Selling Chain Management and Customer Relationship Management (CRM)

1. Selling Chain Management andCustomer Relationship Management (CRM) Marquette University – MBA Program E-Business and Supply Chain Management

2. Discussion and Learning Points • What are key issues in selling chain management? • Architecture • What is customer relationship management (CRM)? • Is CRM a fad or what firms should pursue? • Architecture • Benefits and costs • Implementation issues

3. Selling Chain Structures Enterprise with Multiple Sales Channels Distributor Customers OEM Reseller Sales Force Self Service Selling Chain Management • Selling Chain Management • - An integrated multi-channel order acquisition strategy, focusing on the buying process • Drivers • - Business Forces • Mass customization/personalization, Costs of presale support and order errors, Multi-channels, Product complexity, Deregulation and M&A’s • - Technology Forces • Limited SFA functionality, Limited process functionality, Limited sales effectiveness (Kalakota & Robinson 2001)

4. Customize Inquiry/ Prospect Commit Order Order Life Cycle Core Process & Technology Order Entry Configurator Contract Pricing Sales Lead Commission ATP Proposal/Quote Product Catalog Integrated Solution Integrated Selling Chain Applications Selling Chain Management Architecture (Kalakota & Robinson 2001)

5. To Be a Leader • Cross-vertical-industry experience • Functionally complete multiple configuration capabilities • Proven tools for knowledge workers to maintain configuration models • 20 product references demonstrating multiple configuration capabilities and support for multiple sales channels • Strong distribution channels and financial position • Configuration technology deployed to multiple interenterprise user types • Many ESPs or internal consultants trained in customization and maintenance tools • Architecture support for multiple sales channels • Ability to generate multiple customized outputs • GUI for salespeople or customers Leaders Challengers Ability to Execute Selectica Trilogy Visionaries Niche Players Firepond Siebel Calico Pivotal i2 Baan SAP Primus OnLink Cincom Cybrant Cerepoint Noochee Solutions Clarify Interact Commerce JD Edwards Access Commerce As of 7/2000 Saqqara ResolutionEBS Completeness of Vision Sales Configuration Vendors Sales Configuration Magic Quadrant Oracle (Source: DeSisto, Gartner Research, 7/2000)

6. Customer Relationship Management (CRM) • CRM • An integrated marketing, sales, and service strategy of attracting and retaining customers, using integrated information and consistent channel processes • Require coordinated enterprise-wide actions for managing relationships • Combine business process and technology • Focus on customer lifetime value creation and optimization • Customer Lifetime Value = Average transaction value x Purchase frequency x Customer life expectancy • Customer Profitability = f(acquisition, enhancement, retention, loyalty) • C-CAM (Customer Capital Asset Management) • Finding a way to quantify, track and analyze the value of a customer to a company over time and how to ascertain the impact of future decisions on that value (Mei Lin Fung, www.crmguru.com) • Why CRM? • It costs 7-10 times more to sell to a new customer than to an existing one. • The odds of selling to a new (existing) customer are 15% (50%). • A 5% increase in the retention of your best customers can result in 25-75% increase in profit • A typical distributor loses about one half of its customers within five years. • 90% of dissatisfied customers never return. • The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems. • The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers. • A typical dissatisfied customer tells 8-20 people about the experience, mostly related to poor customer service. • About 60% (70-95%) of the complainers would stay as customers if their problem was resolved (quickly). • A customer who has had a problem resolved by a company will tell about 5 people about their situation. (www.sybase.com, manufacturing.net, Fitzsimmons & Fitzsimmons 2001)

7. Acquire (new customers) Enhance (purchase value) Retain (existing customers) Customer Life Cycle • Differentiation • Innovation • Convenience • Bundling • Reduce cost • Customer service • Repeatable process • Adaptability • Listening • New product • Loyalty program CRM Key Focus Proactive Service Cross-/Up-Selling Direct Marketing Core Process Customer Support, Call Center Sales Force Automation Telephone, Fax, E-mail, Web, VRU (Voice Response Unit) Legacy Systems + Computer/Internet Telephony Integration (CTI/ITI) + Data Warehousing + Decision Support Technology (data model analysis) Enabling Technology Integrated Solution Integrated CRM Applications (Customer content, Customer contact info., End-to-end business processes, Inter-enterprise customer care (partnership relationship mgmt), System/tech integration Integrated CRM Focus and Architecture (Modified from Kalakota & Robinson 2001)

8. Service request management • Account management • Customer surveys • Return-material authorizations • Detailed service agreements • Maintain incident histories • Electronic bills • Electronic bill payment • Real-time balances • Inquiry management • Advertising • Fulfilling customer requests (information, samples) • Product design & improvement 6 Customer service and billing Marketing eMail EFT Prospect or Customer VRU Loyalty and retention • Qualify prospects • Track contacts • Event triggers • Call scheduling • Track order status • Cross-sell synergistic products Web Fax Sales EDI Phone • Provide and track detailed information about customers • Provide a comprehensive view of customer behavior Field sales and service • Quote and proposal generation • Personalized invitations and letters • Field service dispatch management • Remote troubleshooting Role of CRM IT Applications Source: Kalakota & Robinson 2001

9. Customer Service • Customer Service • Manufacturing: “The activity of providing desired goods, quality, and total support to benefit every aspect of product use at a competitive price and in a timely manner” (Gopal & Cahill, 1992) • Service: “A task, other than proactive selling, that involves customer interactions” (Lovelock, 1992) • Customer Service Elements(LaLonde & Zinszer, 1976) • Pre-transaction: Corporate customer policy or program; Accessibility, point of contact; Service management structure, control; System flexibility, information • Transaction: Those directly involved in performing physical distribution functions; Order placement, cycle time, fill rate; Order status info; Product delivery reliability, Stock availability • Post-transaction: Those supporting the product while in use; Shipment delivery; Product installation; Spare availability, Parts/repair service, Call-out time, first call fix rate; Product tracing/warranty/return, Customer complaint/claim • Impact of Web-enabled Technologies • Customers demand information on product, order transactions and inventory on a 24 x 7 basis. • Customers demand new methods of communications with their suppliers. • New channels for order placement and delivery are being created. • Information on products, price, and services are available on a global basis. • Creation of new barriers to entry has to be implemented in order to maintain brand differentiation. • Customers want a consistent service level creating a low acceptance of virtual stock-outs.

10. Customer Value and Order Winning Criteria • The market power is in the services - total experience relationship. • The customer value is not just the means to some desired end customers expect to accomplish, but theresults, the end itself, associated with the overall performance of the whole system. • Order Winning Criteria Today • Conformance to Performance & Ease of Use • Repair to Prevention • Responsiveness to Responsiveness & Speed, Presence, & Joint development • Quality & Cost-of-Product to Quality & Cost-of-Use (TCO) • Customer Activity Service Paradigm Shift (till 80’s to 90’s & on) • Concept: Product-loaded to Service-loaded • Strategy: Product-based to Customer-based • Focus: Market share to Share of market activity • Relationship: Buyer & seller to Strategic • Pricing: Product-based to Knowledge-based • Delivery: On-time & JIT to Anytime & all the time • Management: Sales to Interdisciplinary projects • Rewards: Output-based to Outcome-based

11. A Protect Develop B Develop Maintain Products C Review A B C Customers Developing a Customer Service Strategy • Ensure consistency with e-business/SC objectives and strategies • Analyze gaps among customer requirements and expectations, your practices, and best practices • Analyze optimal cost-service trade-offs • Inventory deployment and IS/IT requirements • Develop key performance measures • Set customer service priorities • Critical Value Analysis: Service Priority = Service profitability rank x Critical value to customers • ABC Analysis

12. Customer Activity Cycle Key activity points book get check board go to ticket ticket in destination look for confirm go to wait collect return info airport luggage office/home Solution System Product service components personal services special various ticket at hotel lounge activities book facility terminal limousine express speed limousine link desk delivery door to door Designing the Solution System Over the Customer Activity Cycle SAS’s Unbroken Chain of Product-Services • Common Principles in Successful Solution System Strategies • Develop a profound understanding of who the end users are, their usage behavior and their objectives • Understand the customer activity cycle as a process over time • Design a system aimed at maximizing performance of product-service components over the customer activity cycle • Deliver the solution system over the activity cycle either their own or in collaboration with suppliers or other firms (Vandermerwe 1991)

13. CRM Project Phases • Strategize • Form a project steering committee • Define the project scope • Evaluate • Develop a full benefit case • Translate strategies into actions • Recruit resources • Define project structure • Evaluate vendors • Execute • Execute the work plan • Implement the pilot and actual solution • Fine-tune benefit and metrics • Manage • Manage the solution life cycle (Kalakota & Robinson 2001)

14. CRM Scorecard (Kalakota & Robinson 2001)

15. Typical features in CRM packages/suites Marketing automation and management Sales force automation Customer service automation Data collection and analysis Typical Product Categories and Vendors Enterprise Space (> 500 employees): Siebel, Vantive, Clarify, Oracle and PeopleSoft Mid-market Space (100- 500 employees): ServiceSoft, Onyx, Pivotal, Remedy and Applix Small-business Space (<100 employees): Goldmine, Multiactive, SalesLogix Selection Approach “Best of the breed“ approach Pick the best application in each functional area Integration & vendor maintenance issues “Single vendor package” Easier integration / support Potential trade-off’s in terms of functionality Finding the Right CRM Packages Define the need Build a business case Set priorities, identify business requirements and technology constraints Weigh the alternatives Identify specific vendors Screen vendors by phone Conduct on-site visits Check references Test the software hands on Request pricing proposals Try to tie payment to performance Finding the Right CRM Tool No CRM package currently offers all the major functions Source: Naras Eechambadi, crmguru.com

16. Leaders Challengers Key SME focus Utilities only As of 7/2000 • To Be a Leader • Provide suite with four core areas • Integrate with front-office components • Integrate with ERP/back-office systems/dB • Horizontal solution with vertical suites • Support multiple channels • 50 referenceable production accounts • Business rule workflow • Multiple dB support • Globalized apps • Robust customization, development & administration tools • Adequate implementation resources • Multiple sales channels • Domestic & international sales SCT Utilities Ability to Execute Siebel Visionaries Niche Players PegaSystems Clarify Quintus Kana Vantive Onyx Pivotal EGain E.Phiphany Epicor Chordiant Hatton Blue Royal Blue Oracle Applix Symix SAIC/BSIS SAP E-Service Players Service Plus ViryaNet POINT Conranta Telephony vendors Remedy Managed Solution Completeness of Vision Customer Service and Support Vendors CSS Apps Magic Quadrant (Source: Fluss, Gartner Research, 2/2000)

17. CSFs Concrete measurement goals Solid consumer and channel partner relationships, channel partner support Strong brand images, Corporate and product brand alignment Complex product and service bundles Executive marketing councils, Targeted marketing to C-level executives Consumer insights, Integrated customer databases Cultural change (customer awareness, intimacy, collaboration) Project ownership & accountability Pitfalls (Failure Rate as High as 80%) Not adhering to project plan Altering or adding requirements AFTER initial phase Customizations Software vendor will no longer support Not upgradable Architectural Tuning Transaction level output Retirement of legacy systems Do a detailed analysis of legacy systems functionality Success Factors for CRM and Potential Pitfalls (Source: Best Practices, LLC, Kalakota & Robinson 2001, Gartner Symposium ITxpo 2000, destinationcrm.com, manufacturing.net)