Facts about customer relations

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Facts about customer relations

• Cost of selling to a new customer is six times as
  high as to existing customer
• Odds of selling to a new customer 1/7 to an
  existing customer 1/2
• Each dissatisfied customer tells 8 to 10 people
• 70 of dissatisfied customers will do business
  again if they feel their complains are handled
  well
• 1 extra of customer retention can boost
  turnover by as much as 15
• Many companies dont have proper customer support
• CRM doing things right turning defence into
  attack!

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retention
Impact of a 5 Increase in Retention Rate on
Customer Net Present Value
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CRM definition

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

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Why CRM?

• Customers dont care about their suppliers
  internal difficulties
• They want to be able to access product and
  services at the least cost
• They want a single point of entry
• Existing loyalty programmes dont go far enough
• Cost of selling to different customers is also
  different gt CPA

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A bit of history

• In the 50s mass marketing
• In the 1970s market segmentation
• In the 1990s personalised marketing
• Since relationship marketing
• acquiring customers is far more expensive than
  keeping them
• knowledge about individual customers is required
  to guide highly focused marketing strategies
• More intense, global competition
• more fragmentation of markets
• high level of product quality
• With the Internet, switching suppliers is merely
  a couple of mouse clicks away.
• Shift in power from the seller to the consumer

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Piecemeal or Full Monty CRM?

• 80 of CRM initiatives are quick win projects
• Important to have clearly define goals
• Reduce call numbers
• Produce more finely tuned products
• Sell more unit per deal
• How much do you want to spend
• CRM should probably be profit making
• But lack of internal collaboration could stand in
  the way (50 of top 500 firms said so)
• And only 30 of companies have metrics in place

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The 3 phases of CRM

• Acquiring new customers
• by promotion
• leading edge product backed by superior service
• Enhancing profitability of existing customers
• cross-selling and up-selling (one stop shopping)
• additional services
• Retaining most profitable customers
• best customer list
• customer profitability analysis
• make best offer to best customer

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Novelty of the CRM Approach

• Complete and integrated solution - breaks down
  the walls of conventional functional areas
• Most companies are good at one of the 3
  activities - CRM concentrates on all 3
• Overall corporate objective of providing customer
  satisfaction
• systems in place to collect, store, exploit CRM
  info
• active distribution of information about
  customers
• Offer single point of entry for customer queries

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Clear obstacles

• Lack of collaboration
• Outright conflict between departmental needs
• Fragmentation of existing processes vis a vis
  customers
• Most unstructured area on the playground
• Idiosyncrasy leads to scope creep
• Customer frustration may lead to excessive
  demands

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Develop common goals centred on the customer

• Composition of CRM team as important as in the
  case of ERP
• Understand the implications for everyone of some
  key scenarios
• Work out conflicts and fill gaps in understanding
  with creativity
• Involve trusted customers when applicable
• Go fact finding on how customers are dealt with
  today
• Process mapping
• rules and procedures
• Be realistic with borderline methods

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Mapping process change

• CRM from marketing to after sales
• Assign clear roles and responsibilities
• Integration of customer content
• integration of customer contact
• integration of end-to-end business processes
• Integration between ERP and activities never
  computerised before

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CRM tools

• Data capture, data organisation and decision
  support
• Data mining to explore and model large amounts of
  customer data
• discover patterns and correlations
• Customer segmentation models
• predictive models of customer behaviour,
• identification of key events that trigger
  behavioural changes
• soliciting data from customers
• Data Warehouse

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ABC of data mining in CRM

• Affinity analysis odd / unexpected patterns in
  customer behaviour.
• Clustering sorting customers into similar groups
  based on certain attributes or behaviours.
• Predictive modelling uses historical purchase
  data plus information about promotions to predict
  future behaviour.
• Segmentation like clustering but used to support
  the development of tailored offerings
• Eg Chase Manhattan Bank, mines data from various
  sources to develop new products.
• Tapscott help to perform surgical strikes
  instead of carpet bombing

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Data Issues

• Bad data quality or no data will be a problem
• Data stewards
• Building up to a DQM strategy
• Dynamic process of tidying up
• Interface into existing systems
• Front and back office
• All communication channels
• 360 view
• New data collection mechanisms gt increased cost

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Metrics

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

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Staff buy in

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

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Integration of customer content

• Transactional data
• Human data (obtained in conversation)
• Procter and Gamble
• HD
• Try to minimise the cost of collecting such data
• Web services are interesting new channel
• Intranet / CRM systems provide a platform for
  distribution on a wide basis

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Integration of business processes

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

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Integration of customer contact information

• All channels
• 24 / 7
• Available to all CCP (customer Contact Personnel)

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Integration of front end and back end functions

• Traditional firm stronger back office functions
  weak customer facing services
• Start up firm opposite
• Adapting the structure / IT infrastructure to
  this problem
• Different expertise
• Different cultures

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

• Marketing databases
• Business intelligence
• Internet / ecommerce
• Call center

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Marketing databases

• Have made an incredible difference
• Reduced attrition drastically
• Reduced cost / risk of new product sales
• Data warehouse gt advanced search
• Cross selling / upselling / event driven
  marketing

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Business Intelligence

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

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Basic principles
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Life cycle of the DW
First time load
Operational Databases
Refresh
Refresh
Purge or Archive
Refresh
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Data Marts
Flat Files
Operational Systems
Sales
Data Warehouse
Finance
Data Marts
External Data
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Original OLAP Rules

• 1. Multidimensional conceptual view
• 2. Transparency
• 3. Accessibility
• 4. Consistent reporting performance
• 5. Client-server architecture

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Original OLAP Rules

• 6. Multiuser support
• 7. Unrestricted cross-dimensional operations
• 8. Intuitive data manipulation
• 9. Flexible reporting
• 10. Unlimited dimensions and aggregation levels

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Multidimensional Database Model
Store
Customer
Store
Time
Time
FINANCE
SALES
Product
GL_Line

• The data is found at the intersection of
  dimensions.

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Three dimensions
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Customer contact point

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

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The Internet

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

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TCO for CRM
Implementation costs more than software Integratio
n costs even more
Upgrade around 30 of initial cost every 24 months
Maintenance about 20 of software Cost yearly
Too expensive When more than 50 staff
Self administering DBs with no need For DBA and /
or open source licencing
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Building the case for ROI

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

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Paradox of productivity gains
Amongst other things, this shows the need for
METRICS
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Key decisions for ROI

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

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Knowledge management

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

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

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

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Eircom solution

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

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AIB

• CRM unit has end-to-end responsibility for the
  delivery of CRM projects
• Mosaic of in-house systems
• the client view system
• up to the minute customer information, contact
  history log and customer contact diary
• the segmentation system
• groups customers based on demographics, and
  assigns specific customers to relationship
  managers
• the campaign management system
• For both current and potential customers
• Replaced a manual system
• Never upgraded legacy systems with proper CRM
  platform because functionality was already there

So it doesnt have the full functionality and
nice bits offered by CRM software packages, it
has the core bits and all the other bits are
being added and tagged on

(CRM Consultant AIB).
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Irish Life - Problems

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

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Irish Life - Solutions

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

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Insurance - problems

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

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Insurance - solution

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

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Summary drivers of projects
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Summary Goals and Objectives
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Summary - priorities
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Eircom success
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Summary problems encountered
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Conclusions

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