantify but can prove invaluable in
  highly competitive, volatile markets

24
Costing CRM Systems Key Cost Trends

• The costs of both the software and its
  configuration are reducing for all but the top
  end high functionality global software
• Companies are increasingly making use of their
  existing communications infrastructure and
  hardware, leading to a reduction in project costs
  and time
• Integration and process re-engineering costs are
  increasing as project scope becomes more
  ambitious and skill shortages lead to reduced
  availability of quality in-house resources

25
Costing CRM Systems Key Cost Trends
26
Costing CRM Systems Key Cost Trends
27
Costing CRM Systems Typical Hard Costs
Note These costs are guidelines only to provide
an overview of the type of costs associated with
a CRM purchase There is a vary wide variation
in these costs from company to company
28
Costing CRM Systems A Cost Checklist

• Hardware
• Software
• Pilot Costs
• Strategy/Process Consulting
• Project Management, Consultancy and Use of IT
  Support Departments
• Configuration, Interfaces and Installation
• Technology Acquisition Costs
• People Issues Change Management
• Publicizing the System/Training/ Documentation
• Data Cleansing Maintenance
• Productivity Lag

29
Presenting The Business Case

• Proving The System Will Add Value
• Convincing The Managers That They Will Gain
• Showing The Big Picture

30
Presenting The Business Case Proving The System
Will Add Value

• The Questions
• Whats in it for me (the managers question)?
• Is the system worthwhile will it increase
  profits?
• Will it increase shareholder value?
• Is the investment better than the alternative?
• Show
• Demonstrate personal benefits to decision makers
  based on the organizational culture
• How the CRM System will support the companies
  sales and marketing activities
• Exploration of alternatives and identify the best
  option
• The real costs and benefits the changes
  arising from the system and their likely
  associated cash flows
• How the system will maximize scarce resources and
  assets e.g. marketing managers time, customers
  market share

31
Conclusions

• Many CRM strategies are based on the theory of
  increasing customer retention through improved
  satisfaction BUT not all customers are willing to
  pay a premium for an intensive personal
  relationship
• Recent CRM projects have yielded an immediate
  increase of 8 in revenue with a target growth
  rate of 16 over two years
• It is essential to establish a clear baseline for
  current operations to ensure an accurate
  measurement of improvements/savings after CRM
  implementation
• Cost of the system will depend on the project
  scope and existing infrastructure

32
Conclusions

• ROI calculations for CRM are difficult because of
• Lack of baseline data making before and after
  comparisons difficult
• Presence of too many independent variables
• Existence of soft and intangible benefits
• CRM benefits to the customer include
• Improved response times to customer queries
• Delivered products meets customer needs
• Reduced costs of buying and using the product
• Instant access to order status
• Wider range of solution options
• Greater responsiveness of technical support
• The key trends driving CRM costs are
• Falling costs of software and configuration in
  all except Tier 1 systems
• Companies are increasingly using existing
  hardware and communications and infrastructure
  leading to reduction in project costs and time
• Integration and process re-engineering costs are
  increasing and projects become more ambitious and
  skills are seen in short supply