eCRM: 1 to 1 Marketing

Jason C.H. Chen Professor of MIS School of Business Administration Gonzaga University, Washington, U.S.A. Senior Consultant, Taskco.com chen@gonzaga.edu

Presentation topics
Why are companies moving to CRM ? Whats in it for you? 1 to 1principles and best practices Other challenges Where do you go from here?

eBusiness Key Concepts

eBusiness

The strategy of how to automate old business models with the aid of technology to maximize customer value The process of buying and selling over digital media

eCommerce

eCRM (eCustomer Relationship Management)

The process of building, sustaining, and improving eBusiness relationships with existing and potential customers through digital media

eBusiness Processes
WHY Customer Relationship

WHAT

Redesign Business Processes (Outside-In)

HOW

Applying Technology

CRM has become the #1 priority for CEOs

Customer Relationships Have Become the top priority for CEOs Worldwide
1. Relationship with Customers 2. Cost Competitiveness 3. Effective Use of Information Technology 4. Managing Change 5. Shareholder Value 6. Revenue Growth 7. Industry Restructuring 8. Globalization 9. Value-Added Supplier Relaationships
Source:A.T. Keamey,1994 Executive issues Survey; A.T. Keamey,1997 CEO Global Business Study

Figure 1:Top Executive Priorities Ranked By Percent Citing Issue As Critically Important

CRM has become the #1 priority for CEOs

Senior Executives Expect Current Customers to Drive Future Revenue Growth

Alliances 7% New Customers 19%

Acquisitions 6%

Deeper Penetration 46%

New Products 22%

Source:The Alexander Group,Incorporated,1996

Why the shift in focus to CRM?

Most companies have already attained operating efficiencies and optimum productivity through past efforts of :
Downsizing Strategically outsourcing non-value added actives Business Process Reengineering Implementation of FRP System

Products in many industries have become commoditized forcing companies to sacrifice margins for sales volume

Presentation topics
Why are companies moving to CRM ? Whats in it for you? 1 to 1 principles and best practices Other challenges Where do you go from here?

And oh, check these numbers

Cutting customer defections by just 5% has the effect of boosting profit between 25% and 85%.* Today ,the average business is losing between 15-35% of its customers annually** 69% of these defections are due to a poor sales or service interaction with the customer**
*Harvard Business Review **Forum Corporation

Investment in CRM capabilities can provide significant financial benefits

50% 40% 30% 20% 10% 0% 2% 42% 35% 25% 20%

ts ns gs ue se s ve n e c r e a du c t i o ve m e n R a t i n Re D o e n h R o st m pr s f a c t i o s C L e n gt r gi n I e tati Sa l e Ma er S y cl t om es C Sa l C us
Source:Insight Technology Group,1998

Other reasons why you need 1 to 1

Increase customer loyalty Get more business per customer Become less dependent on price Increase customer satisfaction Save time Speed up your sales cycle

Our Objectives

1. Get customers 2. Keep customers 3. Grow customers

The only difference is how firms do this

Share of market vs. share of customer

Customer Needs Satisfied
Share of Market

Mass

Marketing

Customers Reached

Share of market vs. share of customer

Customer Needs Satisfied 1 Mass

The longer the bar, The higher unit Margins will be

Share of Customer

to Marketing

1
Share of Market

Customers Reached

In four words

Treat different customers differently

A lasting competitive advantage

The only true competitive advantage comes from the understanding you have of your customer that your competitors dont.
This information has to come from the customer.
The more effort customer invests,the grater their stake in making relationship work. Going to a competitor = Reinventing the relationship

Presentation topics
Why are companies moving to CRM ? Whats in it for you? 1to1 principles and best practices Other challenges Where do you go from here?

Summary of 1to1 strategies

Identify
Customer: -Identities -Contact info -Transactions -Interactions -Give the right people access when they need it One view of the customer: Integrated customer data

Differentiate
Value: -Actual (current profits) -Strategic (potential value) Needs: -Individual -Segment All customers are not created equal

Interact
Learn more: -Needs -Value -Preferences -Behaviors

Customize
Customer Need Set: -Product -Service -Delivery -Bundles

Never make a customer tell us the same thing twice

Use your knowledge about customers to customize

IdentifyWhat information do you need?

Goal: obtain more and better information about a greater number of your customers and use it to build relationships Name, rank, serial number, phone, fax, email History,transactions Customer needs - Business objectives - Complaints - Choice of communication channel - Habits and preferences Revenues, profitability, LTV - Potential value - Lifecycle stage

Source:Insight Technology Group,1998

Where is the customer data?

Where is it? Who has access? Who manages it ? Who owns it?
Sales
Customer Service

Marketing
Collections Department

Operations
Other Providers

Internet
Call Center

How do you manage it ?

Make sure individuals are recognized at all contact points Link customer interactions over time, across all divisions Give the right people access to this info at the right times Figure out who the customer is when the customer is an enterprise

Recognize Company/Family Linkages (BEST OF BREED)

Works.com is an online office supply retailer that offers customers a master agreement that covers all employees

Charles Schwab creates links

Broker access to complete customer account(s) including business and personal links

Broker sees account the way the customer sees the account Picks up where last action/interaction left off Integration across all channels

One Customer view is key

Integrate customer information across the value chain

Customer A
Customer A Customer A Customer A

Customer A

Marketing

Call Center

The Web

Sales Force

Differentiate
Customers have different values to the enterprise

Actual value Strategic value=share of customer,not market

Customers have different needs from the enterprise

Tiering by actual value

First: Determine Actual Customer LTV

First Tier

Second Tier

Third Tier

Fourth Tier

Fifth Tier

Tiering by strategic value

Use dialogue to determine Customers potential

First Tier

Second Tier

Third Tier

Fourth Tier

Fifth Tier

Naming the tiers

Keep These Customers
Grow These Customers
Actual Strategic Servicing Costs

Fire Them?

MVCs

MGCs

Migrators Migrators BZs

Call Center Example

Inbound queries through a call center MVC Routes to Designated Call Request for Center Agent directly Caller A service after VRU identifies MVC and their need MGC Request for Caller B service Routes to general split agent after VRU Migrator or BZ Request for Caller C service VRU prompts to go to web site for info access

8% APR 11% APR 18% APR

Basis of customer differentiation

Differentiate them by their NEEDS What the customer needs, not what you want to sell Some needs are apparent through transactional records

How to think about NEEDS

Initial learning about product Marking initial contact Decision in what to buystyle, design, information Decision in how to configure Preferences color, size, shapes, added services Pricing, billing, financing Pick-up, delivery Usage purpose, frequency, nature, patterns Errors, complaints Next purchase

Interact Interaction strategy

Goal:Generate more customer feedback less expensively and use it as a competitive advantage - From expensive sales people to call center to the even less expensive Web site - Identify all contact points We identified all guest contact points, and the employees most likely to be involved. It was eye-opening. No one realized how many opportunities we were missing. Patrick Kennedy, GuestNet CEO - Generate feedback, not just messages - Engage your customers in an ongoing dialogue that enables you to learn more and more about their particular needs, priorities, and interests

Rules of interaction
1. 2. 3.

4.

5.

Conversation is a consensual act Neither party in control Feedback results in behavior changes by everyone in your organization Each interaction picks up where last left off across al channels Dont ask too much: use drip irrigation

Benefits of Interaction
Uncovers

Needs (so you can sell more) (Dis)Satisfaction Risk of defection Complaints

Makes you smarter about the customer each time Helps build barriers to exit

Touch point integration

Integration of all customer contact points is becoming increasingly important as customer information migrates to the Web Beyond the Phone

Interaction Using Call Centers

Measuring the efficiency of call centers:

Hold times and call abandonment rates Ratio of complaints handled on first call Percentage of inquiries generating leads Share-of-customer data gathered
Review the metrics list which metrics are efficient vs. effective? Which ones support Learning Relationships?

Measuring their effectiveness:

What are the implications when you off load support the web? How does the call center change

Capital One The customer call

Analyze data on 7M households
Customize Identify Interact Differentiate

Also analyze related data on millions of Capital One customers Pick from 50 options on whom to notify
Remember and pass along 25 pieces of info related to this particular customer

Prepare service rep to make customized product offer at end Predict what this of call individual may want

Customer Interaction Worksheet

(premier On-line Invetment Firm)
Tier IVR&Routing
Wait Time: None Trade Wait Time: None CSA: Best(H:H) and dedicated team

Contact
Call Time: Unlimited Loyalty Offer: Yes CO-Browse Education: Xsell,poss ABC value a service,e.g.,Advice

Resolution
Response type: Customers desired channel E-mail Response Time: Immediate Resolution Cost: open-ended

Diamond (1-2%)

RETAIN GROW UP or OUT

Cubic
Zirconium

Sapphire (ca 5%)

Wait Time: <10secs Trade Wait Time: Virtual None CSA: Best Available high skill(H:M;M:M) Wait Time: <30secs Trade Wait Time: Almost None CSA: Average(M:M;M:M)

Call Time: Not limited Loyalty Offer: Situational Education: Advanced Site features product upsell

Response type: Customers desired channel E-mail Response Time: 4 hours Resolution Cost: <$150 with no escalation Response type: e-mail or web E-mail Response Time: 12 hours Resolution Cost: <$30 with no escalation(Behavioral incentives) Response type: e-mail or web E-mail Response Time: 18 hours Resolution Cost: Avoid monetary resolution

Pearl

Call Time: <4minutes Loyalty Offer: Situational Education: New product/Services or self sufficiency Trade: More $ for broker assisted Call Time: <3 minutes Loyalty Offer: No Education: Self-sufficiency Other: Pay for service Trade more $ for broker assisted

Wait Time: <2-3min Trade Wait Time: Very Low CSA: New Hire, Temp(L:L )

Customize
Reward customers for collaborating with you by tailoring whatever you possibly can for them: service, fees, billing, delivery, terms, product - Low cost - High efficiency - Based on individual customer preferences

How mass customization works

Production and service delivery processes are modularized Component elements or services are mass produced Configuration is digitally controlled Finer granularity of modules leads to larger number of possible fits

Mass customization of a credit card offering

Design: Annual Fee: APR: Billing: Ancillary Services: Golf None 8% Weekly Travel Club Nature $10 10% BiWeekly Dining Club NASCAR $15 12% Monthly Card Reg. Art $25 14% BiMonthly Credit Ins. Sports Team $35 16% Org. by Date Accident Ind. School $50
NASCAR

No Annual Fee Billing Org. By Category Purchase Protection

18% Org. by Category Purchase Protectior

12% APR

Standardized modules are combined into

custom configurations (7776 unique options) The more modules,the greater your ability to customize.

Home office: mobile independent package

Wireless 150 hours Local 30 hours free LD 30 hours $.07 Internet $12/month Data(DSL)$59/month
50 Wireless Minutes Standard Messaging Professional Service 2 hours Yellow Page Basic Standard Payment 50 LD minutes Unified Messaging Professional Service 4 hours Yellow Page Advanced E-Payment 50 Local Minutes Follow me Messaging Professional Service continuous Yellow Page Web Site Custom Billing 800 Number

Sample Package
Base Product (full bundle) Follow Me Messaging Yellow Page Web Site 50 Wireless Minutes E-Payment Professional Svs 2 hr

Product/Service Features Communications bundle(wireless,LD,Local,Internet Access, High Speed Data) Mobility package(Messaging,Professional Services,Yellow Pages) Integration across all modes of communication Value proposition A fully integrated,easy to use and manage package Communications and related services that support your need to be mobile and accessible Pricing Full-bundle discount(mobile magnet) Add ons for specific needs Single bill Channel Web access with easy connection to toll-free specialized reps Single point of contact

Mass customization musts

1. 2. 3.

4.

5. 6. 7.

Demonstration that you know the customer (pre-filled out forms) Remembering transactions, history Remembering specific preferences Using knowledge to deliver individual satisfaction Marking it EASY to be a customer Anticipating needs Delivering

Presentation topics
Why are companies moving to CRM? Whats n it for you? 1to1 Principles and best practices Other challenges Where do you go from here?

Infrastructure
Change hurts
1. 2.

3. 4.

5.

Start small Expand gradually, culture changes take time Dont forget about training Hold people accountable for the right things Measure and reward the right things!

Sales
Identify and track the right infor

- Sales forces automation Spend the right time and effort on MVCs, MGCs, and BZs Drip irrigation, never asking the same thing Change behavior based on feedback

Differentiate

Interact

Customize

Call center
Move from cost center to profit center Sell more to customers (Increase SOC) Support for complicate products Ancillary services (Increase loyalty) Pre-qualify leads Low-cost market research Improve Complaint discovery and tracking Practice IDIC

1to1 web site

Requirements: - Identify and remember visitors - Differentiate visitors on each visit - Does this fast! - Tracks and interprets clickstreams - Remembers all this! - Customizes based on individual preferences

Top 5 Reasons CRM Efforts Fail

from the Home office in silicon valley
5. There isnt a wealth of experience in this area. No one has got it down to a science. 4. The inability to really effectively implement strategy even if you have the right strategy, process, and rules coding. 3. The company thinks they understand strategy and process well, but really dont. 2. No strategy, tactics, business rules or processes in place. 1. The company has processes buy they are bad processes ( like any automation, CRM tools make good things better and bad things worse faster).

Presentation topics
Why are companies moving to CRM? Whats in it for you? 1to1 principles and best practices Other challenges Where do you go from here?

How you can make an impact

1.

2.
3. 4. 5.

6.
7.

8. 9. 10.

Get senior management buy-in Encourage them to establish your multi-disciplinary team Develop short and long term plans Help them start Small, Light Campfires Bring in Strategy/Change Management/Training coaches Help decode IT and marketing Needs and Languages Evaluate and prioritize projects. Look for a couple of Quick Wins Document success, share across the company Start scaling the solution, Test, pilot, Test! Improve on plans and keep going!

Cost-effective 1to1
Below zeros Number of members Differentiate by value Roll out 1 to 1 initiatives based on member value

1 to 1 Most Growable Members Most Valuable Members

Member Value

What should you do real soon?

1.

2.
3. 4. 5.

6.
7. 8. 9.

10.

Work on your database! Ask one question at each interaction Develop a strategy for your BZs Figure out who you really want to do business with Find out why some customers who are buying less this year Make those touch point improvements! Check out your VRU again Improve complaint handling Customize what you can, economically Ask your best customers what you can do differently/better for them (DO IT)

What more help? www.1to1.com

Free weekly email newsletter Discussion groups on different aspects of relationship marketing Best-practices database Download tools, spreadsheets, from Enterprise One to One, The One to One Fieldbook Partners Mwashington@1to1.com