Customer Relationship Management – Consulting approach – Munich, June 2000

1. Customer Relationship Management– Consulting approach – Munich, June 2000 Roland Berger & Partner GmbH – International Management Consultants Barcelona – Beijing – Berlin – Brussels – Bucharest – Budapest – Buenos Aires – Delhi – Detroit – Düsseldorf – Frankfurt – Hamburg – Kiev – Kuala Lumpur – Lisbon London – Madrid – Milan – Moscow – Munich – New York – Paris – Prague – Riga – Rome – São Paulo – Shanghai – Stuttgart – Tokyo – Vienna – Zurich Discussion_Paper_SAG.ppt

2. Content Page • A. Introduction 3 • B. Project objectives and scope 12 • C. Approach 16 • C.1 CRM target setting 19 • C.2 CRM strategy and technology concept 34 • C.3 CRM implementation 74 • D. References 77 • E. Appendix: Supporting tools to implement CRM 81 • E.1 The Internet as a supporting CRM tool 82 • E.2 The call center as a supporting CRM tool 93 This document was created for the exclusive use of our clients. It is not complete unless supported by the underlying detailed analyses and oral presentation. It must not be passed on to third parties except with the explicit prior consent of Roland Berger & Partners. Discussion_Paper_SAG.ppt

3. A. Introduction Discussion_Paper_SAG.ppt

4. The importance of an integrated Customer Care approach receives increasing awareness at top management level all over the world "How important is a single, integrated view of the customer across your company" "Do you have a single, integrated view of the customer today?" Not at all important Yes Somewhat Somewhatimportant Not at all Very important Critical Not really Source: Forrester Research, basis: 50 Sales managers of Fortune 500 companies Discussion_Paper_SAG.ppt

5. In the future, a company's value will increasingly depend on the value of its customer base Factors influencing corporate valuation Customer base Discounted cashflow method Customer lifetime value method Employeebase Multiples method Industrial society Information society Customer acquisi-tion cost method Market value added method Assets Traditional industrial companies, e.g. manufacturing industry Service companies, e.g. consulting firms, software companies Internet companies Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

6. Customer cashflows Higher customer net present value Price premiums Recommendations Increasedcorporate value Annual profit/customer Cost savings Sales growthper customer Base profit 2 3 4 5 6 7 8 Acquisition cost 1 + +x% Number of customers Higher absolutenumber of customers [%] Customerretention rate New customeracquisition rate t The value of the customer base is determined by the key factors individual customer value and size of the customer base • Value of customer base – corporate value Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

7. The market value of the leading InfoCom companies clearly exceeds that of OEMs – the customer base is the key success factor Overview of customer ownership and market value DM 1,000/ customer • Points of customer contact DM 1,100/ customer • Shopping • TV/media • Telephone/mobile • Banking • Sport • Car DM 1,700/ customer DM 4,700/ customer DM 16,300/ customer DM 10,700/ customer DM 18,800/ customer DM 4,500/ customer DM 2,800/ customer Number of customers in millions (12/99) Market value in DM billions (12/99) Discussion_Paper_SAG.ppt Source: Roland Berger & Partners analysis

8. Managing the customer relationship is a key lever to increase shareholder value Example Market and customer value Today Future 3.6 Managing the customer relationship Market value (bn Euro) 0.6 0.4 12/99 Potential Customer Value (Euro) 1.500 (Microsoft) - 9.000 (AOL) 1.000 (Current) Calculation basis: 400.000 customers Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

9. CRM is a strategy designed to increase individual customer value by establishing a long-term and systematic customer relationship 0 1 Initial contact with customer Identification Generating/ recording customer data • Increased customer retention • Wider range of services • Higher efficiency in contacting customers 2 Ongoing customer relationship • Information • analysis • Customerprofiles Learning relationship • Forecasting buying behavior • Monitoringsuccess • Developing customer benefits, e.g. • Value-added services • Customized offers 4 3 Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

10. The „knowledge cycle“ is the key to successful CRM when dealing with customers Actions to support network effects Examples Promotions of member- to-member interaction • Personalized e-mail system for members • Personal web page 2. Customized interaction • Service reminders Increased content attractivity • Product updates • Archive of chat contributions • Bonus programmes (e.g. web miles based on after sales frequency) Conserving relationships Examples Increasing return of marketing & Sales Higher loyalty 3. Community-generated content • Online discussions for members • Create profiles • Cross advertising • Partnerships with road side assistance Partnerships with other organisations • Shopping malls • Partnership with auction provider Creation of a market place/auction Examples • Experience with a product • Customer history/profile Questionaires on the net 1. Need to log-in for each member • For newsletters • For membership Better knowledge about the client • Monitoring of web-usage (focus of interest) Continous report of individual information Source: Hagel/Armstrong; Roland Berger & Partners Discussion_Paper_SAG.ppt

11. 3 1 2 • Enhanced loyalty: Changing occasional customers into loyal customers • Internet as convenience channel • Individual communication, e.g. my.com sites • Information-based value-added services • Broad-based customer communication: Cross selling • The Internet is used to collect information other than the individual product/service range • The Internet is used to address a wide range of products • More efficient contact: Cost savings • The Internet is a low-cost sales channel • Option to provide individualized information (example mail-order: Catalogues tailored to customer profiles) The key lever for CRM success is the Internet innovative options for individual customer contact • Opportunities offered by the Internet Maximum volume Maximum customer potential 3 Marketing/sales cost 1 Current customer value Product/service rangeaddressed 2 Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

12. B. Project objectives and scope Discussion_Paper_SAG.ppt

13. The strategic goals aim at sustainable growth and profitability Strategic goals of CRM Having a clear idea of the customers’ current and future needs Increasing customer satisfaction Enhance identification, segmentation, conquest and loyalty of customers Responding quickly and efficiently to the customer bearing in mind its economic value Reinforcing the awareness of the Group and of its service mix Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

14. Create a strong CRM vision and focus areas with highest business potential Translate CRM vision into bold CRM strategy combined with a customized technology concept Ensure a sustainable implementation supported by reliable CRM processes and systems The project objectives aim at a seamless implementation of CRM from vision to systems integration CRM project objectives Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

15. The project covers the entire business-channel matrix with CRM applications to attract, penetrate and retain customers Example Business-channel matrix Channel Ownconcess 3rd partyconcess. Tele-mktg. Promo-tors Inter-banco Multi-rent Inter-net Inter-national Direct Stores Business SIVA     • CRM applications • Personalized customer dialogue • Personalized offerings • Customer retention module      MULTIRENT           INTERBANCO   COMEPOR    LGA      SIXT    RETALHO Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

16. C. Approach Discussion_Paper_SAG.ppt

17. The approach to define and implement Customer Relationship Management consists of three phases 1 2 3 Target setting CRM strategy andtechnology concept Implementation Objectives • Development of a detailed CRM strategy within the overall sales & marketing strategy • Personal customer dialogue • Personalized offerings • Customer retention • Designing a technology concept in co-operation with CRM systems providers • Set up of detailed CRM business case • Analysis of customer requirements • Benchmarking and Best Practice analysis • Evaluation of existing CRM measures • Development of CRM vision and target system • Estimation of potentials • Implementation of CRM strategy and technology concept (work program to be detailed during phase II) Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

18. The customer relationship management strategy can be ready for implementation in 4.5 months Timing Project month 1 2 3 4 5 Activity 1 Target setting 2. CRM strategy • Personal customer dialogue • Personalized offerings • Customer retention program • Process and organizational implications • Pilot implementation • 3. Technology concept • IT-Audit • Data-model and IT-infrastructure plan • Software and service provider selection • 4. Implementation Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

19. C. Approach C.1 Target setting C.2 CRM strategy and technology concept C.3 Implementation Discussion_Paper_SAG.ppt

20. ? Key questions „target setting“ • What customer segments are addressed by the CRM strategy and what are the segment-specific customer requirements? • Which benchmarks and best practices can be derived from automotive and non-automotive CRM applications? • How is current customer informationdeficit to be tackled? • To what extent can the project build upon existing CRM measures in the Group? • What is the vision as the guideline to define the CRM strategy? • What are quantified and measurable targets to evaluate business options and to track the implementation process in a consistent way? • What overall business potential (additional revenues and improved margins) is associated with the implementation of CRM? Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

21. The „target setting“ phase can be completed within 4 weeks (1) Work schedule „target setting“ Project week 1 2 3 4 Activity 1. Analysis of customer requirements • Definition of relevant customer segments for the CRM strategy • Identification of segment specific requirements with regard to CRM applications 2. Benchmarking and Best Practice Analysis • Identification of relevant benchmarking targets • Gathering of bechmarking data from RB&P databases and external sources • Definition of relevant benchmarks and best practices 3. Evaluation of existing CRM measures • Analysis of existing point-of-contact structure of customers • Documentation and evaluation of existing CRM activities Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

22. The „target setting“ phase can be completed within 4 weeks (2) Work schedule „target setting“ Project week 1 2 3 4 Activity 4. Development of the CRM vision and target system • Break down of CRM goals into detailed targets • Definition of target weights and measures • Set up of balanced score card for entire project 5. Estimation of potentials • Estimation of segment-specific revenue and margin improvements • Rough assessment of cost and investment requirements Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

23. The analysis of customer requirements will deliver segment-specific CRM related needs Business to consumer Business to business • Convenience • Information "on demand" • Individual problem solving • Entertainment • Price advantages • Cost reduction • Reduction of processing times • Service degree/access to services Customer needs • Customer loyalty/penetration • Reach new customers • Brand image • Quality of service • Efficiency improvement • Innovative business models Objectives 1) Fleets/direct customers Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

24. Benchmarking and best practice analysis will reveal feasible and attractive CRM opportunities Example: CRM related content at Porsche • Company links • No data entry • Personalization via cookies only • Travel club • Different travel offers • Online application • Total personalization • Post cards • Via e-mail • Collects sender and recipient addresses … • Games • Simple little games • Personal information entry required in order to be listed in high score tables • Porsche newsletter • Newsletter subscription • Collects e-mail addresses • Guest book • No personalization since only entry of name required Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

25. Transferable best practices can also be derived from non-automotive benchmarking targets • No • Bonus • program • Yes Holistic CRM players • Customer-specific • Customer segment-specific • Degree of individuality • No customiz-ation • Own product/ service range • Cross-selling • Entire demand range • Degree of demand coverage Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

26. Particularly the airline industry is leapfrogging the development in customer retention programs including personalized services for target segments General information Product/service range and partners • American Airlines • Internet market entry of www.aa.com in 1995 • Objectives: Online bookings from US$ 1.7 m per day (max.) in 1998 up to US$ 500 m total in 1999, further expansion of one-to-one customer customer relations • Earning miles: • Fly (AA, BA, Canadian Airlines, Cathay Pacific, Finnair, Iberia, Quantas Airlines, Japan Airlines, Swissair, etc.) • Hotels (Best Western, Holiday Inn, etc.) • Car rentals (Alamo, Avis, Hertz, etc.) • Shopping (Golf, Dining, etc.) • Using miles: • Fly, hotels, car rentals, trips • Each Internet visitor receives an offer tailored to her/his history and individual profile • At present, there are > 35 m AAdvantage-members, 1.7 m of which have already visited the Internet website • Top-tier Aadvantage members have access to a personalized AA page • More than 35 % of the top-tier members use the online offer • Record-booking day 1998: US$ 1.7 m Personalized Internet services Success Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

27. The points-of-contact analysis is supported by specific tools and results in a rough estimate of how CRM functions can be optimally applied Segment-specific points-of-contact analysis supported by tools Customer segment C • What are the points of contact? • What information is generated at these points? • How is this information aggregated/ evaluated/utilized? • What additional information should be collected (cost orientation)? • What further points of contact should be set up? • What analysis results are to be expected from the future information base? • How wide/detailed are future customer profiles? • What is the presumed frequency/intensity of the points of contact? Customer segment B Customer segment A Transaction Presales Sales After-sales Channels Internet Call center Sales force Logisticsservices Etc. Points-of-contact tool Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

28. Existing CRM activities will be evaluated in terms of their potential of being integrated into the overall CRM strategy Project example: Analysis of existing CRM activities for premium OEM Life cycle management Information and complaint mangement • Customer life cycle management • Prospective customer service • Customer service pre-sales • Customer service after sales • New customer program • Reactivation/recovery programs • Vehicle cycle management • Service card (planned first upgrade) • Service program Segment II/III • Information management • Prospective customer service • Complaint management • Definition of response times • Catalog of rules for cooling off customers • Proactive reactivation/recovery appeal • Integrated customer life and vehicle cycle management • Service card (planned second upgrade) Lack of strategic direction and process orientation • Trade service program • Customer retention • Service coupons • Premium program • VIP service • Age group program • Youth • Youth program • Service program • New media/electronics • Real-space worlds– Forum– Representation– Forum for technology/history • Other customer groups • Companies– Fleet management– Industrial customer service– Major customer service • Taxi customers– Taxi customer program • A Plus expanded services – Tourism– Expansion of assistance • Brand/oldtimer club • Mobility guarantee Customer service concept Segment-specific programs Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

29. CRM player C • CRM player B Illustrative The vision will define the future positioning towards the customer relationship Customer retention vision 2005: “Total Customer Ownership” • Address attractive customer segments in many parts of the demand range • Cover product/service range with the help of partners • Establish and trade own currency (e.g. "Miles", "Buxx") • Personalize offer and pricing based on customer behavior • Use the Internet (via different access media) as main channel to reach the customer • Cut other companies from customer access • CRM player A • Mobiletelecom. • Financial Service • CD/books • Gro- • ceries • Mobility • Ele-tronics Personalized offer Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

30. Increase shareholder value Overall Improve profitability Sustain growth Illustrative General Operating Product - specific The evaluation of the target system will allow the definition of a clear hierarchical order…. Target system CRM strategy (1) Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

31. Performance measure Today Goal When … … … … Illustrative … that will translate into a scorecard required in the first phase to evaluate business options Target system CRM strategy (2) Phase 1 Phase 2 Phase 3 Objective Weight Monitoring • Objective • Sub-objective 1 • Operating objective • Operating objective • … • Sub-objective 2 • Operating objective • Operating objective • … 0,5 0,2 0,05 0,1 0,3 0,15 0,1 … Evaluate business options Derive performance targets from selectedbusiness options Implementation milestones Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

32. Example The individual weights of the targets will be defined interactively and represent their relative importance Project example: target system for e-commerce strategy Increaseshareholder-value Increasechannelcontrol (34%) Improveprofitability (31%) Strengthenbrands (35%) • Avoidance of lost sales (7%) • Increase of sales (6%) • ECOM ROI (6%) • Channel cost reduction (6%) • Improved planning (6%) • Customer retention (8%) • Conquest (7%) • Image contribution (7%) • Web-site fidelity (6%) • Compliance with brand strategy (7%) • Control of customerdata/ prospects (9%) • Service quality (7%) • Group-coherent offering (6%) • Top-3 competitive offer (5%) • Time-to-market (7%) Source: Roland Berger & Partners MUC-0260-90099-02-72a.ppt

33. Prod./service range Own product/service range Spectrum to be addressed Segment A B C D N In the course of the actual potential estimation, parts of the customer strategy development have to be anticipated Segment-specific estimation of potential [Based on business plan] Estimating segment-specific potential Identifying focus segments Estimating CRM cost Trans- action Prod./serv. range Resultspectrum Spectrum to be addressed Presales Sales After-sales Segment Channels A Internet B Call center C Sales force D Expected sales (at optimum CRM use) • Frequency • Degree of individualization • etc. Logisticsservices Etc. N Cost Focus segments Realistic CRM potential Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

34. C. Approach C.1 Target setting C.2 CRM strategy and technology concept C.3 Implementation Discussion_Paper_SAG.ppt

35. ? Key questions „CRM strategy and technology concept“ • What are the opportunities to intensify the dialogue with the customer and improve customer knowledge to increase customer loyalty and cross-selling? • What are the most promising business options to develop personalized customer benefits through customized offers and value added services? • What are the most promising business options to establish an ongoing customer relationship through customer retention programs? • What are the necessary adaptations in processes and organizational structure to implement CRM? • What is the main impact on the existing IT-Infrastructure due to “translating” strategy definitions in IT-Logic? • Which functionality could be implemented by choosing “best of bread” software components? • What efforts have to be done to reach quick and lasting results in a stable IT-environment? Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

36. D.2.1 CRM strategy Discussion_Paper_SAG.ppt

37. The CRM strategy can be completed within 14 weeks Work schedule "CRM strategy" • Project week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 • Activity • 1. Personal customer dialogue • Concept • Pilot implementation • 2. Personalized offerings • Concept • Pilot implementation • 3. Customer retention program • Concept • Pilot implementation • 4. Process and organizational implications Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

38. Four steps will derive a winning CRM strategy • Project approach CRM strategy development Personal customer dialogue Personalizedofferings Customerretention Process andorganizatinalimplications • Develop business options per action field • Content • Contact frequency • Customer contact points • Evaluate and select busi-ness options according to the target system • Develop criteria catalogue for the technology concept • Derive control measures • Develop business options per action field • Products-/services range • Cross-selling • Degree of individualiza-tion • Evaluate and select busi-ness options according to the target system • Detail business options • Customer contact/ fore-casting • Partnering concept • Business plan • Develop business options per action field • Bonus programmes • Communities • My.com sites • etc. • Evaluate and select busi-ness options according to the target system • Detail business options • Scope (customer seg-ments/ business units) • Content • Functions/processes • Partnering concept • Business plan • Define core competencies/ make-or-buy • Integrate external service providers • Define processes/ process changes, clearly integrated into existing marketing & sales processes • Derive organizational structure • Change management/ transformation Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

39. How to individualize customer contact: Personal customer dialogue Discussion_Paper_SAG.ppt

40. ? Key questions „Personal customer dialogue“ • Based on the customer contact analysis of phase I: At which contact points should the customer dialogue be intensified? Are the current contact points sufficient? What are additional opportunities to contact the customer in the most efficient way to further increase customer loyalty and cross-selling? • What are the data requirements for an efficient customer dialogue? Which techniques should be applied in order to forecast customer buying behavior? • What are the necessary adaptations among the different companies within the Group in terms of customer contact points, content and contact frequency in order to ensure maximum efficiency of the customer dialogue? • What are the appropriate control measures to safeguard the achievement of the targets set in phase I? Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

41. The personal customer dialogue concept can be completed within 6 weeks Work schedule „Personal customer dialogue“ Project week 1 2 3 4 5 6 Activity 1. Development of business options for personal customer dialogue • Assessment of the current personal dialogue activities among the Group’s companies based on the results of phase I • Selection of the relevant focus action fields • Development of business options per action field (across companies/ company-specific) • Evaluation and selection of the business options according to the target system 2. Development of a criteria catalogue for the technology concept • Define data requirements and layout customer database • Cross-check with data availability • Data aggregation/networking • Definition of analysis and forecasting routines 3. Definition of control measures • Definition of the appropriate control measures per business option • Establish reporting routines 4. Pilot implementation Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

42. CRM business models will be defined for existing and new products and services New business models Smart bonus card Flexible leasing offers Service reminder Current product services 2 3 1 Personal dialogue Personalized offers Customer retention Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

43. Illustrative For the strategically most attractive action fields several business options will be developed … • Lifestyle-oriented newsletter with content partners 3 Indirect customers captive Front-office • Lifestyle-oriented newsletter without partners 2 Expected impact from changes Trans-formation Revolu-tion Evolution • Newsletter with mainly product-oriented content 1 Change effort Neither time nor resource intensive Either time or resource intensive Time and resource intensive Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

44. + o • Customer retention • Efficiency increase • Sales potential 0.25 0.2 0.2 + o Illustrative o ++ o ++ The business options developed are evaluated in qualitative terms in consideration of the target system Qualitative evaluation of business options Business options Criteria Weighting Product-oriented newsletter Lifestyle-oriented news- letter without partners … • Potential to conquer new customers 0.3 Total Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

45. Project example The evaluation according to the target system ensures stringent prioritization across all project modules Evaluation of B2B options versus target system Improve profitability Strengthen brands Increase channel control Control of customer data/prospects Group coherent offering Channel cost reduction Compliance with brand strategy Top 3 competitive offer Avoidance of lost sales Conquest ROI Increase of sales Improved planning Customer retention Image contribution Web- site fidelity Service quality Time-to market Σ E-fleet ordering 11.5 Priority 1 On-line test drive booking 9.5 9 Flexible fleet Priority 2 On-line service appointments 9 Positive impact No impact Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

46. High-quality data analysis Reduce data maintenance Project example Value creation through customer data model Customer data model • Unique and minimal definition of persons/individuals, attributes, code structures, and relationships Basis for CRM processes CRM system country A CRM system country B CRM system country C Country-specificadaptation of data A customer data model allows high-quality data analysis and enormously reduces data maintenance work Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

47. Project example Model Vehicle Partnerservice Contact Contact caserelation Case Partner-vehiclerelation Company Person Partner-addressrelation Exclusionflags Lifestyle Address Partner vehicle service Partner-dealerrelation Dealer Campaign The relationality of the customer database allows comprehensive data management Database structure Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

48. How to maximize customer benefits: Personalized offerings Discussion_Paper_SAG.ppt

49. ? Key questions „Personalized offerings“ • What are the most promising products and services for personalization to maximize customer benefits and thus increase customer loyalty and cross-selling? • What is the optimum degree of personalization with regard to the requirements and potentials of the different customer segments? • How can the input from personal customer dialogue be utilized to forecast customer buying behavior and thus optimize the efficiency of the product’s/services’ customization? • To what extent should external partners be involved to complement the existing product/service range to further increase customer benefits? Source: Roland Berger & Partners Discussion_Paper_SAG.ppt

50. The module “Personalized offerings” can be completed within 6 weeks Work schedule „Personalized offerings“ Project week 4 5 6 7 8 9 Activity 1. Development of business options for personalized offerings • Screening of current product and service range to determine the products and services with the highest potential for personalization • Development of business options for the defined products and services • Definition of the optimum degree of personalization with regard to the requirements and potentials of the different customer segments • Evaluation and selection of the business options according to the target system 2.Detailing selected business options for implementation • Synchronization with personal customer dialogue in terms of contacting customers and forecasting customer buying behavior • Partnering concept to complement offers and fulfillment • Development of a business plan per business option 3. Pilot implementation Source: Roland Berger & Partners Discussion_Paper_SAG.ppt