Title: Facts about customer relations
1Facts 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!
2retention
Impact of a 5 Increase in Retention Rate on
Customer Net Present Value
3CRM 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.
4Why 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
5A 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
6Piecemeal 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
7The 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
8Novelty 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
9Clear 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
10Develop 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
11Mapping 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
12CRM 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
13ABC 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
14Data 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
15Metrics
- Sales analysis
- Returns
- Warrant service requests
- Calls / complaints
- Time to closure
- New contacts generation
- Sales conversion
- Customers retention
- Campaign tracking
- Pricing strategy changes
16Staff 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
17Integration 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
18Integration 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
19Integration of customer contact information
- All channels
- 24 / 7
- Available to all CCP (customer Contact Personnel)
20Integration 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
21Infrastructure 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
22Components of CRM
- Marketing databases
- Business intelligence
- Internet / ecommerce
- Call center
23Marketing 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
24Business Intelligence
- Making sense
- Identifying problems
- Understanding cause and effect relationships
- Anticipating future changes
- EIS / OLAP / dashboards of info
- datawarehouses and data mining
25Basic principles
26Life cycle of the DW
First time load
Operational Databases
Refresh
Refresh
Purge or Archive
Refresh
27Data Marts
Flat Files
Operational Systems
Sales
Data Warehouse
Finance
Data Marts
External Data
28Original OLAP Rules
- 1. Multidimensional conceptual view
- 2. Transparency
- 3. Accessibility
- 4. Consistent reporting performance
- 5. Client-server architecture
29Original OLAP Rules
- 6. Multiuser support
- 7. Unrestricted cross-dimensional operations
- 8. Intuitive data manipulation
- 9. Flexible reporting
- 10. Unlimited dimensions and aggregation levels
30Multidimensional Database Model
Store
Customer
Store
Time
Time
FINANCE
SALES
Product
GL_Line
- The data is found at the intersection of
dimensions.
31Three dimensions
32Customer 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
33The 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
34TCO 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
35Building 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?
36Paradox of productivity gains
Amongst other things, this shows the need for
METRICS
37Key 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)
38Knowledge 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
39A 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
40Eircom
- 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,
41Eircom 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
42AIB
- 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).
43Irish 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
44Irish 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
45Insurance - 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
46Insurance - 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
47Summary drivers of projects
48Summary Goals and Objectives
49Summary - priorities
50Eircom success
51Summary problems encountered
52Conclusions
- 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