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Customer Relationship Management: Essential Strategies for Profitability and Customer Retention

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This presentation outlines the importance of Customer Relationship Management (CRM) for General Managers (GMs) in enhancing profitability and customer satisfaction. It defines CRM as both a business strategy and technology that centralizes customer data, improves processes, and fosters customer-centric behavior. Explore best practices for implementing CRM, including a real-world case study, and discover how to leverage CRM to retain customers and reduce costs. With projected worldwide CRM spending increasing significantly, understanding CRM is crucial for maintaining a competitive advantage.

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Customer Relationship Management: Essential Strategies for Profitability and Customer Retention

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  1. Customer Relationship Management Prepared by: Larry Eisenberg Ron Fogarty Doug Marren

  2. Greenberg, Paul, CRM at the Speed of Light, McGraw Hill 2001

  3. Objective of Customer Relationship Management (CRM) Presentation • Why topic is important to GM’s • Define CRM • Present a real world CRM case • Learn about best practices to implement CRM

  4. What Makes CRM Important to GM’s? • Worldwide CRM Spending, in 2002, is estimated to be $14 billion and $20 billion for 2005 (1). • Why is spending increasing? Because being “customer centric” through technology increases revenues, cuts costs, and offers strategic competitive advantages. • Your company may have or will implement some CRM applications. As a result of change, or potential change, let there be understanding. (1) Source: Aberdeen Group, July 2002

  5. What is CRM?

  6. 2 Part Answer: • CRM Is a Business Strategy: Focus on profitability, revenue and customer satisfaction by: • Organizing your customers. • Fostering customer-satisfying behaviors and implementing customer centric processes. • And Also A Technology: Should enable greater customer insight, produce more effective customer interactions and should integrate of all customer channels and back-office functions. Ed Thompson, Gartner Group, CRM: The Past, Present and Future: YEA Presentation 03/2002

  7. CRM Goals • Cut Internal Costs • Improve your Processes • Ex: Remove customer hold times. • Centralize data from every department • Increase sales • Automate the sales process • Perform more lucrative marketing campaigns • Gain A Competitive Advantage • Ex: Amazon.com Data Mining

  8. Traditional Customer Facing Systems Data center Data Center Data Center Contact Center Sales Service Customer Marketing/Advertising

  9. Warehouse Data Data Warehouse Contact Center Sales Service Customer Data Marketing Warehouse Warehouse Data Patricia Seybold, An Executive’s Guide to CRM: How to Evaluate CRM Alternatives by Functionality, Architecture & Analytics, March 2002, pp 7-10.

  10. With This Strategy: • From a Customer-Viewpoint: • We present One Face to the Customer • From a Knowledge-Viewpoint: • We become more efficient. • If HP knew what HP knows, we would be three times as profitable. • From a Campaign Management-Viewpoint: • We target advertise based on demographics Charles Despres and Daniele Chauvel, “How to Map Knowledge Management” Mastering Information Management, Prentice Hall 2000, pg 170

  11. Sales Force Automation • Contact Management • Name, address, titles, etc. • Account Management • Corporate Information • Sales Process Management • A map that shows every step of sales process • Communication Tools • generate quotations, proposals, trip reports, expense reports, etc.

  12. SFA continued… • Store competitive information. • Track customer and territory performance. • Customer Interfacing Information • When your customer called in for: • help, orders, asked for on-site assistance, checked order status. • Can see data from web access • e-Purchases, e-troubleshooting, etc.

  13. Contact Center • Contact Center Applications: • Telephony Applications for service, sales and marketing. • Automated prompting software that helps the agent solve the customer’s problems. • Centralized Database contains outside sales’ quotations, proposals, trip report, etc.

  14. Ex: Soffront SFA www.soffront.com/ppdemos, viewed 27 September 2002

  15. Campaign Management with CRM • Creating Personalized Marketing Efforts • Helps retain good customers. • And reduces costs of new acquiring new customers. • Identifies customers that are about to take their business elsewhere. • Plan and monitor all marketing activity from beginning to end. Greenberg, Paul, CRM at the Speed of Light, McGraw Hill 2001

  16. Ex: Campaign Management • Ex: Annual Marketing Budget is $12,000,000/year • 10 Million customers in database: Option 1: mail everyone: $.30/mailing = $3,000,000 * 4 mailings per yr. • campaign cost: $12,000,000 • campaign results: $50M in revenue

  17. Ex: Campaign Management cont… Option 2: Make educated guess of who to mail to: • Deduce 6 M of 10M people should receive: • 6,000,000 * $.30 = $1.8M * 4 = $7.2 M • Campaign Results: $50M in revenue

  18. Ex: Campaign Management cont… Option 3: Data Mine and Build a Model: • Deduce only 3M of 10 M should receive • 3,000,000 *$.30 = $900,000 * 4 = $3.6M • Comparing Option 1 to Option 3: $8.4M savings to generate same revenue. • You are the company hero.

  19. In Summary • At the end of the day, it’s about being customer-centric. • Improve business deficiencies • Get a sales lift from existing customers • Find new customers

  20. Why Retain Customers?

  21. Why Retain Customers? • A 5% increase in customer retention can improve business profitability by 50%. • It costs 7 to 10 times as much to get a new customer as keep a current one. • A 2% loyalty increase can translate into a 10% across-the-board cost saving. source: Intermedia Interactive Solutions, www.intermediainc.com, viewed 11/2/02

  22. Why Retain Customers? • Recession Survival • In a down economy, repeat business is the most secure and profitable source of revenue source: Larstan Business Reports, www.larsten.net, viewed 11/2/02

  23. Why Retain Customers? • Repeat Customers Buy More • Research shows that the longer customers stay with a firm, the more they spend per transaction source: www.marketingprofs.com, viewed 10/23/02

  24. Why Retain Customers? • Company Reputation • High retention rates enhance the firm’s reputation within the industry and among potential customers • Word of mouth marketing source: www.marketingprofs.com, viewed 10/23/02

  25. Why Retain Customers? • Repeat Customers are Forgiving • Loyal customers tend to be more understanding when problems develop. source: Susan Keaveney, Denver Business Journal, 4/8/02

  26. Why Retain Customers? • Improved Morale and Productivity • Employees will be more satisfied, and in turn more productive. source: www.marketingprofs.com, viewed 10/23/02

  27. CRM Spending

  28. CRM Spending: Current / Future (1) Source: Aberdeen Group, July 2002

  29. CRM Spending by Industry 2002 Spending • Manufacturing $ 1.7 billion • Financial Services $ 1.4 billion • Retail and Distribution $ .95 billion • Business Services $ .78 billion • Government and Education $ .58 billion (1) Source: Aberdeen Group, July 2002

  30. Suppliers of CRM • Leading CRM Suite Suppliers • Oracle • PeopleSoft • SAP • Siebel • Small to Medium Enterprise Supplier • Front Range Solutions Source:Patricia Seybold Group, An Executive's Guide to CRM, 3/2002, p. 11

  31. Giga slide Source: Giga Information Group, YEA presentation, 3/02

  32. Oracle • Over $9.4 billion annual revenue • World’s largest information software provider • Strong in ERP market Source: 2002 CRM Solutions Guide, June, 2002, www.crmguru.com, viewed November 1, 2002

  33. PeopleSoft • $2 billion annual revenue • ERP and CRM provider • CRM suite of over 22 products Source: 2002 CRM Solutions Guide, June, 2002, www.crmguru.com, viewed November 1, 2002

  34. SAP • $2 billion annual revenue • International business software provider • ERP and CRM provider

  35. Siebel • $1.7 billion annual revenue • Leader in High-end CRM market • Leads industry in specific application suites

  36. - Small-Medium Enterprise CRMsolution • Pioneered Sales Force Automation • Goldmine Front Office • Sales Force Automation • Heat • Customer Service • CustomerIQ • Web-based CRM

  37. Case Study - Motoman CRM Solution – Clarify CRM Suite

  38. General Purpose World Solutions Clean Room Motoman

  39. Motoman, Inc. • Headquartered in West Carrollton, OH. • 420 Employees • Annual Sales of $115M in North America • 30-40 different types of Robots • Customers – Concentration on integrators with specific market capabilities. Gary Pope – Director of IT; Motoman, Inc. phone interview 23 Oct 2002

  40. Motoman continued… • Gary Pope – Director of IS • Responsible for IS, telecommunications, security systems. • Reports to the CFO • CFO Reports to the CEO • No IT outsourcing whatsoever.

  41. Annual Budget • IT Annual Budget • Expenses: $2.4M • Of that $1M of that is capital depreciation • $700k: Manpower related – salaries, insurance, etc. • Capital: $500k Case Study: Motoman

  42. IT Staff • 10 people • Including Gary Pope, the Director of IS • 3 Programmers (at time of installation) • 6 individuals to provide desktop support, telecommunications, network. Case Study: Motoman

  43. Reasons for CRM • Data security • Wanted to more effectively communicate with customer • Increase in Productivity/Efficiency Case Study: Motoman

  44. IT’s Role In CRM • IT Assisted during evaluation and took lead during implementation. • CRM Evaluation Program Leader • Determined who Motoman should use, to what extent it should be implemented. Case Study: Motoman

  45. Prospective Vendors • After a year of evaluation, it came down to: • Siebel, Clarify, PeopleSoft/Vantive, SAP • Toss-up between Clarify and PeopleSoft • Finally selected Clarify’s CRM Package. • Motoman evaluation team made the final decision. Case Study: Motoman

  46. CRM Cost • Clarify - $343,000 • Includes: Software, license for 100 users, Maintenance • External Consulting – $250,000, • 312 man days, 4 month schedule Plus additional $80,000 from Clarify • Training for Integrator Case Study: Motoman

  47. Clarify CRM Components • Customer Service: • Helpdesk • ClearSupport: tracks cases • ClearLogistics: Field Operations, Depot Repair, Order Operations. • Sales Force Automation Tools • ClearSales • Trip Reports • Traveler Case Study: Motoman

  48. Timeline • Timeline: • Selection process – approx. 1 year. • Internal Audit – 6 months • February 2001 • Purchased software, hardware and put out contract for the integration • 9 July 2001 • Customer Service Group go-live date. • 1 August 2001 • Sales Force go-live date. Case Study: Motoman

  49. Implementation • Hired an integrator to help install • Tried to keep customization low • Wanted future software releases to still function. • Quicker, cheaper. • Some minor items had to be modified within the program. • Pull-down menus, options, etc. Case Study: Motoman

  50. Implementation cont… • This integrator had never implemented Clarify before. • This was known ahead of time. • Wanted to have opportunity to learn Clarify. • $330k cost incurred to use them. • Would have cost an additional $200k-$300k to go with a consultant that had the experience. Case Study: Motoman

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