A Customer - Centric OrganizationAs A

Socio -Technical System

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.

Overview

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 loyaltyCRM 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 MovementThe Indian CRM Market - Rs. 50-100 CroresCRM Market - segmented

Services segment

CRM Services Market > Market for CRM Software

Indian Market for CRM Software and Services would grow to about Rs. 100 Crore by 2002

Software Services

Training

Consultancy

Integration

Out-Sourced CRM Services

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 costsTop-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.

ProfitabilitySegment

% ofCustomers

Number ofCustomers

% ofProfits

AverageCustomerProfits

Total Profits$Millions

1 10% 100,000 115% $1,150 $115.02 10% 100,000 25% $250 $25.03 10% 100,000 10% $100 $10.04 10% 100,000 5% $50 $5.05 10% 100,000 0% $0 $0.06 10% 100,000 -2% -$20 -$2.07 10% 100,000 -5% -$50 -$5.08 10% 100,000 -8% -$80 -$8.09 10% 100,000 -10% -$100 -$10.010 10% 100,000 -30% -$300 -$30.0TOTAL 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

ProfitabilitySegment

% of Profits AverageCustomerProfits

% Change inAvg. Profits

New AverageProfits

1 115% $1,150 3% $1,1852 25% $250 5% $2633 10% $100 5% $1054 5% $50 5% $535 0% $0 0% $06 -2% -$20 -10% -$187 -5% - $50 -10% -$458 -8% -$80 -10% -$729 -10% - $100 -10% -$9010 -30% -$300 -10% -$270TOTAL 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

ProfitabilitySegment

AverageCustomerProfits

%Distributionfor StatusQuo Selling

Status QuoSellingTotalProfits$Millions

%Distributionfor TargetedSelling

TargetedSelling TotalProfits$Millions

1 $1,150 10% $17.500 20% $34.5002 $250 10% $3.750 15% $5.6253 $100 10% $1.500 15% $2.2504 $50 10% $0.750 15% $1.1255 $0 10% $0.000 10% $0.0006 -$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)TOTAL $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??

ProfitabilitySegment

AverageCustomerProfits

Status QuoCustomerAttritionDistribution

StatusQuoRetentionLostProfits$Millions

FocusedCustomerRetentionDistribution

FocusedRetention LostProfits$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% $0.0006 - $20 10% $0.200 15% $0.3007 - $50 10% $0.500 15% $0.7508 - $80 10% $0.800 15% $1.2009 - $100 10% $1.000 15% $1.50010 -$300 10% $3.000 15% $4.500TOTAL $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

CASECASESHOPPERS’ STOP’S “FIRST CITIZEN CLUB”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 !