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Customer Relationship Management

Customer Actions Taken After Site Unresponsiveness

Action

Percent

Shopped elsewhere

74%

Sent another e-mail

45

Called a store representative

32

Other

Asked elsewhere, bought at store

Source: Apr. 2000 Jupiter Media Metrix

Customer Relationship Management

Who provides CRM?

Traditional giants such as IBM, Oracle and PeopleSoft

Siebel Systems, which now has a 21% share of the CRM


market

E.piphany

e-mail specialist Kana Communications, NetGenesis

instant chat provider LivePerson.com, Broadbase, Quintus and


Firepond

plus many others.

Customer Relationship Management

Acquisition cost
Quarter

Average Customer
Acquisition Cost

Q3 1999

$35

Q4 1999

$71

Q1 2000

$45**

Q2 2000

$40
Source: Aug. 2000 Boston Consulting Group/shop.org

** Shift from expensive TV advertising to more economical online campaigns

Customer Relationship Management

direct customer interaction

Jupiter reports that

76% of respondents say e-mail is an indispensable part of


customer service.

a listed phone number (65%) and

a FAQ section (53%).

But those e-mails must be answered promptly.

Customer Relationship Management

That's why IDC believes the worldwide market for CRM


products and services will explode to $125 billion by 2004,
from $34 billion last year.

This summer, the Federal Trade Commission fined


Toysrus.com, Macys.com and five other online retailers $1.5
million for making promises they couldn't keep during the
1999 holiday season.

Customer Relationship Management

Expectations

Results

Within 1 hr

15%

8%

1-6 hrs

40%

12%

2hrs and I week

50%

51%

More than 1 week

0%

29%

Source: Jun. 2000 Jupiter Media Metrix

Customer Relationship Management

customer retention

The average online marketer needs three purchases to break


even after acquiring a new customer, according to the survey.

Customer Relationship Management

Evolution of Information Requirements


Materials Requirements Planning
(MRP)
Manufacturing Resource Planning
(MRP II)
Enterprise Resource Planning
(ERP)
Supply Chain Management
(SCM)

Customer Relationship Management (CRM)


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Customer Relationship Management

Number of Relationships

Re
Pr lati
of on
ita sh
bi ip
lit
y

Every Companys Big Unknown ... Customer Value


Full
Potential

Current
Current
Customer
Value

Current

Relationship Duration

Customer Relationship Management


Value ( $ )

Customer Relationship Management Definition


alue
V
The
Targeting

Who Do we target
What segments are most
profitable
What segments match our Value
Proposition
What is the best segmentation
strategy for us / our industry

Acquisition

Re
e
h
of t

hi p
s
n
latio

Retention

What is the best channel for


each segment
What is the acquisition cost for
a channel / segment
Do certain channels deliver
certain types of customers
Cost effective acquisition

How can we improve


retention
What is our average
customer relationship length
How can we hold customer
for as long as possible
What is the most cost
effective method of retention

Duration of Customer Relationship

Expansion

How many products does our


average customer buy
How can we induce our
current base to buy more
products
Who are the prime targets for
expansion
What is the cost of expansion

Customer Relationship Management can be simply defined as everything involved with


managing the customer relationship.

10

Customer Relationship Management

Islands of Automation Need To Be Bridged


Over time, channels & operational systems are added to cater to changing customer
demands. The resultseveral functional groups are interacting with customers
independently.

Sales
Force
Customer
Service
Direct
Mail
Web

Branche
s

11

Customer Relationship Management

Why CRM?

It costs six times more to sell to new customer than to sell


to an existing one.
A typical dissatisfied customer will tell 8-10 people
By increasing the customer retention rate by 5%, profits
could increase by by 85%
Odds of selling to new customers = 15%, as compared to
those for existing customers (50%)
70% of the complaining customers will remain loyal if
problem is solved
90% of companies do not have the sales and service
integration to support e-commerce
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Customer Relationship Management

Importance of CRM
Scope

Depth

Customer Management Process Threads

Customer Interaction Channels

Marketing

Selling

Servicing
Customer Relationship

Strategies

Broadcast
Mail
Field Personnel

Customer Relationship

Agents/Distributors

Structure

Call Center

Are we making the right level


and type of marketing, sales,
and service investments in
each of our customer
segments?

Are we taking a holistic


approach to our customers
across processes and
channels?

Retail
Internet

Customer Relationship

Performance
Back Office Process/Systems

13

Have we implemented best


practices and technology in
process/channel?

Customer Relationship Management

Annual Cash Flow

Customer Relationship Management and Shareholder Value

Service/Usage Revenue
Acquisition
Cost

Cost of Service

Duration of
Relationship

Customer Life Time Value (LTV) is defined by a customers Life Time worth
to the firm and is measured by the net present value (NPV) of the cash flows
generated over the Life Time of the relationship.

Successful Customer Relationship Management can generate positive shareholder value.

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Customer Relationship Management

The Benefits of Customer Relationship Management

In addition to LTV of the customer, likelihood to recommend is another


important benefit of CRM.

Acquisition

Retention

Lift/upsell

Likelihood to
Recommend

Impact on Service Quality

High

Ownership of Problems
Available at
Convenient Times

Easy to Reach
# of Rings

Low
Low

Total Perceived
Value

Know. Product/Svcs.
Resolution Time

Access to
Live Agents

Courteous

Right Tel. #
Know. About Account

Current Performance

The customer value analysis should be performed for each segment individually. The
perceived importance of price and service drivers can differ significantly by segment.

15

High

Customer Relationship Management

The Five Key Drivers of the Lifetime Value of a Customer

Cost of Targeting;

Cost of Acquisition;

Service and Usage Revenue;

Cost of service; and

Duration of relationship.

Customer Relationship Management is about making every customer as valuable as


possible over the lifetime of the relationship

16

Customer Relationship Management

Customer Relationship Management


Process
Capture
Capture Customer
Customer
Data
Data
Measure
and and
Measure
Results
Results

Capture Customer

The
DataCustomer
and Measure
Results

The CRM
Dynamic
Take
Action
to
Capture
Customer
Enrich
the
Customer
Data and Measure
Relationship
Results

Store Data, Mine


Capture
Customer
and Make
Data
and Measure
Information
Results
Accessible

Capture
Build
and Customer
Manage
Data and Measure
Customer
Value
Results

The building blocks of CRM allow an organization to manage this cycle and use the
knowledge on customers to enhance the Life Time value of the customer portfolio.

No organization has perfect information on its customers. Knowledge of customers is


continuously enhanced through the CRM dynamic.

Customer Relationship Management is a ongoing, dynamic learning process for an organization

17

Customer Relationship Management

Implementing CRM must be approached from an Integrated


Perspective
Capture
Capture Customer
Customer
Data
Data
Measure
and and
Measure
Results
Results
Taking action to improve the
relationship without measuring the
results provides no evidence of
success or failure and limits the
opportunity for learning.

Capture Customer

The
DataCustomer
and Measure
Results

CRM
without an
Integrated
Approach

Take
Action
to
Capture
Customer
Enrich
the
Customer
Data and Measure
Relationship
Results

Implementing new technologies without


the knowledge on how to enrich the
relationship is likely to yield a return below
the cost of the capital expenditure.

Capturing gigabytes of customer data


in disparate operational systems that
are next to impossible to access may
render the data useless.

Store Data, Mine


Capture
Customer
and Make
Data
and Measure
information
Results
Accessible

Capture
Build
and Customer
Manage
Data
and Measure
Customer
Value
Results

A data warehouse full of data without


the tools to extract knowledge is
nothing more than expensive
inventory.
Sophisticated mining tools only
produce results only as good as the
data they mine.

Developing insights on how to improve the value of the


customer relationship without having the infrastructure to
take action has no impact on the bottom line. In addition,
there is no opportunity to test the theoretical analysis.

All areas must be implemented, to some degree, to effectively manage the customer
relationship. When pieces are implemented in isolation, the benefits are less than
overwhelming.
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Customer Relationship Management

The Building Blocks of CRM


Data
Capture

Data
Warehousing

Knowledge
Management

Enabling
Technologies

Customer Touch
Point Integration

EIS

Segmentation

Call Centres

Market
Research

OLAP

Customer
Profitability

Sales Process
Automation

External
Databases

Data Cleansing

Data Mining

e-Business

MetaData

Statistical
Modeling

Organization
People
Deployment and Support
The building blocks of CRM are the things that need to be in place for an effective Customer
Relationship management program

19

Customer Relationship Management

Data Capture and Warehouse


What Data do we capture on Customers?
Derived Data
Intentions

ProductPortfolio

External
Data
Census

Product / Service
Preferences

Attitudes

Demographics /
Firmgraphics

Customer
Profile
Campaign
History

Outbound
Contact

Customer
Interactions
Acquisition
Information

Loyalty /
Switching

Migration in
Usage

Customer
Behaviour

Life Time Value

Geodemographics

Profitability

Inbound Contact

Segments

Usage Profile

Householding
Base Data

The Customer Data Model

20

Customer Relationship Management

Enabling Technologies

21

Customer Relationship Management

The Enabling Technologies

Call Centre

Sales Force Automation

e-Business

Techniques:Relationshipmarketing,automatedpackagingandpricing,knowledgebasedselling
Increase revenue from your customer base
Customer satisfaction measure

Consultative selling
Responsiveness to market conditions

SalesForceAutomation
Automatic Call Distribution (ACD)
Incoming Call Queuing
Performance Statistics
Integrated Voice Response (IVR)
Automated Inquiry & Transactions
Automated screen pop on agents
screen
Integration with company legacy
platforms
Billing & Meter Reading
Direct Access to Customer Data

CRM

Technologies

22

ElectronicBusiness

CallCentre

Techniques:ACD,IVR,CTI

Techniques:WEBbased
application,emailprocessing
Automated product and service
information
WEB based sales and support
through standard menus and
automated help screens.
WEB based training
Reaching the global market

Customer Relationship Management

CRM Technologies on the Rise

(Dollars In Millions)

The implementation of CRM


technologies is projected to
accelerate over the next few years

$3,000

The overall use of technology for selling is


growing by more than 50% annually.
Gartner Group
Sales Force Automation is the fastest
growing segment of the high-growth
Client/server market, estimated to represent
$3 billion in revenues by 1997.
Market Intelligence Research Corp.

$2,744

$2,500
$1,960

$2,000
$1,400

$1,500

Sales Force Automation will become a major


driver behind enterprise-wide BPR
(inexorably linked to development of the
customer-focused organization)
META Group

$1,000
$1,000
$500
$0

1996

1997

1998

1999

CRM Revenue

Customer Management is a major initiative at


nearly 80% of Fortune 500 companies and
will grow to a $4.8 billion market by 1999.
Aberdeen Group,
Inc.

Source: IDC 1996

23

Customer Relationship Management

Call Centres - Definition


Call centres are a key enabling arm of Customer Relationship Management. A well designed call centre will
integrate people, process, and technology to improve operational efficiency and maximize the value of the customer
relationship for both inbound and outbound contact.
Call Centre
Technologies

Process

People

Customer data updates, purchase information


Leads tracking update, customer tracking updates
Call statistics, inquiries, etc.

ACD

Marketing / up-selling
Technical support
Product support
Service support
7 x 24 support

CTI
Information

External customer
Internal customer
Sales Force
Support team
Back-office
Technical staff

IVR

Data
Warehouse

24

Customer history, billing, purchases, value, profile


Product & service information, packages, prices
Marketing hints, reports, promotions

Customer Relationship Management

Call Centres - Architecture

Data
Warehouse

Customized Agent Desktop


Applications by Customer & Call Type
Automated Scripting of Call Handling &
Wrap-up
Flexibility to Add New Products,
Services, and Customer Service
Opportunities
Scripted Cross-Selling
Legacy Integration
Billing & Meter Reading
Direct Access

25

Customer Relationship Management

There is a major transition to integrated delivery channels and to


provide one face to the customer.
Call Centre
Old Rule

Call Centre of the Future


Paradigm Shifts

New Rule

Single
Singleproduct
product

Multiple
Multipleproducts
products
and
andcross
crossselling
selling

Backroom
Backroomoperation
operation

Front
FrontOffice
Officeoperation
operation

Stand-alone
Stand-aloneoperation
operation
&&information
information

Distribution
Distributionchannel
channel&&
information
integration
information integration

Minimal
Minimaltechnology
technology

Leading
Leadingedge
edgeand
and
integrated
technology
integrated technology

Reactive
Reactive

Proactive
Proactive

Low
Low skilled
skilledCSRs
CSRs

Multi-skilled
Multi-skilledCSRs
CSRs

Tactical
Tactical

Strategic
Strategic
Enhanced Customer Satisfaction
and Retention Revenue Growth
Lower Cost Distribution

Customer Inquiries
Cost of Business

26

Customer Relationship Management

Sales Process Automation - Definition

Sales Process Automation (SPA) is the approach for helping organizations dramatically improve their
sales and marketing effectiveness through the reengineering and automation of their sales and
marketing processes, with the ultimate goal of increasing revenues. SPA combines a working
knowledge of the markets best ideas, technologies, and vendors with a practical, relentless focus on
implementation to deliver outstanding shareholder and customer value.

BasicFeatures
Intranet - as an alternative sales channel
Electronic catalog - On-line self served service
ordering
Commission - Effective tracking of performances
and accurate commissioning
Opportunity Management - tools such as
automated customer data analysis and pop-up
screens will assist in up-selling
Competitor Data - effective analysis of competitive
data and automated access for sales force
Contact Management - Effective tracking and
follow-up of leads
Customer Data - Sales people will have a
complete analysis of the customer before their
eyes when attending to a customer. No wait, no
repeated questions, no frustrated customers

News Service - Optional news sorting and reporting


will result in informed sales people
Order Entry Quoting - On the spot quoting will not
give the client a chance to shop around and be
hunted
Proposal Development - Automated document
creation based on corporate standards
Pricing - Automated on-line prices based on
company rules
Product - On-line and easily accessed
Just-in-Time Training - Automated training, WEB
based training, and self training through information
sharing
Electronic Kiosk - WEB page shopping.

27

Customer Relationship Management

Sales Process Automation - Benefits


PERCEIVED BENEFITS OF SPA FIELD TECHNOLOGY
Improve Sales Effectiveness
Increase Customer Satisfaction
Increase Revenues
Reduce Sell Cycle
Improve Communications
Improve Management Effectiveness
Team Selling
Decrease Costs
Improve Margins
Reduce Administration
Increase Sell Time

% of Survey Responses (N=295)

Improve Forecasts

Source: Insight Technology Group

Current Information

0%

10%

20%

30%

40%

50%

60%

70%

Improving sales force productivity and effectiveness by implementing field technology is a


key goal for many organizations
28

Customer Relationship Management

e-Business - Definition
Business Partner

Business
Processes

The Value
Proposition
of
Electronic
Business
Solutions

Integrating
more directly
with the
business
processes of
Business Processes
customers and
partners
Business to Business
Tailoring
products and
services to
customers
needs and
values
Business to Customer

Profiles &
Preferences

Business Partner
Extending key business
applications to clients and
business partners

e-Business
e-Business is
is all
all about
about integrating
integrating the
the internal
internal and
and external
external processes
processes between
between business
business partners
partners and
and
customers.
customers.

29

Customer Relationship Management

e-Business - Benefits

On average, it costs about $5 - $50 per query to support via phone

On average, it costs about $1 - $3 per query to support via E-mail

On average, it cost less than $1 per query to support via WWW

Internet technology can improve the level of customer care, while reducing the cost of
maintaining the customer base.

30

Customer Relationship Management

e-Business - Architecture
A$X,XXX B$X,XXX

1. Adaptive
Product Offer

Internet
and
World
Wide Web

5. Product
Fulfillment
Pick and pack
Integration/configuration

Customer preferences
Products and availability
Pricing and promotions
Adaptive selling
Build/configure to order

of third party products

Ship products or deliver servic


Inventory management
Order tracking

2. Order Capture
and Validation

Order entry
Tax calculation
Validation
Confirmation

Payment

3. Payment
Processing

information
Security
Link with
finance

4. Order
Management
Link with third parties
Create pick list
Consolidate orders

For
For both
both business-to-business
business-to-business and
and business-to-consumer
business-to-consumer sales,
sales, there
there are
are five
five key
key elements
elements to
to
e-Business
e-Business
product
product offer,
offer, order
order capture
capture and
and validation,
validation, payment
payment processing,
processing, order
order
management,
management, and
and product
product fulfillment.
fulfillment.

31

Customer Relationship Management

Conclusion
Call Centres
Customer Care Systems
Sales Force Automation
IVR

Data Warehouse

Customer
Management
Systems

Service
Management
Systems

Billing System

Enterprise
Management
Systems
Business
Management
Systems

Network
Management
Systems

OSS

SAP, PeopleSoft, Oracle,


etc.

Customer Relationship Management is an integral part of successful convergence

32

Customer Relationship Management

The CRM Market

33

Customer Relationship Management

CRM Marketplace - Fast Growth To-Date with a Bright Future


Worldwide Front-office Applications, 1998, US$b
Vendor Revenue (Software and Services)

Worldwide Front-office Applications, 1998, US$b


Vendor Revenue (Software and Services)

TES

TEM

CSS
20

in billions

16
12

$1.60

$2.00

4
0

1998

1999

2000

2001

2002

2003

The software and service revenue from


CRM vendors will reach $19 billion by
2003 (0.6 probability).

$0.60
= $4.2b up 45% 55-45
Service to Software

Source: GartnerGroup
:
34

Customer Relationship Management

Explosive Market Growth

Application License Revenue in Billions


% Change

Customer
Management

$1.46

Industry Specific

$2.02

Human Resources

$0.83

Supply Chain

$2.02

Manufacturing

$1.52

Financials

53.9%
39.5%

$5.33

265%

$5.49

172%

$1.83

120%

$3.70

83%

$2.53

66%

$2.18

19%

30.0%
22.4%
18.5%
$1.83

6.0%

1998

2001
Based on Forrester Research

35

Customer Relationship Management

The CRM Market - No Clear Market Leader

60% of the $2.0B CRM software license market is controlled by 3


vendors
Siebel
Trilogy
Baan/Aurum

60% of the Top 3 share is controlled by Siebel

No vendor will have complete CRM functionality until 2003 (Gartner)

The 1998 consulting market for CRM is estimated to be $4.0B (2:1)

The consulting market for CRM is a large and growing high margin /
high revenue opportunity in contrast to the shrinking ERP market

36

Customer Relationship Management


Tier 1: CSS Applications for
Large Enterprises

Ability to Execute

Challengers

Leaders

SCT Utilities (2)


Broadway
& Seymour (3)

Clarify
IMA

Onyx
Platinum Software/Clientele

Applix
Remedy/Baystone

Point Information
GWI (a)

Silknet (5)

Astea

ERP
Vendors
(b)

Chordiant (4)
As of 1/99

Niche Players

Visionaries

(1) CorePoint is a subsidiary of IBM, consisting


of various IBM customer service application
assets
(2) SCT Utilities: Large utilities only
(3) Broadway & Seymour: Banks only
(4) Chordiant: Large call centers only

CustomerSoft
SalesLogix

Royal Blue

Niche Players

As of 1/99

Visionaries

Completeness of Vision

Completeness of Vision

(5) Internet-centric

Leaders

Siebel (6)

Quintus

IBM/CorePoint (1)

Oracle

Challengers

Vantive

Pegasystems (8)

ERP
Vendors
(7)

Tier 2: CSS Applications for Small to Midsize


Enterprises or Divisions of Large Enterprises

(7) Major ERP vendors currently have noncompetitive feature/


function sets
(8) Pegasystems: Due to its broad product line, its direct CSS
applications license revenue and strategy is uncertain
(a) GWI: Lotus Notes platform
(b) Many mid-market ERP vendors express a vision of creating
full-featured CSS applications, but have not executed yet

(6) Siebel now includes Scopus

37

Customer Relationship Management

CRM Vendors
Vendor

CRM Market Position


Acknowledge leader
Very integrator focused

TRILOGY

Leader in their niches


Not integrator focused
Excellent product
Number 2, but struggling

Product continually delayed


Intimidation capacity lessening
Bold announcements
Claim high strategic priority

38

Customer Relationship Management

Siebel 99

Siebel Sales Enterprise

Siebel Marketing Enterprise

Siebel Service Enterprise

Siebel Call Center

Siebel Field Service

Siebel Handheld

Siebel InterActive

Siebel Product Configurator

Siebel Sales

The Most Complete ERM Solution


39

Customer Relationship Management

Siebel Industry Solutions


Siebel Finance
Siebel Insurance
Siebel Communications
Siebel Consumer Goods
Siebel Pharma
Siebel Utilities
Siebel Public Sector
Siebel High Technology

40

Customer Relationship Management

Siebel 99 Product

More than 600 Person Years of Engineering

1100 Screens

1300 Business Objects/Components

110 Reports

900 Database Tables

144 Interface Tables

41

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