A Customer - Centric Organization

As A
Socio -Technical System
 Overview

CRM is not a product or service

“A strategy used to learn more about customers'

needs and behaviors in order to develop stronger
relationships with them”

It provides an integrated view of a company’s

customers to everyone in the organization.
An overall business strategy that:
• enables companies to effectively manage
relationships with their customers.
• which dictate re-designing of functional
activities
• which drive re-engineering of work processes
• which require CRM technology to implement

CRM is a "chain reaction"

Why is CRM Necessary?
Gather & access information about customers'
buying histories, preferences, complaints, and other
data so they can better anticipate what customers
will want.

The goal is to instill greater customer loyalty

CRM helps businesses use technology and human
resources to gain insight into the behavior of
customers and the value of those customers.

Identifying the most profitable customers

(Pareto’ s Principle 80:20)
CRM at the forefront - Reasons

Global competition ↑& products harder to

differentiate,
Product-centric view to a customer-centric
view

Technology has ripened to the point where it's

possible to put customer information from all over
the enterprise into a single system
Types of CRM /Areas of Application
Traditional CRM -transaction level data about
individuals and products-sales force automation,
marketing automation and call center systems

Operational CRM -tracking customer activity-

analytics - strategic planning support tool

Collaborative CRM -provides a point of

interaction between customers; staff and
business partners, through a portal

eCRM - online components of CRM

Market Movement
The Indian CRM Market - Rs. 50-100 Crores
CRM Market - segmented

Software Services

Services segment Out-Sourced CRM Services

Integration Training

Consultancy

CRM Services Market > Market for CRM Software

Indian Market for CRM Software and Services would
grow to about Rs. 100 Crore by 2002
CRM Market Segments
Global CRM Market
Forecast by Vertical Industry

•communications/telecom
•financial services/ banking/insurance
•discrete manufacturing/technology
•retail/consumer goods and services
•81% of the total market opportunity for CRM
services
Trends in the Market
Elements of Integrated Customer
Management
Benefits
❧Customer Advocacy
❧ Loyal customers = Profitability↑@ ↓ cost
❧ continual revenue stream
❧ opportunities for cross sell and up sell
❧ a rich source of referrals
❧ A customer-centric organization ensures that
customers have a consistent, satisfying, and
personalized experience
 ROI
❧ Bottom Line -biz has to sell more and service
that demand without increasing the resources
to do so
❧ increase revenues or reduce costs
❧ Top-line growth
❧ 3 sources only
Better Customer Management

Targeted Selling Efforts Focused Customer Retention

Case Study - Innovative Company

❧ $100 million in annual profits and 1 million

customers
❧ Baseline plans -grow customer base by 5% in
the next year (with a 15%↑in customer growth
and a 10% reduction due to customer attrition)
❧ Performing well
❧ Average profits are $100 per customer
❧ what steps they should take to improve
overall profitability??
Detailed customer profitability for
each of its 1 million customers

❧ segmented their customers into 10 profitability

buckets
❧ Top 1% of customers - highest profitability
❧ Bottom segment - 10% of customers with the
worst profitability results
❧ profitability ranges from an average $1,150 in
the top segment to an average $300 loss in
the their bottom segment.
Profitability% of Nu m ber of % of A verage T otal Profits
Segm en t C ustomersC u stom ersProfits C ustom er $M illions
Profits
1 10% 100,000 115% $1,150 $115.0
2 10% 1 00,0 00 25% $250 $25.0
3 10% 1 00,0 00 10% $100 $10.0
4 10% 1 00,0 00 5% $50 $5.0
5 10% 1 00,0 00 0% $0 $0.0
6 10% 1 00,0 00 - 2% - $20 - $2.0
7 10% 1 00,0 00 - 5% - $50 - $5.0
8 10% 1 00,0 00 - 8% - $80 - $8.0
9 10% 1 00,0 00 - 10% - $100 - $10 .0
10 10% 1 00,0 00 - 30% - $300 - $30 .0
TO TA L 100 % 1 ,000 ,000 100 % $100 $100 .0
3 initiatives to improve overall profitability

❧ Better Customer Management

❧ Targeted Selling Efforts

❧ Focused Retention Efforts

Better Customer
Management
❧ Grow the top customers’ profits by only 3%
❧ The next 4 groupings of customers by 5%
❧ Decreases the losses on the less attractive customers by
10%
❧ Courses of Action
❧ Use more of existing products
❧ Increase fees, stop waiving fees or discounting revenues
❧ Migrate customers to less costly distribution channels
❧ Cut excess capacity and channel costs
Profitability % of Profits Average % Change in New Average
Segment Customer Avg. Profits Profits
Profits
1 115% $1,150 3% $1,185
2 25% $250 5% $263
3 10% $100 5% $105
4 5% $50 5% $53
5 0% $0 0% $0
6 -2% -$20 -10% -$18
7 -5% - $50 -10% -$45
8 -8% -$80 -10% -$72
9 -10% - $100 -10% -$90
10 -30% -$300 -10% -$270
T OT AL 100% $100 11% $111

Average profits↑ by 11% or $11 per customer

Targeted Selling Efforts
❧ Increase customer base by 15% or 150,000 customers
❧ If IC can acquire a few more profitable customers and a
somewhat fewer customers with an unprofitable profile???
❧ Without targeted selling - 150,000 customers with an average
profitability of $125 =worth $15 million
❧ With targeted selling - 150,000 customers with an average
profitability of $263 = worth more than $39 million
❧ Diff of more than $24 million & a 163%↑ over the status
quo scenario
ProfitabilityAverage % Status Quo% T argeted
Segm ent C ustomer Distribution Selling Distribution Selling T otal
Profits for Status T otal for TargetedProfits
Quo Selling Profits Selling $M illions
$M illions
1 $1,150 10% $17.500 20% $34.500
2 $250 10% $3.750 15% $5.625
3 $100 10% $1.500 15% $2.250
4 $50 10% $0.750 15% $1.125
5 $0 10% $0.000 10% $0.000
6 -$20 10% ($0.300) 5% ($0.150)
7 -$50 10% ($0.750) 5% ($0.375)
8 - $80 10% ($1.200) 5% ($0.600)
9 - $100 10% ($1.500) 5% ($0.750)
10 -$300 10% ($4.500) 5% ($2.250)
T OT AL $100 100% $15.000 100% $39.375
Focused Retention Efforts
❧ Attrition - IC loses 10% of their customer base
every year due to customers moving out of the
service area, customer satisfaction issues and
other reasons
❧ 100,000 customers = $10 million in customer
profits
❧ If they can lose fewer of their more valuable
customers and more of their less valuable
customers??
Profitability Average Status Quo Status Focused Focused
Segment Customer Customer Quo Customer Retentio
Profits Attrition Retention Retention n Lost
Distribution Lost Distribution Profits
Profits $Millions
$Millions
1 $1,150 10% ($11.500) 5% ($5.750)
2 $250 10% ($2.500) 5% ($1.250)
3 $100 10% ($1.000) 5% ($0.500)
4 $50 10% ($0.500) 5% ($0.250)
5 $0 10% $0.000 5% $0.000
6 - $20 10% $0.200 15% $0.300
7 - $50 10% $0.500 15% $0.750
8 - $80 10% $0.800 15% $1.200
9 - $100 10% $1.000 15% $1.500
10 -$300 10% $3.000 15% $4.500
TOTAL $100 100% ($10.000) 100% $0.500

Realize a $500,000↑ in profits

The Bottom Line
❧ Grow by 5% because the customer base grew
by 5% and their distribution of customer
profitability remains unchanged
Vs
❧ Customer base by 5% but has the potential to
grow total profits by 10 times.
❧ Even if IC can only achieve 50% of this goal
-five-fold increase
Customer Satisfaction
Revenue Growth
Managing Costs
 CASE
SHOPPERS’ STOP’S “FIRST CITIZEN CLUB”
 Launched in 1994 (shoppers’ stop opened its first store in 1991) 4000 +
FCC members in 1994
 Three Tier system
Classic-Rs.2500 p.a/Silver-Rs.10000pa/Gold-Rs.40000p.a
 100000 FCC members in 2000
Gold:2% , Silver:25% , Classic:73%
 15% of the walk-ins on any day are FCC members
 40% – 60% of sales come from FCC members
 FCC Programme integrated into in-store
ERP package Merchandise Management
Progress happens not when questions
are answered
But when answers are questions !