Selling Chain Management and Customer Relationship Management CRM

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Selling Chain Management andCustomer
Relationship Management (CRM)

• Marquette University MBA Program
• E-Business and Supply Chain Management

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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

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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 MAs - Technology Forces Limited SFA
functionality, Limited process functionality,
Limited sales effectiveness
(Kalakota Robinson 2001)
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Selling Chain Management Architecture
(Kalakota Robinson 2001)
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Sales Configuration Vendors
Sales Configuration Magic Quadrant
Oracle
(Source DeSisto, Gartner Research, 7/2000)
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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).

(www.sybase.com, manufacturing.net, Fitzsimmons
Fitzsimmons 2001)
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Integrated CRM Focus and Architecture
(Modified from Kalakota Robinson 2001)
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Role of CRM IT Applications
Source Kalakota Robinson 2001
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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.

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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
  the results, 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
  80s to 90s 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

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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

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Designing the Solution System Over the Customer
Activity Cycle
SASs 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)
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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)
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CRM Scorecard
(Kalakota Robinson 2001)
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Finding the Right CRM Tool
No CRM package currently offers all the major
functions

• 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 (gt 500 employees) Siebel,
  Vantive, Clarify, Oracle and PeopleSoft
• Mid-market Space (100- 500 employees)
  ServiceSoft, Onyx, Pivotal, Remedy and Applix
• Small-business Space (lt100 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-offs 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

Source Naras Eechambadi, crmguru.com
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Customer Service and Support Vendors
CSS Apps Magic Quadrant
(Source Fluss, Gartner Research, 2/2000)
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Success Factors for CRM and Potential Pitfalls

• 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

(Source Best Practices, LLC, Kalakota Robinson
2001, Gartner Symposium ITxpo 2000,
destinationcrm.com, manufacturing.net)