Chapter 4:
Implementing the CRM Strategy
Overview
Topics discussed:
Elements of a CRM System
Customer Interphase / Touch Points
CRM Applications
Return on Investment (ROI) of CRM
CRM Costs
Why is ROI of CRM difficult to measure?
Stages of ROI Estimation
CRM Implementation
Case Study: Capital One
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Elements of a CRM System
Mobile-Based
Customer Web based
Interface/ Contacts: Contacts
Sales Person • Direct mail • Telesales
Touchpoints • Text Message
Contacts • Email • Coupons • Kiosks
• Mobile Sites
• Websites
• Applications
Marketing Functions Customer Service
CRM Sales • Campaign Management Functions
Applications Management • Helpdesk
• Segmentation
Functions • Personalization and • Customer Care
Customization
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Customer Interface / Touch Points
Touch Points
Exact moment the firm can simultaneously gather and disseminate information
Interfaces used for customers to interact with the company
CRM System
Needs to provide consistent view of all customers regardless of the touch point being
used
Should provide current information about customer’s needs to maximize opportunity
for sale
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CRM Applications
Sales and Sales Management Function
Contact and quote management, account management, pipeline analysis
Interaction of sales force with prospect, turning prospect into customer, maintaining
mutually profitable relationship
Marketing function
Multi-channel campaign management, opportunity management, web-based
encyclopedia, market segmentation, and lead generations /enhancement /tracking
Personalization
Content management, relationship marketing, and
one-to-one marketing
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CRM Applications (2)
Customer service function:
Incident assignment, escalation, field personnel tracking, reporting, problem
management, resolution, order management, and warranty/contract management
Key to a company’s ability to maintain proactive relations with customers and hence
retain satisfied loyal customers
CRM systems assist in managing help desk and providing customer care
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Return on Investment (ROI) of CRM
Formula: Profits/Investment X 100% = ROI (%)
Is the investment in CRM elements worth it?
The practice of developing and implementing a CRM system should always measure
the expected monetary benefits to see if the investment is likely to payoff
Key questions when ROI is applied in the context of CRM
What should be counted as an investment in CRM?
What should be counted as a return on that investment?
What is the time period over which ROI should be measured?
How do we arrive at the ROI estimate?
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ROI of CRM (2)
Questions on what can be counted as investment in CRM?
Can the system be easily configured and maintained by internal IT staff or is
continuous external assistance required?
What is the cost of training the company’s staff to use the CRM system?
What is the timeframe for implementation and what will happen to the current system
processes during that time?
What are recurrent costs?
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ROI of CRM (3)
Key Decision Questions to Compute ROI for CRM Activities
Consulting Services Procurement & Maintenance
• What will be the consulting cost for the • Can the system be easily configured and
project maintained by internal IT staff or is
continuous external assistance required?
Business Processes
Staffing & Training
• To what degree is business process re-
design necessary? • What is the cost of training the company’s
staff to use the CRM system?
Information Technology Implementation
• What new IT software and hardware must • What is the timeframe for implementation
be purchased to accommodate the new and what will happen to the current system
system? processes during that time?
Vendor Management Costing
• How much customization is required and at • What are recurrent costs in the
what cost? implementation?
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CRM Costs
IT Costs
People Costs
Process Costs
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IT Costs
One-fifth to one-third of total cost
Investment in IT infrastructure, database development and software
Software categories required for CRM Investment
Sales Force Automation
Sales Management Automation
Call-Center Automation
Customer Service Automation
Marketing Automation
Operations Management
E-commerce Functions
Knowledge Management
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People and Process Costs
People costs
Recruitment, redeployment and training costs
Process costs
Market segmentation process, selling process and campaign management process
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Why is ROI of CRM difficult to measure?
Computing the gain associated with a CRM initiative requires that all other variables
impacting profit are held constant
Some CRM investments are necessary costs which enable the functionality of CRM.
Although measuring the return on CRM investment becomes easier with small scale
projects, without appropriate controls in place, the management can-not be sure that the
cause of the change is the CRM investment
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Stages of ROI Estimation
Setting the target
Reaching the target
Building consensus and commitment
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Setting the target
Content
Determine ROI goal of CRM project based on benchmarking, similar projects, external
and internal knowledge
Questions to raise
Is the goal sufficient?
Is this goal achievable?
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Reaching the Target
Content
Generate ideas of how to reach target through internal bottom-up participation, external
views, consultants, benchmarks, etc
Questions to raise
What factors have to change and by how much?
Does it work from a technical perspective?
Are the proposed benefits clear?
Will customers and/or staff accept these measures?
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Building Consensus and Commitment
Content
Have executives and line staff agree on proposed ROI goals and ensure commitment
on both sides
Questions to raise
Are we collectively prepared to sign them off?
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CRM Implementation
Implementation Projects
Operational Projects Analytical Projects
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Operational Projects
Objectives:
Construct infrastructure meeting technical and functional requirements of CRM
Don’t directly generate revenue, but provide resources to perform value-added CRM
Projections
Maximize profitability
Reduce support costs
Increase sales and customer loyalty
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Components of CRM Infrastructure
Information
Delivery/ Online
Catalogs
Customer Database
Personalization and Content
Management
Sales force Automation
Partner Channel Automation
Customer Services
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Analytical Projects
Also called Data Analytics
Leverages resources created by operational projects
Adds value by enabling firms to understand their customers
Helps determine customer strategy and development of on-going CRM strategy
Major activities:
Customer data transformation - data warehousing, data integration
Customer knowledge discovery - data analysis, prediction based on results
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Analytical Projects (2)
Capturing all relevant customer information
Data integration and standardization
Real-time updating of customer information
Incorporation of external sources of information
Evaluation of customer-related back office data
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Analytical Projects (3)
Customer demographic analysis and customer behavior modeling
Define customer segments to form basis for differential marketing decisions
Analysis of customer transaction history
Analysis of customer service records
Prediction of future purchase behavior
Customer Value Assessment
Focus resources on most valuable customer relationships
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Deploying Operational and Analytical Outputs
Issues with executing CRM strategies
Resistance from employees
Motivation and Training
Availability of information
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Improving Profitability by Investing in CRM
Economic
Medical Legal
Social Issues Marketing
Challenges
Ignored Technical
Managerial
Political
Resources
Required
Original Process
Pre-CRM
Challenges
Addressed
New Process
Time
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CRM at Work
Enhancing Customer Interface using technology
La Croissanterie introduced loyalty program
which allowed customers to record purchases through
three channels – loyalty card, a mobile phone, or a transit pass
Customer data collection was possible using
Near Field Communication (NFC) technology
CRM Implementation
In 2008 economic slump, Giant Eagle, a national
grocery chain, realized the importance of CRM program
Giant Eagle increased use of its customer loyalty program through fuel discounts, which
managed to cross-over fuel discounts with a food discount loyalty card and increasing cross
buy between food and fuel.
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Case: CRM Practices at Capital One
Segmentation Strategy
Targeting all types of risk profiles, offering different prices and products
Customer database distinguishes high-risk ‘revolvers’ and low-risk ‘transactors’
Retention Strategy
Help retain customers when introductory rate expires or risk of ‘dormancy’ exists
Operations aligned with customer requirements
Personalized and flexible handling of customers
Calculation of profitability on an individual basis to improve product offer to customer
IT infrastructure
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CRM Practices at Capital One (2)
Collections
Payment assistance, recoveries and fraud
Sales
Sales system (SALSA) enables targeting cross-sell offers to specific customers
Uses accumulated data on customers to suggest how to react to specific customer
requests
Co-operation between Marketing and Analysis (M&A) and operations
Partnership to review risk perspective of present and future strategies enabled through
IT
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CRM Practices at Capital One (3)
Information Technology
Interaction with company in terms of prospect pool management and solicitation,
account acquisition, account servicing and call-center technologies, core systems
Human Resources
Managing associate selection and development of company culture
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Test and Learn Strategy
Account Acquisition Account Management
Test Stragety
Executed Developed
Account
Strategies Accounts Tests
Performance
Developed Required Developed
Assessed
Results Results
Analyzed Analyzed
Drives New Product Development
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Systems Infrastructure
Different Systems Working together
Service View
Screen of front-end accolades
Vectus Bass Salsa
Data from Data from Solicitation and
customer customer marketing data
applications applications
MIS
Data Warehouse
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Systems Infrastructure
Use of Data
Online decision
Customer Data Segmentation
of associate
• Statistic consumer data • Expected NPV • Rank order of what to
(identity) • For every customer offer/ cross-sell
• Demographics • For all sales activities • Which products
• Transaction data • Monthly recalculated • Value per product
• Products sold • Products already
• Campaigns received offered (=bared from
sale)
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Growth of Capital One’s Revenues
(Worldwide Operations)
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Summary
Illustrates successful implementation of a CRM strategy
Business model founded on the crucial premise that each customer requires a different
product and service from a credit card provider
Adopted an Information Based Strategy (IBS), to collect information on customers
“Test & Learn” tests customer related activity in a controlled condition before it is introduced
in the market
CRM is viewed as a key strategic process in Capital One; different depts. work in an
integrated fashion towards understanding and satisfying customers
2001 - Capital One was named 3rd ‘Best Place to Work in the UK’ by The Sunday Times.
Capital One named in Forbes 400 list -Best Big Companies in America
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Minicases : Challenges in Implementing CRM
CRM in FMCG Industry:
To define, conceptualize, and implement a suitable CRM approach
B2B CRM Implementation:
To create transparency across customer relationships
To design cooperation processes across the three companies
To develop sales support tools
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Summary
The key elements of CRM are touch points and CRM applications that span sales,
marketing and service functions
Once the elements of CRM are identified it is important to calculate the ROI of CRM to see
whether investment in CRM is worthwhile
Building a complete customer database incorporating all the relevant customer information
from different departments and external sources is very crucial for a successful analytical
CRM project
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