- 1 -Roland Berger & Partner GmbH International Management ConsultantsBarcelona Beijing Berlin Brussels Bucharest Budapest Buenos Aires Delhi Detroit Dsseldorf Frankfurt Hamburg Kiev Kuala Lumpur LisbonLondon Madrid Milan Moscow Munich New York Paris Prague Riga Rome So Paulo Shanghai Stuttgart Tokyo Vienna ZurichCustomer Relationship Management Consulting approach Munich, June 2000- 2 -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.Content PageA. Introduction 3B. Project objectives and scope12C. Approach 16C.1CRM target setting19C.2CRM strategy and technology concept34C.3CRM implementation74D. References77E. Appendix: Supporting tools to implement CRM 81E.1The Internet as a supporting CRM tool82E.2The call center as a supporting CRM tool93- 3 -A. Introduction- 4 -The importance of an integrated Customer Care approach receives increasing awareness at top management level all over the worldSource: Forrester Research, basis: 50 Sales managers of Fortune 500 companiesDo you have a single, integrated view of the customer today?How important is a single, integrated view of the customer across your company48 %44 %6 %2 %Very importantCriticalSomewhatimportantNot at all important2 %10 %52 %36 %YesSomewhatNot reallyNot at all- 5 -In the future, a companys value will increasingly depend on the value of its customer baseFactors influencing corporate valuationMarket value addedmethodDiscountedcashflow methodMultiplesmethodCustomer lifetimevalue methodCustomer acquisi-tion cost method IndustrialsocietyInformationsocietyTraditional industrial companies, e.g. manufacturing industryService companies, e.g. consulting firms, software companiesInternet companiesAssetsEmployeebaseCustomer baseSource: Roland Berger & Partners- 6 -The value of the customer base is determined by the key factors individual customer value and size of the customer baseValue of customer base corporate valueIncreasedcorporate valueHigher customer net present valueHigher absolutenumber of customersCustomer cashflowsNumber of customersAnnual profit/customer12345678Price premiumsRecommendationsCost savingsSales growthper customerBase profitAcquisition costCustomerretention rateNew customeracquisition rate%t+x%Source: Roland Berger & Partners- 7 -The market value of the leading InfoCom companies clearly exceeds that of OEMs the customer base is the key success factorSource: Roland Berger & Partners analysisOverview of customer ownership and market value449011218922830037640542806740142820904001,128VWGMFordYahoo!MannesmannVodaphone/AirtouchAOLNokiaMicrosoftNumber of customers in millions (12/99) Market value in DM billions (12/99)DM 1,000/customerDM 1,100/customerDM 1,700/customerDM 4,700/customerDM 16,300/customerDM 10,700/customerDM 18,800/customerDM 4,500/customerDM 2,800/customerPoints of customer contact Shopping TV/media Telephone/mobile Banking Sport Car- 8 -Managing the customer relationship is a key lever to increase shareholder valueMarket and customer valueExampleManaging the customer relationshipMarket value(bn Euro)Customer Value(Euro)Today0.412/991.000 (Current)0.63.6PotentialFuture1.500 (Microsoft)- 9.000 (AOL)Calculation basis: 400.000 customersSource: Roland Berger & Partners- 9 -CRM is a strategy designed to increase individual customer value by establishing a long-term and systematic customer relationshipLearning relationshipGenerating/ recording customer dataOngoing customerrelationship2341IdentificationInformationanalysisCustomerprofiles Forecasting buying behavior MonitoringsuccessInitial contact with customer0Developing customer benefits, e.g. Value-added services Customized offersIncreased customer retentionWider range of servicesHigher efficiency in contacting customersSource: Roland Berger & Partners- 10 -The knowledge cycle“ is the key to successful CRM when dealing with customers Actions to support network effectsSource: Hagel/Armstrong; Roland Berger & PartnersCommunity-generated content Online discussions for members Create profilesPartnerships with other organisations Cross advertising Partnerships with road side assistanceCreation of a market place/auction Shopping malls Partnership with auction providerQuestionaires on the net Experience with a product Customer history/profileNeed to log-in for each member For newsletters For membershipContinous report of individual information Monitoring of web-usage (focus of interest)Promotions of member- to-member interaction Personalized e-mail system for members Personal web pageCustomized interaction Service remindersConserving relationships Product updates Archive of chat contributions Bonus programmes (e.g. web miles based on after sales frequency)Increased content attractivityBetter knowledge about the clientHigher loyaltyExamplesExamplesExamplesIncreasing return of marketing & Sales1.2.3.- 11 -The key lever for CRM success is the Internet innovative options for individual customer contact 312Maximumcustomer potentialMaximumvolumeProduct/service rangeaddressedCurrentcustomer valueMarketing/sales costEnhanced loyalty: Changing occasional customers into loyal customersInternet as convenience channelIndividual communication, e.g. sitesInformation-based value-added services1Opportunities offered by the InternetBroad-based customer communication: Cross sellingThe Internet is used to collect information other than the individual product/service rangeThe Internet is used to address a wide range of products2More efficient contact: Cost savingsThe Internet is a low-cost sales channelOption to provide individualized information (example mail-order: Catalogues tailored to customer profiles)3Source: Roland Berger & Partners- 12 -B. Project objectives and scope- 13 -The strategic goals aim at sustainable growth and profitabilityEnhance identification, segmentation, conquest and loyalty of customers Strategic goals of CRMHaving a clear idea of the customers current and future needs Reinforcing the awareness of the Group and of its service mix Increasing customer satisfaction Responding quickly and efficiently to the customer bearing in mind its economic value Source: Roland Berger & Partners- 14 -The project objectives aim at a seamless implementation of CRM from vision to systems integrationCRM project objectivesCreate a strong CRM vision and focus areas with highest business potentialTranslate CRM vision into bold CRM strategy combined with a customized technology conceptEnsure a sustainable implementation supported by reliable CRM processes and systemsSource: Roland Berger & Partners- 15 -The project covers the entire business-channel matrix with CRM applications to attract, penetrate and retain customersCRM applicationsPersonalized customer dialogue Personalized offeringsCustomer retention moduleDirectOwnconcessSIVAINTERBANCOCOMEPORChannelBusinessBusiness-channel matrix3rd partyconcess.MULTIRENTTele-mktg.Promo-torsInter-bancoMulti-rentInter-netStoresInter-nationalLGASIXTRETALHO ExampleSource: Roland Berger & Partners- 16 -C. Approach- 17 -ImplementationThe approach to define and implement Customer Relationship Management consists of three phasesObjectivesTarget settingCRM strategy andtechnology concept123Analysis of customer requirementsBenchmarking and Best Practice analysisEvaluation of existing CRM measuresDevelopment of CRM vision and target systemEstimation of potentialsSource: Roland Berger & PartnersDevelopment of a detailed CRM strategy within the overall sales & marketing strategy Personal customer dialogue Personalized offerings Customer retentionDesigning a technology concept in co-operation with CRM systems providersSet up of detailed CRM business caseImplementation of CRM strategy and technology concept (work program to be detailed during phase II)- 18 -The customer relationship management strategy can be ready for implementation in 4.5 monthsProject monthActivity121 Target setting2. CRM strategy Personal customer dialogue Personalized offerings Customer retention program Process and organizational implications Pilot implementation3. Technology concept IT-Audit Data-model and IT-infrastructure plan Software and service provider selection4. Implementation34Source: Roland Berger & PartnersTiming5- 19 -C. ApproachC.1 Target settingC.2 CRM strategy and technology conceptC.3 Implementation- 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 information deficit 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- 21 -The target setting“ phase can be completed within 4 weeks (1)Project weekActivity1234Work schedule target setting“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 practices3.Evaluation of existing CRM measures Analysis of existing point-of-contact structure of customers Documentation and evaluation of existing CRM activitiesSource: Roland Berger & Partners- 22 -The target setting“ phase can be completed within 4 weeks (2)Project weekActivityWork schedule target setting“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 project5.Estimation of potentials Estimation of segment-specific revenue and margin improvements Rough assessment of cost and investment requirements1234Source: Roland Berger & Partners- 23 -The analysis of customer requirements will deliver segment-specific CRM related needsBusiness to businessBusiness to consumerCost reductionReduction of processing timesService degree/access to servicesConvenienceInformation on demandIndividual problem solvingEntertainmentPrice advantagesCustomer needsQuality of serviceEfficiency improvementInnovative business modelsCustomer loyalty/penetrationReach new customersBrand imageObjectives1) Fleets/direct customersSource: Roland Berger & Partners- 24 -Benchmarking and best practice analysis will reveal feasible and attractive CRM opportunitiesExample: CRM related content at PorschePost cards Via e-mail Collects sender and recipient addressesCompany links No data entry Personalization via cookies onlyTravel club Different travel offers Online application Total personalizationPorsche newsletter Newsletter subscription Collects e-mail addressesGuest book No personalization since only entry of name requiredGames Simple little games Personal information entry required in order to be listed in high score tablesSource: Roland Berger & Partners- 25 -Transferable best practices can also be derived from non-automotive benchmarking targetsBonus programCustomer-specificCustomer segment-specificNo customiz-ationOwn product/ service rangeEntire demand rangeDegree of individualityDegree of demand coverageHolistic CRM playersCross-sellingNoYesSource: Roland Berger & Partners- 26 -Particularly the airline industry is leapfrogging the development in customer retention programs including personalized services for target segmentsEarning miles: Fly (AA, BA, Canadian Airlines, Cathay Pacific, Finnair, Iberia, Quantas Airlines, Japan Airlines, Swissair, etc.)Each Internet visitor receives an offer tailored to her/his history and individual profileAt present, there are 35 m AAdvantage-members, 1.7 m of which have already visited the Internet websiteGeneral informationProduct/service range and partnersPersonalized Internet servicesSuccessHotels (Best Western, Holiday Inn, etc.)Car rentals (Alamo, Avis, Hertz, etc.)Shopping (Golf, Dining, etc.)Using miles: Fly, hotels, car rentals, tripsTop-tier Aadvantage members have access to a personalized AA pageMore than 35 % of the top-tier members use the online offerRecord-booking day 1998: US$ 1.7 mSource: Roland Berger & Partners- 27 -The points-of-contact analysis is supported by specific tools and results in a rough estimate of how CRM functions can be optimally appliedSegment-specific points-of-contact analysis supported by tools TransactionChannelsInternetCall centerSales forceLogisticsservicesPresalesSalesAfter-salesCustomer segment ACustomer segment BCustomer segment CPoints-of-contact tool 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?Etc.Source: Roland Berger & Partners- 28 -Life cycle managementInformation and complaint mangementCustomer service conceptSegment-specific programsSource: Roland Berger & PartnersExisting CRM activities will be evaluated in terms of their potential of being integrated into the overall CRM strategyLack of strategic direction and process orientationCustomer life cycle management Prospective customer service Customer service pre-sales Customer service after sales New customer program Reactivation/recovery programsVehicle cycle management Service card (planned first upgrade) Service program Segment II/IIIIntegrated customer life and vehicle cycle management Service card (planned second upgrade)Information management Prospective customer serviceComplaint management Definition of response times Catalog of rules for cooling off customers Proactive reactivation/recovery appealTrade service program Customer retention Service couponsService program New media/electronics Real-space worldsForumRepresentationForum for technology/history A Plus expanded services TourismExpansion of assistance Brand/oldtimer club Mobility guaranteePremium program VIP serviceOther customer groups CompaniesFleet managementIndustrial customer serviceMajor customer service Taxi customersTaxi customer programAge group program Youth Youth programProject example: Analysis of existing CRM activities for premium OEM- 29 -CRM player CThe vision will define the future positioning towards the customer relationshipAddress attractive customer segments in many parts of the demand rangeCover product/service range with the help of partnersEstablish and trade own currency (e.g. Miles, Buxx)Personalize offer and pricing based on customer behaviorUse the Internet (via different access media) as main channel to reach the customerCut other companies from customer accessCustomer retention vision 2005: “Total Customer Ownership”CRM player BCRM player AFinancial ServiceMobiletelecom.Gro-ceriesEle-tronicsMobilityCD/booksPersonalized offerIllustrativeSource: Roland Berger & Partners- 30 -The evaluation of the target system will allow the definition of a clear hierarchical order.IllustrativeTarget system CRM strategy (1)Increase shareholder valueImprove profitabilitySustain growthOverallGeneralOperatingProduct - specificSource: Roland Berger & Partners- 31 - that will translate into a scorecard required in the first phase to evaluate business optionsTarget system CRM strategy (2)Phase 1ObjectiveWeightObjectiveSub-objective 1Operating objectiveOperating objectiveSub-objective 2Operating objectiveOperating objective0,50,20,050,10,30,150,1Evaluate businessoptionsPhase 2Phase 3MonitoringPerformance measureTodayGoalWhenImplementationmilestonesDerive performance targets from selectedbusiness optionsIllustrativeSource: Roland Berger & Partners- 32 -The individual weights of the targets will be defined interactively and represent their relative importanceProject example: target system for e-commerce strategyIncreaseshareholder-valueImproveprofitability(31%)Strengthenbrands(35%)Increasechannelcontrol(34%)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 & PartnersExample- 33 -In the course of the actual potential estimation, parts of the customer strategy development have to be anticipatedSegment-specific estimation of potentialBased on business planProd./service rangeSegmentABCDOwn product/service rangeSpectrum to be addressedNProd./serv. rangeSegmentABCDResultspectrumSpectrum to be addressedNFocus segmentsTrans-actionChannelsInternetCall centerSales forceLogisticsservicesPresalesSalesAfter-salesExpected sales(at optimum CRM use)CostRealistic CRM potentialEstimating segment-specific potential Identifying focus segments Estimating CRM costEtc. Frequency Degree of individualization etc.Source: Roland Berger & Partners- 34 -C. ApproachC.1 Target settingC.2 CRM strategy and technology conceptC.3 Implementation- 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- 36 -D.2.1 CRM strategy- 37 -The CRM strategy can be completed within 14 weeksWork schedule CRM strategySource: Roland Berger & PartnersProject week Activity12345678910111213141.Personal customer dialogueConceptPilot implementation2. Personalized offeringsConceptPilot implementation3.Customer retention programConceptPilot implementation4.Process and organizationalimplications- 38 -Personal customerdialoguePersonalizedofferingsCustomerretentionProcess 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 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 Develop business options per action field Bonus programmes Communities M 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 Develop business options per action field Products-/services ran