Session Three

Implementing the CRM Strategy

 Topics Discussed
• Elements of a CRM System

• CRM Applications

• CRM Costs

• Stages of ROI Estimation

• CRM Implementation

• Case Study: Capital One

 Elements of a CRM System
Web based
Customer Contacts
Sales Person • Direct mail • Telesales
Interface/ Contacts • Coupons • Kiosks
• Email
Touch points • Websites

Marketing Functions Customer Service

Sales Functions
CRM • Campaign Management
Management • Segmentation • Helpdesk
Applications Functions Personalization and
• • Customer Care
Customization
 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
 CRM Applications (contd.)
• 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
 ROI (Return on Investment) of CRM
• Formula: Profits/Investment X 100% = ROI (%)

• Questions on what can be counted as investment in CRM?

– How much will consulting for the project cost ?

– To what degree is business process re-design necessary?
– What new software and hardware must be purchased to
accommodate
the new system?

– Does the system need to be customized or will it work “out of the

box”?
– How much customization is required and at what cost?
 ROI of CRM (contd.)
Questions on what can be counted as investment in CRM? (contd.)

– 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?
 CRM Costs
• IT Costs

• People Costs

• Process Costs
 IT Costs
• One-fifth to one-third of total cost
• Investment in IT infrastructure, database development and software
• Software components
– Sales force automation
– Sales management automation
– Call-center automation
– Marketing automation
– Customer-service automation
– Knowledge and operations management
– E-commerce functions
 People and Process Costs
• People costs

– Recruitment, redeployment and training costs

• Process costs
– Market segmentation process, selling process and campaign
management process
Stages of ROI Estimation
Setting the target

Reaching the target

Building consensus and commitment

 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?
 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?
 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?
CRM Implementation
 Operational Projects

Objectives:
– Construct infrastructure meeting technical and functional
requirements of CRM

– Maximize profitability

– Reduce support costs

– Increase sales and customer loyalty

Components of CRM Infrastructure

Component Description

1. Information Delivery/Online Catalogs Capability to display and list company's

products and services online

2. Customer Database Capture, organize, present, and analyze

customer-specific data

3. Personalization and Content Utilizing results of data analysis to

Management create an individualized experience for
customers

Enhance/modify service delivery

vehicles to match specific needs of
customers
 Components of CRM Infrastructure
(contd.)

4. Sales force Automation Deployment and use of tools and services

designed to automate sales and marketing
lifecycle

5. Partner Channel Automation For integration of a company's service vehicles

with those of its provider and third-party partners

6. Customer Services Use of technology and business processes to

successfully support a company's products and
services
 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
 Analytical CRM
• 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

 Analytical CRM (contd.)
• 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
 Deploying Operational and Analytical Outputs

• Issues

– Resistance from employees

– Motivation and Training

– Availability of information
 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
CRM Practices at Capital One (contd.)
• 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
 CRM at Capital One (contd.)
• 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
Test and Learn Strategy
 Capital One: Systems
Infrastructure
Different systems working together

SERVICE
VIEW

Screen of front end associates

VECTUS BASS SALSA

Data from Account

customer servicing Solicitation and
applications data marketing data

MIS

Data warehouse
 Use of Data

Online decision of
Customer data Segmentation associate

•Static customer data Expected NPV = Expected Rank order of what to Offer/

•(Identity) response X product NPV cross sell

•Transaction data For every customer Which

- products

•Products
• sold For all sales activities • Value per product

•Campaigns received Monthly recalculated Products already offered

-
= (barred from sale)

Decision captured and fed into data warehouse

Growth of Capital One’s Revenues
(Worldwide Operations)
Revenues
Millions
2529

$2,500

1924.5
$2,000

1412.5
$1,500
1048.4
769.5
$1,000
590
436.9
$500

$0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
1996 1997 1998 1999 2000 2001 2002
Annual
Growth 63% 40% 33% 39% 29% 36% 41%
Rate
 Capital One: 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
 Minicases : Challenges in
Implementing CRM
• CRM in FMCG Industry: Henkel (Dial)

– To define, conceptualize, and implement a suitable CRM

approach

• B-to-B CRM Implementation: Deutsche Post World Net

(international logistics service provider (Euro Express, DHL)

– To create transparency across customer relationships

– To design cooperation processes across the three companies

– To develop sales support tools

 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