eCRM:1 to 1 Marketing

Jason C.H. Chen (陳周宏教授 ), Ph.D.

Professor of MISGraduate School of Business

Gonzaga UniversitySpokane, WA 99258, USA

chen@jepson.gonzaga.edu

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Presentation Outlines

Why are companies moving to CRM ?What’s in it for you?1 to 1principles and best practicesOther challengesWhere do you go from here?

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Customercentric

______ are the customers?_______are the customers?Their __________ habits.

What they need/want?How many they need/want?

When they need/want?How to reach them?

Demands Products

E-BUSINESS

BUSINESS FOCUS

• SCM• CR

M• BPR• ERP

WhoWhere

purchasing

eBusiness Key Concepts eBusiness

The strategy of how to automate old business models with the aid of technology to maximize customer value

eCommerce The process of buying and selling over

digital media eCRM (eCustomer Relationship

Management) The process of building, sustaining, and

improving eBusiness relationships with existing and potential customers through digital media 4

eBusiness Processes

WHY Customer Relationship

Redesign Business Processes (Outside-In)

Applying Technology

WHAT

HOW

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Formula for Customer Benefit Customer Benefit (cb)=

+ v(value of market offering)+ b(value of brand)+ r(value of relationship)- c(cost of market offering)- t(cost of time)

The v, b, r, c, and t vary across customer segments and individual customers.

How to maximize cb? eCRM is one of the strategies to maximize cb and Mobilization

CRM has become the #1 priority for CEOs …

1. Relationship with Customers 2. Cost Competitiveness 3. Effective Use of Information Technology 4. Managing Change 5. Shareholder Value 6. Revenue Growth 7. Industry Restructuring 8. Globalization 9. Value-Added Supplier Relaationships

Customer Relationships Have Become the top priority for CEOs

Worldwide

Figure 1:Top Executive Priorities Ranked By Percent Citing Issue As “Critically Important”7

CRM has become the #1 priority for CEOs …

Senior Executives Expect Current Customers to Drive Future Revenue Growth

New Products 22%

Deeper Penetration 46%

Acquisitions 6%Alliances

7%

New Customers19%

Source:The Alexander Group,Incorporated

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Why the shift in focus to CRM?

Most companies have already attained operating efficiencies and optimum productivity through past efforts of : Downsizing Strategically outsourcing non-value added actives Business Process Reengineering Implementation of FRP System

Products in many industries have become commoditized forcing companies to sacrifice margins for sales volume

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Presentation Outlines

Why are companies moving to CRM ?What’s in it for you?1 to 1 principles and best practicesOther challengesWhere do you go from here?

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And oh, check these numbers…

Cutting customer defections by just 5% has the effect of boosting profit between 25% and 85%.*Today ,the average business is losing between 15-35% of its customers annually**69% of these defections are due to a poor sales or service interaction with the customer**

*Harvard Business Review**Forum Corporation

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USA Companies …

Every (Years) Lost -------------------- ---------------- 5 4 1

½ _________

½ __________½ __________

CustomersEmployeesInvestors

Other reasons why you need 1 to 1

Increase customer loyaltyGet more business per customer Become less dependent on priceIncrease customer satisfactionSave timeSpeed up your sales cycle

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Business (Our) Objectives 1. Get customers 2. Keep customers 3. Grow customers

The only difference is how firms do this

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Share of Market vs. Share of Customer

Customer Needs Satisfied

Customers Reached

Mass Marketing

Share of Market

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Share of Market vs. Share of Customer

Customer Needs Satisfied

Customers Reached

Mass Marketing

Share of Customer1

to

1

Share of Market

The longer the bar,The higher unitMargins will be

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In Four Words … Treat

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different

customersdifferently Personalization

A Lasting Competitive Advantage

The only true competitive advantage comes from the understanding you have of your customer that your competitors don’t.

This information has to come from the customer (_________ !?)

The more effort customer invests, the gratertheir stake in making relationship work.

Going to a competitor ____________ the relationship

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Reinventing

Big Data

Presentation Outlines

Why are companies moving to CRM ?What’s in it for you?1to1 principles and best practicesOther challengesWhere do you go from here?

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Summary of 1to1 Strategies

Identify Differentiate Interact Customize

Customer:-Identities-Contact info-Transactions-Interactions-Give the right people access when they need it

One view of the customer:Integrated customer data

Value:-Actual(current profits)-Strategic(potential value)

Needs:-Individual-Segment

All customers arenot created equal

Learn more:-Needs-Value-Preferences-Behaviors

Never make a customer tell us the same thing twice

Customer Need Set:-Product-Service-Delivery-Bundles

Use yourknowledge aboutcustomers to customize

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Identify–What information do you need?

Source:Insight Technology Group,1998

Goal: obtain more and better information about a

greater number of your customers… and use it to

build relationships

Name, rank, serial number, phone, fax, email

History, transactions

Customer needs - Business objectives - Complaints - Choice of communication channel - Habits and preferences

Revenues, profitability, LTV (loan-to-value ratio) - Potential value - Lifecycle stage

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Where is the customer data?

Where is it? Who has access?Who manages it ? Who owns it?

Sales Marketing Operations

Internet

Customer Service

Collections

Department

OtherProviders

CallCenter

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How do you manage it ?

Make sure individuals are recognized at all contact pointsLink customer interactions over time, across all divisionsGive the right people access to this info at the right timesFigure out who “the customer” is when the “customer” is an enterprise

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Charles Schwab creates links

Broker access to complete customer account(s) including business and personal links Broker sees account the way the

customer sees the account Picks up where last action/interaction

left off Integration across all channels

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“One Customer” view is key

Integrate customer information across the value chain

Customer A

Customer A

Customer A

Customer A

Customer A

MarketingCall

CenterThe Web

Sales Force

25What IT is needed to achieve this goal?

Ans: Integrated database

Differentiate

Customers have different values to the enterprise

Actual value Strategic value=share of customer, not market

Customers have different needs from the enterpriseStrategy? Market segmentation, 80/20 Rule

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Basis of customer differentiation

Differentiate them by their NEEDSWhat the customer needs, not what you want to sellSome needs are apparent through transactional records

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Interact – Interaction strategy

Goal: Generate more customer feedback less expensively … and use it as a competitive advantage- From expensive sales people to call center … to the even less

expensive Web site- Identify all contact points “We identified all guest contact points, and the employees

most likely to be involved. It was eye-opening. No one

realized how many opportunities we were missing.” Patrick Kennedy, GuestNet

CEO- Generate feedback, not just messages- Engage your customers in an ongoing dialogue that enables

you to learn more and more about their particular needs,

priorities, and interests …

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Rules of interaction

1. Conversation is a consensual act2. Neither party in control3. Feedback results in behavior

changes by everyone in your organization

4. Each interaction picks up where last left off – across al channels

5. Don’t ask too much: use “drip irrigation” 29

Benefits of InteractionUncovers Needs (so you can sell more) (Dis)Satisfaction Risk of defection ComplaintsMakes you smarter about the customer each timeHelps build barriers to exit

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Touch point integration

Integration of all customer contact points is becoming increasingly important as customer information migrates to the Web

… Beyond the Phone

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Interaction Using Call Centers

Measuring the efficiency of call centers: Hold times and call abandonment ratesMeasuring their effectiveness: Ratio of complaints handled on first call Percentage of inquiries generating

leads Share-of-customer data gathered

What are the implications when you off load support the web? How does the call center change

Review the metrics list – which metrics areefficient vs. effective?Which ones support Learning Relationships?

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Capital One – The customer call

• Pick from 50 optionson whom to notify

• Also analyze relateddata on millions of

Capital One customers

• Analyze data on 7M households

• Remember and pass along 25 pieces of info related to this

particular customer• Predict what this individual may want

• Prepare service rep to make customized product offer at end of call

Customize Identify

Interact Differentiate

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Customize

Reward customers for collaborating with you by tailoring whatever you possibly can for them: service, fees, billing, delivery, terms, product…- Low cost- High efficiency- Based on individual customer preferences

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How mass customization works

Production and service delivery processes are modularizedComponent elements or services are mass producedConfiguration is digitally controlledFiner granularity of modules leads to larger number of possible “fits”

What kind of strategic resource issue? _________35

Combinable

Mass customization of a credit card offering

Golf Nature NASCAR ArtSportsTeam

School

None $10 $15 $25 $35 $50

8% 10% 12% 14% 16% 18%

WeeklyBi-

WeeklyMonthly

Bi-Monthly

Org. byDate

Org. byCategory

TravelClub

DiningClub

CardReg.

CreditIns.

AccidentInd.

Purchase Protectior

Design:

AnnualFee:

APR:

Billing:

AncillaryServices:

Standardized modules are combined into …

…custom configurations (7776 unique options)

The more modules,the greater your ability to customize.

NASCARNo

Annual Fee

12% APRBilling Org.By Category

PurchaseProtection

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Presentation outlines

Why are companies moving to CRM?What’s n it for you?1to1 Principles and best practicesOther challengesWhere do you go from here?

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InfrastructureChange hurts …1. Start small2. Expand gradually, culture

changes take time3. Don’t forget about training4. Hold people accountable for the

right things5. Measure and reward the right

things!38

SalesIdentify and track the right infor - Sales forces automation

Differentiate Spend the right time and effort on MVCs,

MGCs, and BZs

Interact Drip irrigation, never asking the same thing

Customize Change behavior based on feedback

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Call centerMove from cost center to profit centerSell more to customers (Increase SOC- "Servoce Organization Controls")Support for complicate productsAncillary services (Increase loyalty)Pre-qualify leadsLow-cost market researchImprove Complaint discovery and tracking Practice IDIC ("Infinite Diversity in Infinite Combinations ")

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1to1 web site

Requirements:- Identify and remember visitors (Amazon.com)- Differentiate visitors on each visit- Does this fast!- Tracks and interprets clickstreams- Remembers all this!- Customizes based on individual preferences

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Top 5 Reasons CRM Efforts Failfrom the Home office in silicon valley

5. There isn’t a wealth of experience in this area. No one has got it down to a science (WebVan)

4. The inability to really effectively implement strategy - even if you have the right strategy, process, and rules coding (formulation vs. implementation)

3. The company thinks they understand strategy and process well, but really don’t.

2. No strategy, tactics, business rules or processes in place.

1. The company has processes but they are bad processes (like any automation, CRM tools make good things better and bad things worse _______ ).

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faster

Presentation outlines

Why are companies moving to CRM?What’s in it for you?1to1 principles and best practicesOther challengesWhere do you go from here?

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How you can make an impact1. Get senior management buy-in2. Encourage them to establish your multi-disciplinary

team3. Develop short and long term plans4. Help them start Small, “Light Campfires”

5. Bring in Strategy/Change Management/Training coaches

6. Help ”decode” IT and marketing Needs and Languages7. Evaluate and prioritize projects. Look for a couple of

“Quick Wins”

8. Document success, share across the company (best practices)

9. Start scaling the solution, Test, pilot, Test!10. Improve on plans and keep going! 44

Cost-effective 1to1

Below zeros

Most Growable Members

Most Valuable Members

Number of members

MemberValue

• Differentiate by value• Roll out 1 to 1 initiatives based on member value• 80/20 Rule

1 to 1

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20% of (valuable) members but they generate 80% or

more of value

What should you do real soon?1. Work on your database!2. Ask one question at each interaction3. Develop a strategy for your BZs4. Figure out who you really want to do business with 5. Find out why some customers who are buying less this

year6. Make those touch point improvements!7. Check out your VRU again8. Improve complaint handling9. Customize what you can, economically10. Ask your best customers what you can do

differently/better for them (DO IT)

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Trend for Now and Future Social Media

Technology Big Data and Data

Mining Market Basket Target Market

Cloud computing Others …

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