BGS Customer Relationship Management Chapter 14 The Future

Future CRM Strategy

CRM Strategy “Implementing customer relationship marketing strategy ranks as one of the top 5 corporate objectives in 60% of enterprises worldwide. ” Scott Nelson – CRM Is Dead, Long Live CRM • The promise of CRM is to provide companies an information-rich environment for developing winning customer strategies.

What is the Problem With CRM? • If CRM is so promising, why are the majority of U. S. companies still foundering with CRM? – Companies report mixed results! – Confounding when everyone agrees that CRM is necessary strategically.

The Solution: Ease of Use? • We believe the promise of CRM systems will only be realized if systems become more user friendly. – CRM value will be recognized only when the value of inputting data into systems becomes personally rewarding for employees.

The Facts • In a recently completed De. Paul University survey on best sales practices: – Only 50 percent of companies with sales volume over $1 billion reported using CRM – Of the companies using CRM, only 55 percent reported their programs as being helpful in building customer relationships – Conversely, for companies with sales volumes less than $100 million that have embraced easier to use on-demand CRM solutions, • 81 percent reported the CRM software was beneficial • 75 percent reported CRM helpful in building customer relationships

The Point • The point is clear – The simpler the system is to use, the more powerful it becomes – Future CRM applications will have to be far simpler to use than previous generation’s systems • There is a long way to go to change sales department and management attitudes toward use of the software

The Point • “Despite the abundance of data, most companies do a poor job of predicting customer behavior. ” – Businesses are only successful in predicting customer purchase behavior 60 percent of the time – That hardly justifies the cost of having a CRM system – Inaccuracies in prediction and the use of older, cumbersome CRM systems have created the impression that CRM is in some difficulty V. Kumar, Rajkumar Venkatesan, and Werner Reinartz

The Point • We believe that the problems are not in the CRM system but rather how we apply what we learn from the system. – The future of CRM is dependent upon • • Our ability to simplify systems Providing users the time necessary to learn Becoming proficient using CRM Helping users understand the payoff

The Point • The future of CRM technology promises significant improvement in CRM functionality – Expediting managerial and diagnostic system application processes – CRM systems in the future will provide more insight into customer behavior and relationship development

The Future of Sales Strategy • Sales strategy is beginning to change as CRM data enables – New account management structures – Different territory coverage plans – More customer responsive cultures • Superior account management structures result from improved customer data detailing improvement in customer performance

New Sales Implications • The need to consider alternative territory management models is also under significant scrutiny as sales management struggles with a more competitive sales recruiting environment and the evolution of its sales force. – 80 million baby boomers are approaching retirement – Only 40 million Generation X'ers are in position to take their place

New Sales Applications of CRM • Many senior salespeople are baby boomers and are currently entrusted with key account responsibility. – What if they exit the business without passing on their customer knowledge? – How will that insight be retained if not through CRM? – This group has been among the most resistant to accept the technology-based CRM.

New Sales Applications of CRM • Alternative territory management formats are being explored as a result of relatively high salesperson turnover – In a recent study by De. Paul University’s Sales Leadership Program, turnover is as high as 14 percent annually among manufacturers – Plans for covering these vacant territories include • Improved inside telephone sales support from customer service • New inside sales organizations that will take advantage of easier to use and more functional CRM systems – The payback for these initiatives is clear when you consider that the cost of a vacant sales territory has significant negative impact on bottom line

CRM and Sales Organizations • Companies with CRM systems are keenly aware of the new account management needs within sales organizations • New tools have recently been released to help resourceconstrained organizations leverage sales management • A new generation of software has been developed to help management – Better direct their sales teams – Improve customer ROI – Improve the sales talents of their organization

Force Logix • New software has been developed to better link management to the sales process. – Sales Force Optimizer provides management with a sales force management tool that assists with sales coaching and sales process management – This tool eliminates the bulk of sales managers’ administrative responsibilities and utilizes performance metrics from CRM systems in addition to data input from a variety of other corporate databases

CRM and Promotion • Improvements in CRM systems will improve campaign management of electronic and direct marketing programs. – Higher system utilization rates means more current data will improve quality of customer communication – The expeditious return of participation data will mean improved program performance results – Improving technology will mean shorter promotion intervals and better response

New Tools • It is not difficult to consider the impact that Radio Frequency Identification (RFID) tagging and improved household coding will have – Expedient analysis will provide additional programs that can motivate responsive customers – A new era of customer management will be possible. In the area of B 2 C marketing, the motivation of customer segments will be possible as promotion results allow for shorter promotion cycles and perhaps continuous stimulation of important segments

CRM and Forecasting • Future CRM systems will provide users – Improved data management functionality – Better forecasting models – Improved customer data and sales performance metrics • New editions to existing software products are already adding improved features to enhance system capability • Improved methodology will eliminate past forecasting problems

CRM and ERP • Technical improvements in CRM will be matched by improvements in ERP systems. • In the future, CRM will be seamlessly integrated with customer demand with production, delivery, and billing. • The direction of manufacturing, logistics, and accounting operations will be far more efficient.

CRM Strategy and Organizational Change • For CRM to be more effective in the future, we need to rethink how we sell – Organizational structure change • Alternative territory coverage plans • Increased use of sales force automation – The organization, functions, and titles will need to be evaluated regarding how they add value to customers • Key customer contacts will require more visibility internally and more responsibility in developing accounts

CRM Strategy and Organizational Change • Examples of two groups that warrant reevaluation – Customer service and technical support do not enjoy the organizational status commensurate with their customer value • These organizations can evolve to provide inside sales support capability • These groups are technically proficient working with customers over the phone and are expert in CRM and data entry • They are gold mines of talent for their organizations • As a centralized resource, these organizations can serve as a feeder system to external sales

CRM Strategy and Future Cultural Change • Corporate culture must grow to embrace CRM – Leadership must use CRM to drive participation • CRM will be used to make optimal strategic decisions • Customer-centric thinking requires an increase in status for customer facing groups – Sales – Customer service – Marketing departments

CRM Strategy and Future Cultural Change • Management must prepare the organization to accept change. – This will become easier as CRM systems improve and people recognize the personal value of using technology • Organizations that accept change and use CRM will develop competitive advantage.

CRM and Future Technology

A Changing CRM Landscape • Differing CRM technologies are competing for clients, and that competition should provide for – Differences in product pricing – Improved system feature functionality – Different CRM applications that support sales and marketing programs

A Changing CRM Landscape • In the next five years, we will see intense competition of CRM technology platforms as – On-demand CRM seeks to expand its penetration in small to mid-size companies to effectively serve large enterprise customers – Enterprise software companies like Oracle and SAP focus on the on-demand product model • In February 2006, SAP introduced SAP CRM on-demand solution • But old habits die hard, as SAP has hedged its bet by introducing their product as a hybrid, offering the product as both software and an on-demand service • Oracle/Siebel and Microsoft offer the same hybrid form

Which System Is Right? • The question of which technological approach is better is moot. – There are particular companies that will be perfectly suited for each CRM technology platform – The real question is what technology will be most appropriate for the majority of customers – There are millions of dollars at stake in this market share war

Which System Is Right? • The market is beginning to resolve this issue already, with the adoption of the “software as a service, ” or on-demand mentality, being adopted by market leaders Oracle and SAP.

Which System Is Right? • Consider how other industries are resolving the software as a service issue. – Consumer Research - previously entirely software based, has now embraced an on-demand model • ACNielsen’s new Category Business Planner system is an ondemand tool sold as a subscription service • Spectra Marketing’s new Infi. Net is an on-demand customer segmentation tool – Corporate Web Sites – Once developed exclusively with software and as proprietary programs are now evolving to a web portal environment • i. Centera is a prime example of this trend – The Appexchange is home to 400 different software as application to services

On-Demand CRM Solutions • The benefits of on-demand solutions are – – Little or no IT involvement No software upgrades to purchase System user-focused program costs CRM access anywhere you have access to the Internet • On-demand solutions host a company’s database; their customers utilize the system to manage their data and business remotely

On-Demand CRM Solutions • The on-demand CRM system requires virtually no support and is immediately usable once data is uploaded. – Except for initial on-line training for sales users – Week-long system administrator training • The system is upgraded automatically as new generation software becomes available. • While there can be system downtime when upgrades occur, there are usually no noticeable differences in service levels.

On-Demand CRM Solutions • The pricing for on-demand services is dependent upon the number of “seats” utilized, or individual users, and can vary from $100 to $150 per month. – The benefit of this pricing model is that it can be turned off and on as needed • The service is hosted off-site and accessed by the Internet. – The system is available anywhere a connection to the Web is possible – On-demand systems also offer customers the ability to have continuous access to on-demand systems through Blackberrys or other PDAs

Server-Based CRM Systems • One important benefit of server-based CRM applications today is the ability to customize the program for their users. – Server-based systems have been the historical leaders in CRM • User of these systems are: IBM, Ford, Boeing, Honeywell, Master. Card, Caesar’s Palace – Future server-based systems will offer more robust functionality, superior analytics, and graphics – Server-based systems are also sold as highly customized tools for a particular industry and integrated into the ERP or the operational systems of the company

Server-Based CRM Systems • These software applications are expensive. • The software expense is just the tip of the iceberg when considering the cost of the entire implementation project. – The total cost of a server-based system can easily reach $4 -$8 million Figure 14. 2

Server-Based CRM Systems • The major benefit of server-based CRM applications is their robust functionality – The systems are customized to their particular industry and then to the user. The customization provides real benefit to all users, as well as customers

Data Security Comparison Neither on-demand nor server-based systems have a distinct advantage in security. • Server-based systems – Server-based systems rely on system design, but more importantly on their IT department – There is a real difference in the degree of vigilance that companies take in protecting their data

Data Security Comparison • Neither on-demand, nor server-based systems have a distinct advantage in security. – On-Demand systems • CRM security of customer data is arguably the most important concern for software as a service • Not all of the hosting companies will take the same security precautions, and like server-based applications there will be variability in performance company to company • However, without providing a secure environment, this business will fail

Data Security Comparison • We think that in the matter of data security, companies should certainly make decisions based on – A systems security design – The dedication and expertise of the IT group supporting CRM – The dedication to customer service of the on-demand solution

Future Applications of CRM • Companies will manage customer relationships more carefully and with a different combination of resources because – There will be fewer people to cover accounts and for those that do the process will have to be different – Companies will invest more heavily in technologies and sales support services, changing sales coverage approaches and marketing communications

Future Applications of CRM • In the future, we need to use technology to improve employee productivity. • CRM will be expected to offer us the foundation for these anticipated activities. • System usage should increase because – Technology provides us more user friendly systems – The people using the system are typically younger and more accepting of technology

Future Applications of CRM • In the future, independent organizations will develop more of the on-demand content for CRM systems. – These new applications will supply companies with more functionality – These products will be integrated with the CRM engine so that results will be automatically added to their customer databases • This process is already at work. Salesforce. com has already developed a site called the Appexchange

The Near Future • In order to predict the near future of CRM technology, let us review how corporate leaders are investing. – Over the past two years, we have seen a significant industry consolidation – Acquisitions have established Oracle, SAP, and SAS as the current titans – Where have these giants been focusing their attention?

The Near Future • Each of these organizations has recently entered the ondemand CRM space. – Prior to two years ago, all the giants had sold aggressively against the on-demand technology platform • Today they are aggressively promoting the format. • What changed their thinking?

A Look at Users • If we believe what companies publish on their web sites then: – Oracle claims 3, 700, 000 customers – SAP claims 3, 000 customers – In just five years, salesforce. com claims 500, 000 customers • The market that salesforce. com has cultivated is with small to medium-sized businesses, and according to experts in its infancy – That market has attracted the giants

A Look at Users • According to an article by Kate Du. Bose Tomassi, “The market is ready to embrace the easier-to-use on-demand model. ” – That means that as on-demand providers continue to build their business with small and medium-size customers, they may also consider expanding with enterprise applications

A Look at Users • Additionally, the largest corporations are already customers of enterprise CRM solution. – These complex solutions have created the usage rate problems confronting CRM today – Oracle and SAP look to the on-demand market as representing the future for significant growth in CRM – Does on-demand have the potential long term to impact their share of the enterprise market negatively? • Time will tell

Questions?