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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