Transcript Facts about customer relations

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 don’t have proper customer support
• CRM = doing things right + turning defence into
attack!
retention
Industry
% Increase in
Customer NPV
Advertising Agency
95
Life Insurance
90
Bank
85
Insurance
84
Car Service
81
Credit Card
75
Laundry
45
Software
35
Impact of a 5% Increase in Retention Rate on Customer Net Present Value
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.
Why CRM?
• Customers don’t 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 don’t go far
enough
• Cost of selling to different customers is
also different => CPA
A bit of history
•
•
•
•
In the 50’s mass marketing
In the 1970’s market segmentation
In the 1990’s 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
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
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
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
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
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”
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
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
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’
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 => increased
cost
Metrics
•
•
•
•
•
•
•
•
•
•
Sales analysis
Returns
Warrant service requests
Calls / complaints
Time to closure
New contacts generation
Sales conversion
Customers retention
Campaign tracking
Pricing strategy changes
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
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
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
Integration of customer contact
information
• All channels
• 24 / 7
• Available to all CCP (customer Contact
Personnel)
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
Infrastructure for CRM
Customers
Telephony
Internet
Face-to-Face
Mail
Fax
Customer Interface
Infrastructure
Front Office CRM Processes
Sales
Marketing
Data Mining and Analysis
Data Warehousing
Services
Legal
HR
Finance
R&D
Servers
Storage
Back Offices and External
Systems
Components of CRM
•
•
•
•
Marketing databases
Business intelligence
Internet / ecommerce
Call center
Marketing databases
•
•
•
•
•
Have made an incredible difference
Reduced attrition drastically
Reduced cost / risk of new product sales
Data warehouse => advanced search
Cross selling / upselling / event driven
marketing…
Business Intelligence
• Making sense
• Identifying problems
• Understanding cause and effect
relationships
• Anticipating future changes
• EIS / OLAP / dashboards of info
• + datawarehouses and data mining
Basic principles
Life cycle of the DW
First time load
Operational Databases
Warehouse Database
Refresh
Refresh
Purge or Archive
Refresh
Data Marts
Flat Files
Operational
Systems
Marketing
Marketing
Sales
Finance
Human Resources
Data
Warehouse
Sales
Finance
Data Marts
External Data
Original OLAP Rules
1. Multidimensional conceptual view
2. Transparency
3. Accessibility
4. Consistent reporting performance
5. Client-server architecture
Original OLAP Rules
6. Multiuser support
7. Unrestricted cross-dimensional
operations
8. Intuitive data manipulation
9. Flexible reporting
10. Unlimited dimensions and
aggregation levels
Multidimensional Database
Model
Customer
Store
Store
Time
SALES
Product
Time
FINANCE
GL_Line
The data is found at the intersection of
dimensions.
Three dimensions
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 => increased in-coming calls
• But automation means complete framework for
measuring performance
• Counter measures can be derived from findings
• Email management provides further automation
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
TCO for CRM
Implementation costs more than software
Integration 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
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?
Paradox of productivity gains
Amongst other
things, this shows
the need for
METRICS
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)
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
A study of CRM in Ireland
Company
Business
Maturity
CRM software
Eircom
Telecom
5 years
Seibel CRM, GTX, Campaign Management System
AIB
Financial Services Industry
3 years
Client view system, segmentation tool, Campaign
Management System
Irish Life
Financial Services Industry
2 year
Siebel eInsurance, POS system
Insurance Co
Health Care
18 months
Analytical tool
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
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,
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
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 doesn’t 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).
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
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
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 restructuring
• changes required would be so great it would
involve ‘starting all over again’.
• Piecemeal approach followed – over next 5
years
Insurance - solution
• Norkom’s 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
Summary – drivers of projects
Company
Origins
Poor Customer Segmentation
AIB
Eircom
Insurance Co
Irish Life
X
X
X
X
X
X
X
X
X
X
Process not Standardised
Competitive Environment
Regulatory Environment
Inefficient use of customer data
X
X
X
Automation of customer centric business
processes
Improve Campaign Management
Predictive Customer Modelling
X
X
X
X
X
X
Summary – Goals and Objectives
Company
Goals and Objectives
Insurance
Co
AIB
Eircom
Holistic view of the customer
X
X
Customer retention
X
X
X
X
Target Marketing
X
X
X
X
Increase in revenue
X
X
X
X
Improve customer relationship
X
X
X
X
Better use of customer information
X
X
X
X
X
X
Communicate
customers
more
effectively
with
Irish Life
X
X
Summary - priorities
Company
Most
Important
Objectives
AIB
Eircom
Holistic view of the customer
X
Customer retention
X
Target Marketing
Increase in revenue
Irish Life
X
X
Better use of information
Improve the customer relationship
Insurance Co
X
X
X
X
Eircom success
Key performance indicator
1998
2002
Customer Service Level
20% in 10 seconds
85% in 10 seconds
Calls abandoned
24%
4%
Customer wait time
150 seconds
8 seconds
Transaction handling time
480 seconds
205 seconds
Query resolution at point of contact
60%
87%
Electronic enablement
17%
50%
Cost per contact-Care Centre
€4.48
€3.26
Eircom.ie hits per month
285K
426K
Eircom.ie substitutable contacts
20%
35%
Summary – problems encountered
Company
Limitations
Getting ‘buy-in’ from users
Unwillingness to change
AIB
Eircom
X
X
X
X
X
X
No large scale processing power
Lack of ‘fool proof’ systems
Lack of integration
No real time CRM
Economic limitations
Lack of service function
X
X
X
Insurance Co
Irish Life
X
X
X
X
X
X
X
X
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