1 fundamentals of crm

Editor's Notes

• #3: The highly competitive Internet market has empowered customers to demand both quality products and world class customer service. As products become increasingly less differentiated, customer service will distinguish market leaders from market losers.
• #5: Lets understand what do we mean by each of these keywords. Customer: The word historically derives from "custom," meaning "habit"; a customer was someone who frequented a particular shop, who made it a habit to purchase goods there, and with whom the shopkeeper had to maintain a relationship to keep his or her "custom," meaning expected purchases in the future. Relationship:
• #9: With the changing business scenario, the customer view of the ‘delivered value’ of the product or the service is changing drastically. When buying a product or a service, every customer used to have only a single purpose in mind (its USE) which acted as the key evaluator for that product or service. Today, the value has changed and it has in effect changed the way in which the customer looks at the product or service. Today, usage is not the only criteria but all the additional benefits that the product or service can deliver. The customer looks at a number of factors before buying the product or service e.g. Quality, Availability, Delivery service, Price, After sales service etc.
• #10: Knowing the customers is not enough. The key differentiating factor here is how effectively the customer information is used to your benefit. Its all about knowing your customers better than your competitors.
• #11: Customer Focus is all about putting your Customer ‘FIRST’ –at the employee level, at the process level, at the policies level, at the strategy level: all in all its about aligning your organization to the changing needs of the customer. The challenge here is not only to know your customers but to know your customers ‘Well’.
• #12: Building a Customer Focused Enterprise is the key to an effective CRM strategy. The customer sits at the heart of the system interacting with the enterprise through the 3 key customer centric processes i.e. Marketing, Sales and Service. The interaction happens through the touch points created by various communication channels. The 3 customer centric processes interact with all the other enterprise components making use of the central customer data. The enterprise in turn interacts with the external environment to get the customer information. This gives a 360 degree view of the customer where the enterprise is driven by the customer (data) placed in the centre.
• #13: Let us now look at the concept of the customer-centric process cycle. Marketing, Sales and Service form the 3 major process areas to be looked at from a customer-centric perspective. From identifying your customer base to delivering superior value to your customers, the diagram above gives a flavor as to how our processes can be aligned to focus on our customer-centric business objectives. Each of these processes are discussed in detail in the slides to follow.
• #14: Marketing: It has been defined as a process which “consists of analyzing market opportunities, researching and selecting target markets, developing marketing strategies, planning marketing tactics, and implementing and controlling the marketing effort to satisfy customers and generate profits.”
• #15: From a seller's point of view, a sales process mediates risk by stage-gating deals based on collection of information or execution of procedures that gate movement to the next step. This controls seller resource expenditure on non-performing deals. Ideally this also prevents buyers from purchasing products they don't need though such a benefit requires ethical intentions by the seller. Because of the uncertainty of this assurance, buyers often have a buying or purchasing process. Sales processes are generally more common for companies that either have large revenue risks that require systematic assurance of revenue generation and/or those that choose to use a more consultative sales approach (e.g. Saturn, IBM, Hewlett-Packard). Strictly even an effective ad hoc or retail sales process can be described by steps of an ideal sales process though some of the steps may be executed quickly. Often a bad sales experience can be analyzed and shown to have skipped key steps. This is where a good sales processes mediate risk for both buyer and seller. Many companies develop their own sales process; however, off the shelf versions are available from companies such as Huthwaite International and Miller Heiman. These provide a customisable process and a set of electronic tools that can be freestanding or can be integrated if required with the company's CRM or opportunity management system. Sales Cycle consists of: Planning Process Execution Process Analysis Process Feedback loop: Plans  Execution Activities  Results  Analysis Control  Plans
• #17: The highly competitive Internet market has empowered customers to demand both quality products and world class customer service. As products become increasingly less differentiated, customer service will distinguish market leaders from market losers.
• #18: Companies need capabilities in the following eight areas for successful CRM: CRM vision: Building a market position against competitors with defined value propositions based on requirements, personified by the brand and communicated. CRM strategies: Turning the customer base into an asset via delivery of customer value propositions (CVPs). A strategy provides objectives (for example, development) and defines how resources will be used in interaction. Valued customer experience: Ensuring that the propositions have value to customers and the company, achieve the market position and are delivered consistently. Organisational collaboration: Involving the changing of culture, structures and behaviours to ensure that staff, partners and suppliers work together to deliver what is promised. Processes: Managing customer life cycle processes, such as inquiry, welcome, complaints and "winback," and processes in analysis and planning that build customer knowledge. Information: Ensuring that the right data is collected and the right information goes to the right place. Technology: Managing data and information, customer-facing applications, and supporting IT infrastructure and architecture. Metrics: Defining internal and external measures of CRM success and failure.
• #19: CRM vision is the company "personality." Without it, customers will not have a clear image of what the company offers in comparison with the competition, which would leave service expectations unmanaged and at the mercy of market forces. Employees need a vision of what to deliver to customers. The vision should motivate staff and enable them to work together, generate customer loyalty, gain greater market share and turn target customers into advocates. A vision starts with understanding market demand as well as the company's market position, then creating a core proposition to target customers that they will value and that stands out from the competition. This core proposition should be a declaration of intent around which a CVP and culture can be built. Next, the company needs to consider the set of competitively differentiated brand values that the customer values, such as expertise, independence, innovation, involvement and quality. These values should be determined from the customers' rather than the company's view. Too many companies believe that they know what customers want, but find out through costly mistakes that they do not. They overinvest in services that customers do not want or value, and they fail to invest enough in the elements of service delivery that would generate value and, thus, loyalty. Finally, companies need to produce an outline of what the customer experience should be for different situations and segments. Action Item: Companies should examine their core business proposition to customers, if it exists. In addition, companies need to determine whether this proposition is different from those of its competitors, whether it is understood by and motivates employees, and whether customers associate it with the company.
• #20: A CRM strategy is not an implementation plan or road map. A real CRM strategy takes the direction and financial goals of the business strategy and sets out how the enterprise is going to build customer loyalty — that “feel-good factor” of customer connection with an enterprise that means customers stay longer, buy more, recommend the enterprise to others and are more willing to pay a premium price. The objectives of a CRM strategy are to target, acquire, develop and retain valuable customers to achieve corporate goals. For a detailed explanation on CRM Strategy please refer “Developing a CRM Strategy” (TU-14-9475) which discusses the steps involved in the development of the CRM strategy.
• #21: A CRM strategy takes the direction and financial goals that the business strategy provides and revisits the marketing strategy to customise it. This strategy outlines how the company will build valuable customer relationships and customer loyalty. The CRM strategy is viewed as an academic exercise and disregarded unless it has an active connection to the business strategy. The first stage in developing a strategy, which entails an audit of the market and customer position, is to divide customers into segments (for example, by need and value) and to set objectives and metrics by segment. A traditional marketing strategy positions the company in its market relative to its competitors — the strategy audits the market position and defines objectives based on this and the product life cycle. The additional, required customer perspective positions the company with its customer base to create greater customer value and loyalty — it audits the customer base and defines customer objectives based on the customer life cycle. It is difficult to develop customer loyalty, understand customer value and have customer insight without understanding customers in the context of market segments and market forces. However, many companies attempt to determine customer value without knowing their share of a customer's "wallet." Action Item: Start gathering the detailed information needed to set market and customer objectives. Ensure that the objectives set are measurable and have associated key performance metrics.
• #22: Customers’ experiences when interacting with the enterprise play a key role in shaping their perception of the enterprise — the value it provides and the importance it places on the customer relationship. Good customer experiences drive satisfaction, trust and long-term loyalty. Poor customer experiences have the opposite effect and, because bad news travels faster and further than good news, they harm the enterprise’s ability to create new relationships with prospects. Most of the customer experience occurs at the interface between the customer and the company — particularly in service sectors. It is delivered through a front-line experience, such as salespeople, call centre agents, marketing and product brochures, field engineers, deliverers, invoicers, Web sites and mass-media advertising. However, it is filtered through customer expectations. That is, customer satisfaction can be as high for shoppers in a high-end store (such as Harrods and Neiman Marcus) as it is for shoppers of less-high-end stores (such as, Costco and Ikea). In many cases, the shoppers are the same. As a result, these intereactions are not just customer service, but the customers' experience of products and services, mediated by their expectations. In the context of customer experience management (CEM), customers can be customers, employees, partners, students or citizens (in e-government). The management part of CEM comes in the form of: Helping to set expectations. Delivering on the promise during the experience Collecting customer feedback and providing a company's response to the feedback. Feedback can be explicit, as in a survey, or implicit, as when a company follows a customer's mouse clicks while the customer navigates a Web site. Customer experience is not separate from CRM, as some vendors and service providers would like to portray it. Action Item: Companies should consider the before, during and after of every customer experience. Invest more in the before and after of CEM by investing in processes and technology that improve expectation setting and feedback. For more information, please see www.gartner.com, "Customer Experience Management Strategic Analysis Report."
• #23: Poor customer experience can place relationships at risk of reduced share of wallet and defection. The case study shown in slide 9 is from a retail store in which defection accounted for $19.6 million in lost revenue per year. In this example, introducing operational customer feedback should increase the level of complaints and enable more of them to be resolved. In addition, the system should provide feedback for improvements to the customer experience. Resolving additional complaints and improving the customer experience will reduce the level of defection and business risk. Some companies that specialise in customer feedback technology (such as CustomerSat, Respond, ResponseTek Networks and ViewsCast) report that, on average, operational feedback can help to reduce defection by 2 percent to 3 percent per year. Action Items: The customer experience affects revenue potential at every interaction. Enabling staff to add their own touches to a consistent, basic service will improve satisfaction in staff and customers. Use customer and staff feedback to design, develop and personalise the customer experience. Encourage customer feedback by telling customers how their feedback changes the service.
• #24: Many enterprises believe that implementing CRM technologies makes them a customer-centric organization. They forget, ignore or deliberately avoid the necessary changes to the enterprise itself. True CRM means that individuals, teams and the whole enterprise must become more focused on the needs and wants of the customer. The term “organizational collaboration,”, highlights the many facets of the customer-centric internal change needed to deliver the required and desired external customer experience. As a critical part of a CRM program, it will involve changing organizational structures, incentives and compensation, skills and even the enterprise culture. Ongoing change management will be the key. Organisational structure, behaviour and culture are developed over a long period and require deliberate action to change. Employees should understand why they need to change and why they should support the initiative. This requires communication at the corporate level (that is, what the company is trying to achieve, and its value to the company and its customers) and the individual level (that is, how employees will benefit). The five ingredients for successful CRM changes to the company and to individuals are: Leadership: CEOs want to build more-relaxed, non-hierarchical organisations with a strong sense of purpose, and they know that they need to understand how to motivate their staff. Skills and competencies: Companies take great leaps with technology without developing the relevant business skills, particularly in IT, analysis, project management, facilitation and service. Knowledge: Sharing knowledge builds collaboration and innovation, but political barriers are high. The evolving tools and techniques of knowledge management should be employed. Organisation: Decision making needs to move closer to the customer and allow for greater speed of action. Organisational structures should use communities and virtual teams. Incentives: Targets should be aligned with customer goals at first, but recognising and celebrating contributions are more motivating. There are numerous ways to recognise people. For more information, please see www.gartner.com, "CRM Change Management: Creating Organizational Collaboration," R-20-6954.
• #25: There are four main approaches to making changes to customer-facing processes: Much work has been done during the past 15 years to identify, automate and optimise generic processes in individual departments, such as campaign management in marketing, case management in customer care and sales forecasting in sales. Since the late 1990s, the focus has shifted to processes that are generic, but cut across multiple departments and apply to most industries, such as welcoming, change of address, death and quote to cash. In this case, the main challenge lies in building processes that will cross internal departments and functions, because the politics of these internal organisations tend to present a barrier. This approach is likely to require the integration of many applications — for example, more than 200 applications in one government department, and more than 150 applications in one national telecommunications company. Generic processes may dominate the interaction relationship in some industries (such as high technology), but in other sectors (such as telecommunications or insurance) they are of little importance to CRM in comparison with specific processes that are unique to that industry. For example, fault restoration, service reliability and new service introduction are critical processes in telecommunications service provisioning. These approaches to customer-facing processes have merit, but they look from the inside outwards at the customer. As a result, the company and the customer are concerned about widely different key processes. Even within one industry, different companies will find that their customer bases have differing priorities and weights of importance for the processes that affect them. Therefore, more companies are taking an outside-in approach to processes. Action Item: Companies that are focused only on departmental customer-facing processes should work on automating end-to-end processes that cut across departments. Consider welcoming, death and change address as base starting points. For more information, please see www.gartner.com, "Suggested reading: Business Process Automation: The New Buzzword in CRM," T-19-5892.
• #26: Re-engineering requires process mapping or auditing to identify the processes that affect and do not affect the customer. In most cases, organisations will find 150 to 200 processes, depending on the granularity of the definition of a process. It is difficult to query customers without knowing which processes affect them and how to articulate these processes from the customer's perspective. Finding and focusing first on those processes that cause the most dissatisfaction is key. Meaningful, measurable targets can then be set using customer input. Process re-engineering may be significant, cutting across multiple departments and functions, and may take years to complete. For example, one Dutch insurance company took 18 months to re-engineer only one part of its claims-handling, which involved more than 20 processes. No process should be left without ownership. The processes that matter most to customers may be internal and within the control of the company, but many involve partners and suppliers. Communicating with customers about targets for service levels, appropriate compensation levels and feedback on improvements for individual processes are key parts of helping to design the customer experience. After meeting the basic needs of the entire customer base, the re-engineering approach can be repeated for more-targeted segments (for example, highest value or least profitable). Action Item: Companies should catalogue the processes in their organisation to identify which ones touch the customer or which ones the customer touches. Prioritise processes that customers have cited as being a hindrance and redesign those first. Then reiterate as needed. Focus on five or less processes at one time.
• #27: Successful CRM demands the creation of an accurate, timely and complete single view of the customer, for operational and analytical purposes, and a customer information "blood supply" that flows through the organisation, and integrates operational and analytical systems. Customer data and insight needs to reach the touchpoints to support and prioritise customer interactions and drive profitable customer relationships. Organisations need a customer information management strategy that defines how they intend to source, manage and deploy their customer information assets. It should be owned and executed by someone with sufficient authority. Without this strategy and ownership, customer information will be disorganised, which will result in a profusion of unneeded data and a scarcity of vital information. Most organisations' customer information capabilities are poor because of numerous and fragmented departments, initiatives, databases and systems. This has several negative impacts on the company: The costs of storing and managing duplicated data. The inability to manage customer interactions and contacts efficiently, effectively and accurately. The lack of insight into the customers' actual and potential value. The lack of insight into the customers' past and likely future behaviour and requirements. The inability to segment and profile customers for differentiated product offerings and service levels. Action Item: Companies need to determine how to create and maintain a single view of the customer and a customer information and insight "blood supply" for their organisation. For more information, please see www.gartner.com, "Create a Single Customer View With Customer Data Integration," G00123563.
• #28: Companies have many choices when sourcing CRM applications, ranging from the build-it-yourself solution to CRM as part of a business application suite. In between these extremes are the integrated CRM suites (for example, from Siebel), the CRM framework (for example, from Chordiant) and the best-of-breed integrated approach (for example, from Avaya, Selectica and Unica). The fully integrated suite approach guarantees internal integration (of data model and processes), but tends to lag behind leading best-of-breed or CRM suites in horizontal and vertical functionality. However, this approach often appeals to the board of directors, which is comfortable expanding relationships with its strategic partners. To compete, the CRM suite needs to offer better functionality and ensure integration with ERP systems. In most cases, both approaches (that is, CRM suite and integrated ERP CRM suite) impose a data model (an exception is E.piphany's operational CRM modules). In addition, they promote their own process definitions as industry best practices. Companies that aim to approach CRM from a process-centric viewpoint, re-express differentiating processes and continue using established data models will choose a framework approach. Different approaches need different amounts and types of integration work. Action Item: Companies need to review their functional, process, data model and integration requirements, and their skill levels and outlook to technology before evaluating and selecting CRM applications.
• #29: Gartner suggests a hierarchy of linked CRM metrics. There will be different metrics for different areas of the organization but all help to achieve the ultimate customer and corporate goals. The framework has four levels: Corporate (e.g., market share, revenue, profit, margins, cost ratios) Customer Strategic (e.g., acquisition, retention, customer lifetime value) Operational and Process (e.g., complaint levels, response levels) Infrastructure Inputs (e.g., call answering times, data accuracy levels) Corporate metrics and corporate objectives are set by the board-level executives of an enterprise. They are not CRM-specific, but they affect the CRM strategy directly. Some are financial, others are competitive. Corporate goals are big, simple and understandable. For enterprises, they are aimed primarily at shareholders and investment analysts; for nonprofit or government organizations, they are aimed at stakeholders. Customer strategic metrics monitor the success of the CRM strategy. They are vital because they provide a key link between operations and corporate goals through the customer; however, because they are the most difficult to obtain, they are frequently left out. Customer strategic metrics come from both internal and external sources, and users will typically be senior management. Many of these metrics are financially linked, such as current profitability per customer and cost per-interaction. However, the key performance indicators (KPIs) are customer acquisition, development and retention (see "Financial Metrics for Measuring CRM ROI," SPA-13-0854). These tell senior management what sort of customers they are acquiring and rate the satisfaction, loyalty and wallet share of those with the greatest profitability potential. Operational and process metrics are tactical and provide the raw data for the customer strategic metrics. Similarly, customer churn rates and satisfaction levels are often correlated with staff turnover rates, staff knowledge levels, staff empowerment levels and staff satisfaction levels. Enterprises must establish which operational metrics drive their strategic measures. Infrastructure input metrics measure the efficiency of a specific process and provide input to the operational and process metrics. The difference between operational and infrastructure metrics is that infrastructure metrics can be measured real time, whereas operational and process metrics — such as response levels — have to be measured over time, taking trends into account. Infrastructure metrics can often be easily extracted from existing systems such as call center logs, Web site analytic systems, HR systems for employee qualifications or enterprise resource planning systems manufacturing defect rates and delivery dates. Figure 1 gives examples of metrics, purposes and users at each level. These are only a guide; each enterprise needs to have metrics specific to its own unique strategy. The overall aim of the framework should be to link together each level by cause and effect. For more information, please see www.gartner.com, "Getting the Best Out of CRM Performance Metrics," DF-13-1433.
• #30: Few Examples of the CRM Performance Metrics based on the Metrics Hierarchy described earlier. Enterprises must set measurable CRM objectives and monitor all levels of CRM indicators to successfully turn customers into assets. Without performance management, a CRM strategy and associated program is destined to fail. Key challenges lie in establishing the "missing link" of customer strategic metrics that link processes to corporate goals, and in showing the unique cause-and-effect chain of metrics that supports the evolution of a CRM strategy, from infrastructure input to corporate objective.
• #32: The highly competitive Internet market has empowered customers to demand both quality products and world class customer service. As products become increasingly less differentiated, customer service will distinguish market leaders from market losers.
• #33: Benefits of CRM: CRM, if properly institutionalized within all the organizational processes, creates an opportunity to generate more benefits than expected: 1+1=3! The value is not seen as a tangible return in the short term, but is created by increasing the customer experience  satisfaction  loyalty  repeat purchases  increased revenues in the long term. The benefit is in terms of creation of customer loyalty and a dedicated customer base with a large buying potential.
• #34: As seen from the previous slide it is quite evident that the benefits of CRM are manifold in the long term. The above slide mentions some of these benefits which are mutual in nature. The benefits to the customers through customer satisfaction lead to an increase in the profit margins of the company. Many of these benefits follow a cause-effect relationship between ‘Customers’ and the ‘Company’ in the long term and so are termed as mutual benefits.
• #35: The highly competitive Internet market has empowered customers to demand both quality products and world class customer service. As products become increasingly less differentiated, customer service will distinguish market leaders from market losers.
• #36: The degree of customer interaction determines the importance of CRM to that industry. It includes two key aspects i.e. Ability to gather & process customer information and the Value generated from the information. If we look at the matrix above, the ability to gather and process information and generate value from the same is equally high in Telecommunication and the BFSI (Banking & Financial Services Industry). But the BFSI sector has a better chance of benefiting from CRM as it gets the most valuable information from the very basic data collection processes in the industry. The potential for up-sell or cross-sell financial products is also higher as are the returns from the same. So everything depends on what information you can gather and then how can your Analytics tool convert that information into meaningful knowledge (Value) for your customers and the business.
• #37: The CRM Market is full of CRM product variants having a host of applications and features. Based on the Deployment Options, the products are classified mainly as On Premise and Hosted. Majority of the CRM products are available as Out-of-the-Box products. These products have a varied set of functional applications dealing with different industry verticals already built into the product. There are also certain products which are built as per the business requirements and are known as the ‘Custom Build’ products. The Hosted solutions are the latest trend on the CRM market block as these are easily deployable over any platform across geographical locations and are easy to maintain.
• #41: CRM Services Market Market Definition : Services for customer facing systems and processes that help organizations in attracting, serving, retaining and expanding relationships with customers. It involves Consulting, Development & Integration and IT Management.
• #44: The highly competitive Internet market has empowered customers to demand both quality products and world class customer service. As products become increasingly less differentiated, customer service will distinguish market leaders from market losers.
• #46: Although a great number of organizations have achieved significant results by implementing CRM solutions, some have not achieved all of the benefits they had hoped for. Instead, they encountered problems ranging from cost overruns and integration challenges to poor user acceptance. The good news is that all of these of problems are avoidable—if the CRM implementation is well designed and executed. Indeed, when properly deployed, CRM solutions produce a significant return on investment by streamlining business processes and providing frontline employees access to richer and more integrated customer information.
• #47: Although a great number of organizations have achieved significant results by implementing CRM solutions, some have not achieved all of the benefits they had hoped for. Instead, they encountered problems ranging from cost overruns and integration challenges to poor user acceptance. The good news is that all of these of problems are avoidable—if the CRM implementation is well designed and executed. Indeed, when properly deployed, CRM solutions produce a significant return on investment by streamlining business processes and providing frontline employees access to richer and more integrated customer information.